HAFA GUIDELINES FOR Freddie Mac () - Origination

Home Affordable Foreclosure Alternatives

Freddie Mac is proud to play a leading role in the Making Home Affordable Program.

Key Features Program Eligibility

• The initiative strives to help borrowers who do not qualify for or complete a HAMP permanent modification, or other Freddie Mac foreclosure alternatives, transition into more affordable housing and avoid foreclosure.

• Servicers must proactively offer a HAFA Short Sale to eligible borrowers and use standard documents and tools.

• All potentially eligible borrowers must be considered for HAFA before the mortgage is referred to foreclosure or a pending foreclosure sale is conducted.

• Borrowers cannot make cash contributions or promissory note obligations to satisfy either the first lien or subordinate liens, and upon completion of the HAFA Short Sale or HAFA Deed-in-Lieu all mortgage debts are extinguished.

• Borrowers and Servicers may receive incentives for successfully closing a HAFA Short Sale or HAFA Deed-in-Lieu, subject to certain requirements.

• The initiative is mandatory August 1, 2010, for first-lien mortgages owned, guaranteed, or securitized by Freddie Mac that were originated on or before January 1, 2009, and it will expire December 31, 2012.

• Eligible properties are single-family 1-4 unit primary residences, including condos, Single-Family Seller/Servicer Guide (Guide)-eligible manufactured homes, and negotiated conforming jumbos.

• Servicers must verify that the borrower is occupying the property as a primary residence, and it is not abandoned, condemned, or vacant (without an applicable exception).

• Borrowers must meet the basic eligibility criteria for HAMP, but not qualify for or complete a HAMP modification or other Freddie Mac home retention solutions.

• Borrowers must be more than 60 days delinquent and have cash reserves less than the greater of $5,000 or three times their current monthly mortgage payment.

• Borrowers who may be in foreclosure, in pending litigation involving the mortgage, or who are in active bankruptcy may be eligible for this initiative.

• Borrowers must be able to convey a clear, marketable title to the mortgaged property.

FreddieMac.com Freddie Mac is proud to play a leading role in the Making Home Affordable Program.

Publication Number 846 June 1, 2010

The information in this document is not a replacement or substitute for information found in the Single-Family Seller/Servicer Guide and/or the terms of your Master Agreement and/or Master Commitment.

As a component of the Making Home Affordable Program (MHA), the Home Affordable Foreclosure Alternatives (HAFA) initiative offers eligible borrowers who did not qualify for or complete a permanent modification under the Home Affordable Modification program (HAMP) or another home retention option to avoid foreclosure. HAFA solutions help stabilize communities by limiting foreclosures in surrounding neighborhoods and allow affected borrowers to transition into more affordable housing.

A streamlined approach for short sales and deeds-in-lieu to help more borrowers avoid foreclosure

HOME AFFORDABLE FORECLOSURE ALTERNATIVES

General Solicitation • Servicers must consider HAMP-eligible borrowers for HAFA within 30 calendar days after the borrower: Is determined by the Servicer they do not qualify for a HAMP Trial Period Plan. Does not successfully complete a HAMP Trial Period Plan. Is delinquent on his or her modified mortgage by missing at least two consecutive payments. Is offered, but refuses, a HAMP Trial Period Plan and any other Freddie Mac home retention solution, and

requests a short sale or deed-in-lieu of foreclosure.

Short Sale Solicitation

• Servicers must proactively notify eligible borrowers about the availability of a HAFA Short Sale in writing and allow the borrower 14 calendar days from the date of the notice to respond to the offer.

• Borrowers cannot be offered a HAFA Short Sale Agreement if they are in an active HAMP Trial Period Plan, performing on a HAMP modification, or being evaluated for a Freddie Mac Short Payoff.

Deed-in-Lieu Solicitation

• A HAFA Deed-in-Lieu may be offered if the home does not sell within the HAFA Short Sale marketing period, and Freddie Mac authorizes the HAFA Deed-in-Lieu.

SERVICING TECHNOLOGY

Workout Prospector® • Servicers must use Workout Prospector for all borrowers being considered for a HAFA Short Sale or HAFA Deed-in-Lieu.

FEES AND INCENTIVES

Amounts Paid by Borrower

• No borrower processing fees may be charged to the borrower. The borrower cannot be required to make a cash contribution or execute a promissory note to release the first lien or any subordinate lien(s).

Fees Paid by Servicer • Notary fees, release fees, property valuation fees, credit report fees, and other required fees. • May request reimbursement for certain costs that would otherwise be paid by the borrower.

Subordinate Lien Holder Incentives

• Six percent of the outstanding unpaid principal balance of each subordinate lien in order of lien priority, with an aggregate total of $6,000 to all lien holders, will be offered in exchange for releasing their liens and satisfying the underlying debts.

Servicer Incentives and Reimbursements

• $2,200 will be paid upon successful completion of the borrower’s HAFA Short Sale and $1,500 for a HAFA Deed-in-Lieu.

Borrower Incentives • $3,000 will be paid to the borrower to help with relocation expenses after a completed HAFA Short Sale or HAFA Deed-in-Lieu.

For More Information: • Call 800-FREDDIE. • Contact your Freddie Mac representative. • Visit Freddie Mac’s Home Affordable Foreclosure Alternatives Web page at

FreddieMac.com/singlefamily/service/hafa.html • Additional information about the federal Making Home Affordable program can be found at

www.makinghomeaffordable.gov. Servicer understands that this document may not incorporate every requirement under, and is not to be relied on as a replacement or substitute for, the information contained in the Single-Family Seller/Servicer Guide (Guide) or Guide Bulletin. Servicer is responsible for complying with the requirements of the Guide and relevant Guide Bulletins(s), notwithstanding the extent to which they may be inconsistent with this document. Refer to Chapter D65 of the Guide.

2 Freddie Mac is proud to play a leading role in the Making Home Affordable Program.

Bulletin NUMBER: 2010-12

TO: Freddie Mac Servicers June 1, 2010

SUBJECT: HOME AFFORDABLE FORECLOSURE ALTERNATIVES

With this Single-Family Seller/Servicer Guide (“Guide”) Bulletin, we are announcing Freddie Mac’s requirements for the United States Department of the Treasury (“Treasury”) Home Affordable Foreclosure Alternatives (HAFA) initiative.

BACKGROUND

In Guide Bulletin 2009-6, Freddie Mac announced its eligibility, underwriting and servicing requirements for the Home Affordable Modification Program (HAMP). These requirements are incorporated into Guide Chapter C65, Home Affordable Modification Program (as amended by Bulletins 2009-26, 2009-28, 2010-1 and 2010-3). Under HAMP, Servicers apply a uniform loan modification process to provide eligible Borrowers with sustainable monthly payments for their First Lien Mortgages. While HAMP is intended to reach a broad range of at-risk Borrowers, it is expected that Servicers will encounter situations where HAMP is not a viable option.

On November 30, 2009, Treasury released Supplemental Directive 09-09, Introduction of Home Affordable Foreclosure Alternatives – Short Sale and Deed-in-Lieu of Foreclosure, which was subsequently revised on March 26, 2010 by Supplemental Directive 09-09R. HAFA is part of HAMP and provides financial incentives to Servicers and Borrowers who utilize a short sale or a deed-in-lieu to avoid a foreclosure on a loan that meets the eligibility requirements for HAMP. Both of these foreclosure alternatives reduce the need for potentially lengthy and expensive foreclosure proceedings. These options help preserve the condition and value of the property by minimizing the time the property is vacant and subject to vandalism and deterioration. In addition, these options generally provide a substantially better outcome for borrowers and communities than a foreclosure sale and Borrowers may benefit from an alternative that transitions the Borrower to more affordable housing.

Freddie Mac’s HAFA requirements are contained in the new Guide Chapter D65, Home Affordable Foreclosure Alternatives. Servicers must comply with the requirements set forth in Chapter D65, which provide the eligibility, evaluation, processing and servicing requirements for the application of HAFA to Freddie Mac Mortgages.

Effective August 1, 2010, Freddie Mac Servicers must have incorporated HAFA into their operations and begin offering HAFA solutions to eligible Freddie Mac Borrowers. However, Servicers may begin implementing HAFA immediately.

Borrowers may be accepted into HAFA if a Form 1135, Short Sale Agreement, or a Form 1139, Deed-in-Lieu Agreement, as described in Chapter D65, is fully executed by the Borrower and received by the Servicer on or before December 31, 2012.

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HAFA FEATURES

Key requirements

Under Freddie Mac’s implementation of HAFA, Servicers must first consider a Borrower for HAMP and then for other home retention workout options before considering the Borrower for HAFA. Once all other home retention workout options have been exhausted, eligible Borrowers must be considered for a HAFA Short Sale in accordance with Chapter D65. If the Borrower is eligible for and agrees to a HAFA Short Sale, but the Mortgaged Premises do not sell within the HAFA marketing period, the Servicer may offer an eligible Borrower a HAFA Deed-in-Lieu if authorized by Freddie Mac.

Eligibility requirements

Among other eligibility and evaluation criteria, Chapter D65 requires that the following eligibility requirements be met:

■ Borrower must be more than 60 days delinquent

■ Borrower’s Cash Reserves must be less than the greater of $5,000 or three times the current monthly payment

Financial parameters

The following financial parameters are unique to a HAFA and differentiate HAFA from a Freddie Mac short payoff or deed-in-lieu under Chapter B65:

■ Each subordinate lien holder, in order of priority, may be paid no more than 6% of the unpaid principal balance of their loan, until the $6,000 aggregate cap is reached, in exchange for release of the subordinate liens and satisfaction of the underlying debts

■ Freddie Mac will accept the short sale minimum acceptable net proceeds in satisfaction of the amount owed under the Note and release of its lien

■ No cash contributions or promissory notes will be requested or accepted from the Borrower by Freddie Mac. Subordinate lien holders must also agree to release all liens without promissory notes or contributions from the Borrower in order for the Borrower to be eligible for HAFA.

Incentive compensation

Freddie Mac will pay Servicers $2,200 for every HAFA Short Sale and $1,500 for every HAFA Deed-in-Lieu completed in accordance with Chapter D65.

Following the successful closing of a HAFA Short Sale or HAFA Deed-in-Lieu, the Borrower will be entitled to an incentive payment of $3,000 to assist with relocation expenses.

Forms

HAFA provides for the use of standard forms that will reduce complexity and improve response times. The forms that must be used for HAFA solutions offered to Freddie Mac’s Borrowers are identified in Section D65.1(b) and are available on our web site at http://www.freddiemac.com/singlefamily/service/hafa.html under the Borrower Solicitation and Documentation tab.

Reporting to Fannie Mae as program administrator

Servicers will be required to provide periodic HAFA loan-level data to Fannie Mae in its capacity as program administrator for Treasury (“Program Administrator”). HAFA Servicer incentives and reimbursements for Servicer advances will be paid through the Program Administrator’s payment process.

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Servicers must refer to and comply with the reporting requirements published by the Program Administrator on http://www.HMPadmin.com.

Reporting to Freddie Mac

In addition to reporting HAFA data to the Program Administrator, Servicers must report certain loan-level data to Freddie Mac. Servicers must use the following existing electronic default reporting (EDR) codes, as applicable, beginning with the first EDR reporting cycle after the Servicer’s implementation:

■ Event code HB – To report that a Mortgage is being reviewed for a short sale at the Borrower’s request or response to the Servicer’s solicitation

■ Event code HC – To report that a Mortgage is ineligible for a short sale

■ Default action code 09 (“Forbearance Plan”) and reason code 015 (“Other”) – During the time the Mortgaged Premises are being marketed for a HAFA Short Sale

In addition, Freddie Mac will be implementing the following new EDR codes and will communicate to Servicers at a later date the mandatory effective date for reporting these new codes:

■ Default action code HF to notify Freddie Mac that the Borrower has executed the Form 1135, Short Sale Agreement

■ Reason code HAF, together with the default action code 09 (“Forbearance Plan”), during the marketing period

Exhibit 82, Electronic Default Reporting Transmission Code List, will be updated at a later date to reflect these new reporting codes.

Finally, until otherwise directed by Freddie Mac, Servicers must track certain key loan-level HAFA activity and data in a Microsoft Excel spreadsheet and submit the spreadsheet to Freddie Mac on a monthly basis. The spreadsheet must be submitted electronically to Freddie Mac at [email protected] within the first three Business Days of each month. Servicers must begin reporting loan-level HAFA activity utilizing the spreadsheet beginning in the first month after the Servicer’s implementation.

The template and instructions for completing the spreadsheet are available on the Reporting and Incentives tab of our HAFA web page at http://www.freddiemac.com/singlefamily/service/hafa.html.

CONCLUSION

Freddie Mac remains focused on assisting troubled Borrowers with Freddie Mac Mortgages avoid foreclosure whenever possible. The changes announced in this Bulletin are part of our ongoing efforts to promote sustainable homeownership and stabilize communities and neighborhoods across the nation.

If after reviewing this Bulletin you have any questions about HAFA or Freddie Mac’s role in HAFA, please contact your Freddie Mac representative or call (800) FREDDIE.

Servicers can also enroll in the Home Affordable Foreclosure Alternatives (HAFA) webinar, a comprehensive HAFA training session available through Freddie Mac's Learning Center. Additional training opportunities are also available through the Learning Center, including tools and resources that focus on HAMP.

Sincerely,

Patricia J. McClung Vice President Offerings Management

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Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.1: Overview (06/01/10)

D65.1: Overview (06/01/10)

This chapter provides the requirements for implementation of the federal government's Home Affordable Foreclosure Alternatives (HAFA) initiative, which includes short sale and deed-in-lieu alternatives to foreclosure, and is a component of the Home Affordable Modification Program (HAMP) described in Guide Chapter C65.

References to Chapter C65 include Chapter C65 and all Bulletins amending same, which, as of the date of this chapter, include: Bulletin 2009-26, Bulletin 2009-28, Bulletin 2010-1 and Bulletin 2010-3.

The following topics are covered in this chapter:

Topic Section

Foreclosure alternatives D65.2

HAFA consideration D65.3

Evaluation D65.4

HAFA Short Sale D65.5

HAFA Deed-in-Lieu D65.6

General terms and conditions D65.7

Incentive compensation D65.8

Standard form documents D65.9

Reporting requirements D65.10

Compliance D65.11

(a)Definitions

Servicers should be familiar with Freddie Mac's definitions for the following terms as they relate to HAFA:

• Borrower (within the context of HAFA, the term "Borrower" includes all Borrowers obligated on the Note)

• Business Day

• Condominium Unit

• Cooperative Share Mortgage

• Conforming Jumbo Mortgage

• First Lien

• Mortgaged Premises

• Mortgage

• Note

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In addition to the definitions applicable to HAMP found in Chapter C65, Servicers should be familiar with the following terms as they relate to HAFA:

• Primary Residence

• Purchase Documents

• Security Instrument

• Allowable Transaction Costs: The costs that the Servicer is permitted by Freddie Mac to deduct from the gross sales proceeds of a short sale, as determined in Section D65.5(a)

• Cash Reserves: Any non-retirement liquid asset the Borrower has available for withdrawal from any financial institution or brokerage, including funds on deposit in the Borrower's checking, savings, money market or certificate of deposit account or other depository account, stocks, bonds, mutual funds, U.S. Government Securities and other securities that are traded on an exchange or marketplace generally available to the public (e.g., New York Stock Exchange, National Association of Securities Dealers Automated Quotations, Midwest SE, Chicago Board Of Trade or Over the Counter) for which the price can be readily verified through financial publications. Assets are only considered retirement assets if they are held in a qualified retirement account such as a 401k, 403b, 457, IRA or pension fund. If the assets are not held in a retirement account, the assets must be considered Cash Reserves. Refer to Section D65.4(b) for information on calculating and verifying Cash Reserves.

• HAFA: Home Affordable Foreclosure Alternatives

• HAFA Deed-in-Lieu: A voluntary transfer of title to the Mortgaged Premises to Freddie Mac in exchange for full satisfaction of the Mortgage, as described in Section D65.6

• HAFA Short Sale: The sale of the Mortgaged Premises, by agreement of all parties with an interest in the Mortgaged Premises, for less than the total amount necessary to satisfy the Mortgage obligation, as described in Section D65.5

• HAMP: Home Affordable Modification Program

• HAMP Modification: A loan modification pursuant to Chapter C65

• B65 Deed-in-Lieu: A deed-in-lieu pursuant to Sections B65.42 through B65.48

• B65 Modification: A loan modification pursuant to Sections B65.11 through B65.26

• B65 Short Payoff (a.k.a. "short sale"): A short payoff pursuant to Sections B65.35 through B65.41

(b) HAFA forms

Servicers must use the following forms for HAFA, which are available on our web site at http://www.freddiemac.com/singlefamily/service/hafa.html under the Borrower Solicitation and Documentation tab. Servicers may amend the terms of these documents only as necessary to comply with applicable federal, State and local law and this chapter.

Refer to Section D65.9 for additional information.

•Short Sale Agreement ("SSA") (Form 1135): The agreement between the Borrower and the Servicer under which the Borrower may sell the Mortgaged Premises to a third party and Freddie Mac will accept the sales proceeds in full satisfaction of the Mortgage as described in



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.2: Foreclosure alternatives (06/01/10)

D65.2: Foreclosure alternatives (06/01/10)

HAFA provides incentives to Borrowers and Servicers to convey a Mortgaged Premises without undergoing the time and expense of a foreclosure sale. Such conveyances generally maximize the sales price and minimize the impact of vacant homes on surrounding communities. Servicers must consider and evaluate Borrowers for HAFA as described in this chapter. If a Borrower is ineligible for HAFA, then the Servicer must consider the Borrower for a B65 Short Payoff or a B65 Deed-in-Lieu. While there are similarities between the foreclosure alternatives described in Chapter B65 and the HAFA Short Sale and HAFA Deed-in-Lieu, there are also differences between them including eligibility criteria, processing, incentives and standardized forms. One major difference is that a Borrower may not be required to make a cash contribution or provide a promissory note as a condition of either a HAFA Short Sale or a HAFA Deed-in-Lieu.

Under Freddie Mac's HAFA requirements, eligible Borrowers must be offered a HAFA Short Sale, in accordance with this chapter. If the Mortgaged Premises do not sell within the marketing period provided in the SSA, the Servicer may offer eligible Borrowers a HAFA Deed-in-Lieu, if authorized by Freddie Mac.

Servicers must adopt a written policy for the consideration, evaluation and processing of Borrowers for HAFA. The written policy must be consistent with the requirements of this chapter. Servicers may adopt and incorporate this chapter by reference into their policy applicable to Mortgages serviced for Freddie

Co-branding/use of Freddie Mac's logo and the Making Home Affordable logo

Servicers may download the Freddie Mac logo and the Making Home Affordable logo for use on HAFA forms, envelopes and packages from FreddieMac.com at http://www.freddiemac.com/singlefamily/service/mha_modification.html.

A Servicer may use the Making Home Affordable logo by itself, together with the Servicer's logo, or together with the Servicer's and Freddie Mac's logos on envelopes and packages used to send HAFA materials to Borrowers. The Servicer's name and return address must be shown on any solicitation materials sent to Borrowers.

A Servicer may use Freddie Mac's logo together with its own logo. However, a Servicer may not use the Freddie Mac logo without also including its own logo.

Section D65.5

• Request for Approval of Short Sale ("RASS") (Form 1136): This form must be used by a Borrower to request approval for a HAFA Short Sale as described in Section D65.5(e), once the Borrower has received a purchase offer

• Approval of Short Sale (Form 1137): The form the Servicer executes in which the Servicer consents to and approves a Borrower's request for approval of a HAFA Short Sale that was submitted via Form 1136, Request for Approval of Short Sale

• Disapproval of Short Sale (Form 1138): The form the Servicer executes in which the Servicer disapproves a Borrower's request for approval of a HAFA Short Sale that was submitted via Form 1136, Request for Approval of Short Sale

• Deed-in-Lieu Agreement ("DIL Agreement") (Form 1139): The agreement between the Borrower and the Servicer to allow the Borrower to transfer ownership of Mortgaged Premises to Freddie Mac in lieu of foreclosure as described in Section D65.6



Mac.

Activities under HAFA are considered part of HAMP and, therefore, must comply with the provisions of Section C65.13.

Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.3: HAFA consideration (06/01/10)

D65.3: HAFA consideration (06/01/10)

(a) Consideration process

(i) Servicers must first consider Borrowers for a HAMP Modification and then for a B65 Modification or other home retention workout options before considering them for foreclosure alternatives under HAFA. A Mortgage meets the basic eligibility criteria for HAFA if all of the following conditions are met:

• The Mortgage is a First Lien owned, securitized or guaranteed by Freddie Mac originated on or before January 1, 2009, including super conforming Mortgages and Conforming Jumbo Mortgages sold to Freddie Mac under a Seller's negotiated Purchase Documents, which are secured by 1- to 4-unit single-family Primary Residences, including Condominium Units and Guide-eligible Manufactured Homes that are not abandoned, condemned or vacant (except as otherwise specified in D.65.4(b))

• The Mortgaged Premises are occupied by the Borrower as the Borrower's Primary Residence

• The Borrower is more than 60 days delinquent in payment of the Mortgage

• The Borrower's original total monthly Mortgage payment prior to a loan modification, if any, exceeds 31% of the Borrower's gross monthly income as described in Chapter C65

• The Servicer previously considered the Borrower for a HAMP Modification, a B65 Modification or other home retention workout options, but the Borrower was either ineligible or refused a modification as described below

(ii)

Every potentially eligible Borrower who meets the qualifications of Section D65.3(a)(i) must be considered for HAFA before the Borrower's Mortgage is referred to foreclosure or a pending foreclosure sale is conducted. Servicers must consider HAMP eligible Borrowers for HAFA within 30 calendar days of any of the following events, as applicable:

The date and outcome of the HAFA consideration must be documented in the Mortgage file.

• The Borrower is determined by the Servicer not to qualify for a HAMP Trial Period Plan

• The Borrower does not successfully complete a HAMP Trial Period Plan

• The Borrower is delinquent on his or her modified Mortgage by missing at least two consecutive payments

• The Borrower is offered, but refuses, a HAMP Trial Period Plan, B65 Modification or other home retention workout options and requests a short sale or deed-in-lieu of foreclosure



Borrowers may be accepted into HAFA if an SSA or DIL Agreement, as described in this chapter, is fully executed by the Borrower and received by the Servicer on or before December 31, 2012.

A Borrower may not participate in a HAMP Trial Period Plan, HAMP Modification or B65 Short Payoff and agree to an SSA simultaneously, and the Servicer may not offer an SSA to a Borrower if the Borrower is currently in an active HAMP Trial Period Plan, is performing on a HAMP Modification or is in the process of being reviewed for a B65 Short Payoff.

Borrowers in active Chapter 7 or Chapter 13 bankruptcy cases must be considered for HAFA if the Borrower, Borrower's counsel or bankruptcy trustee submits a request to the Servicer. With the Borrower's permission, a bankruptcy trustee may contact the Servicer to request a short sale or DIL under HAFA. Servicers are not required to solicit these Borrowers proactively for HAFA. The Servicer and its counsel must work with the Borrower or Borrower's counsel to obtain any court and/or trustee approvals required in accordance with court rules and procedures. Servicers must extend the deadlines specified in this Chapter D65, as necessary, to accommodate delays in obtaining court approvals or receiving any periodic payment when they are made to a trustee.

Mortgages ineligible for HAFA include the following:

• Mortgages secured by Investment Properties or second homes

• Cooperative Share Mortgages

• Leasehold Mortgages

• Mortgages sold to Freddie Mac on a participation basis

• Mortgages sold to Freddie Mac with recourse or indemnification

• FHA, VA and RHS Mortgages

(b)

Borrower notice if considered for HAFA at Borrower request

If the Borrower requests to be considered for HAFA and is found to be ineligible, the Servicer must send the Borrower a notice ("Borrower Notice") containing the following information within 10 days after the consideration:

• The primary reason(s) why the Borrower was ineligible

• If the Borrower is eligible for a B65 Short Payoff, the steps the Borrower must take in order to proceed with a B65 Short Payoff. The Servicer must evaluate the Borrower for a B65 Short Payoff prior to sending the Borrower Notice.

• A toll-free number through which the Borrower can reach a Servicer representative capable of providing specific details about the contents of the Borrower Notice

• The HOPE Hotline Number (888-995-HOPE), with an explanation that the Borrower can seek assistance at no charge from Department of Housing and Urban Development (HUD) approved housing counselors and can request assistance in understanding the Borrower Notice by asking for "MHA help"

• Any information, disclosures or notices required by the Borrower's Note, Security Instrument and applicable federal, State and local law



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.4: Evaluation (06/01/10)

D65.4: Evaluation (06/01/10)

If the Servicer determines that the Borrower is eligible for HAFA pursuant to Section D65.3, the Servicer must follow the steps below to determine if the Servicer may extend an SSA to the Borrower:

If the Servicer considers the Borrower for a HAFA Short Sale, but did not do so pursuant to the Borrower's request and determines the Borrower is ineligible, then the Servicer does not have to send a Borrower Notice.

After the Servicer has determined the Borrower is ineligible for a HAFA Short Sale, the Servicer must consider the Borrower for a B65 Short Payoff.

(a) Borrower solicitation and response

Servicers may not solicit a Borrower for HAFA until the Borrower has been evaluated for a HAMP modification in accordance with the provisions of Chapter C65. If the Servicer has not already discussed a HAFA Short Sale with the Borrower, the Servicer must proactively notify the Borrower in writing of the availability of a HAFA Short Sale, unless the Borrower is in an active Chapter 7 or Chapter 13 bankruptcy case. The Servicer must allow the Borrower 14 calendar days from the date of the notice to contact the Servicer by verbal or written communication and request consideration under HAFA. If the Borrower fails to contact the Servicer within that period, or at any time indicates that he or she is not interested in a HAFA Short Sale or B65 Short Payoff, the Servicer has no further obligation to evaluate the Borrower for HAFA or any other loan workout option. The Servicer must then (i) continue with delinquency collection efforts pursuant to Chapter 64, or (ii) initiate or continue foreclosure pursuant to Chapter 66, as applicable.

(b) Evaluation criteria

If a HAFA-eligible Borrower responds to the Servicer's solicitation or otherwise requests evaluation for HAFA, the Servicer must conduct the following evaluation to determine whether to extend an SSA to the Borrower. If the Borrower was previously considered for HAMP, the Servicer must use the documentation collected during the HAMP evaluation process as long as it is less than or equal to 90 days old from the date of the HAFA evaluation (excluding the tax return or tax transcript). If the documentation is older than 90 days or the Borrower was not previously evaluated for HAMP the Servicer must collect the necessary documentation from the Borrower.

If the Servicer must order a new credit report, the Servicer may not require the Borrower to pay in advance for the credit report but the Servicer may add the cost to the amount owed under the Mortgage to the extent permitted by the Note, Security Instrument and applicable law in the event the HAFA Short Sale or HAFA Deed-in-Lieu is not completed. If a HAFA Short Sale or Deed-in-Lieu is completed, the Servicer must pay for the credit report from the Servicer incentive payment received under Section D65.8(b).

(i) Borrower criteria

In order to be eligible for an SSA, the Borrower must:

•Currently occupy the Mortgaged Premises as his or her Primary Residence. The Servicer must obtain a credit report for each Borrower or a joint report for a married couple who are co-Borrowers showing the Mortgaged Premises as the Borrower's Primary Residence.



The Servicer may make an exception to the occupancy requirement if the Mortgaged Premises are vacant no more than 90 days prior to the effective date of the Short Sale Agreement if the Borrower provides documentation that he or she was required to relocate at least 100 miles from the Mortgaged Premises to accept new employment or was transferred by the current employer. The Borrower must declare in writing that he/she has not purchased prior to the HAFA evaluation, or is not currently in the process of purchasing, another one-to-four unit property until the HAFA agreement is completed, and there is no evidence, such as credit report information, indicating that the Borrower has purchased or is in the process of purchasing another one-to-four unit property. The Servicer must obtain reasonable assurances that the Borrower will maintain and preserve the condition of the Mortgaged Premises while vacant at the Borrowers expense.

• Submit a signed Form 1114, Request for Modification and Affidavit (RMA), Internal Revenue Service (IRS) Form 4506-T or 4506T-EZ, and income documentation (as described in Section C65.6(b)). The Servicer must process the Borrower's Form 4506-T/4506T-EZ with the IRS and receive the tax transcripts from the IRS, unless the Borrower provides a signed copy of his or her most recent federal income tax return (including all schedules and forms).

Servicers may use other proprietary financial information forms in lieu of the RMA, provided that the forms are substantially similar in content to the RMA, and the information and attestations requested from the Borrower are the same. When the RMA is not used to obtain the Borrower's financial information, Servicers must obtain an executed Form 1115, MHA Hardship Affidavit ("MHA Hardship Affidavit") from the Borrower. In lieu of the Form 1115, Servicers may incorporate all of the information on the MHA Hardship Affidavit into their own form.

• Have Cash Reserves as of the date of the evaluation that are less than the greater of $5,000 or three times the Borrower's total monthly payment on the Mortgage, determined as follows:

The process for calculating and verifying Cash Reserves is as follows:

• Principal and interest based on the existing Mortgage terms

• Monthly pro rata amount for real estate taxes, property and flood insurance, if applicable

• Monthly pro rata amount of homeowner's association/condominium fees

• Any Escrow payment shortage amounts subject to a repayment plan

1) The Servicer must determine that all of the Borrower's Cash Reserves have been accounted for on the RMA and verified. In verifying and making the determination that all Cash Reserves have been accounted for, Servicers must review the Borrower's federal income tax return or tax transcript, including information from applicable schedules (i.e., Schedules B - Interest & Ordinary Dividends, D - Capital Gains & Losses, E - Supplemental Income & Loss) and all other available information provided by the Borrower to determine if the asset information stated on the RMA is reasonably consistent with information available from the tax return or tax transcript, or other information. The Servicer must ensure that the Borrower's disclosure of assets is consistent with the interest, dividend income or gain/loss information reflected in the tax return information.

2)If, upon reviewing the Borrower's tax return or tax transcript, the Servicer observes interest, dividend income or gains/losses that, in total, could not be reasonably



produced by the Borrower's disclosed reserves, and such income indicates deposits, securities holdings or other assets that could be in excess of the amounts disclosed by the Borrower on the RMA, the Servicer must reconcile the inconsistency with the Borrower. The Servicer must require the Borrower to produce a signed federal tax return and all relevant schedules, in the event the Servicer used a tax transcript in lieu of a tax return, along with any other relevant documentation that verifies the disposition and/or current status of those assets, which produced the income or gains/losses to resolve the inconsistency. The Servicer must ensure that the Borrower's disclosure of assets is reasonably accurate despite the inconsistency between the disclosed assets and the income or gain/loss from assets reported on the tax return or tax transcript. In determining what documentation is needed to reconcile an inconsistency, the Servicer must review the detailed tax return schedules and forms, and request from the Borrower copies of recent and past statements from those asset holdings or transactions indicated on the schedules and forms that produced the income or gain/loss (e.g., checking, savings, brokerage account statements, asset sale statements or records, etc).

3) If there are inconsistencies between the Borrower's disclosure of assets and the tax return information that cannot be reconciled with the Borrower, or the required Cash Reserves documentation cannot be obtained from the Borrower, the Borrower cannot be considered for HAFA.

4) Based on the Cash Reserves test, if the Servicer determines that the Borrower's Cash Reserves exceed the greater of $5000 or three times the monthly payment (as determined above) at the time of evaluation, the Borrower is not eligible for HAFA, and the Servicer must evaluate the Borrower for a B65 Short Payoff.

(ii) Mortgaged Premises criteria

The Servicer must order an interior Broker's Price Opinion (BPO) or appraisal using the 90 day "as is" marketing value from our web site at https://www.bpodirect.com in accordance with the requirements of Section 65.39. The BPO or appraisal may not be more than 30 days old from the date the Servicer evaluates the Borrower for a HAFA Short Sale.

The Servicer must review the BPO or appraisal to confirm that the Mortgaged Premises are occupied and not abandoned, condemned or vacant (except as otherwise specified in D65.4(b)). If there are inconsistencies between the BPO and the credit report or other documentation, the Servicer must reconcile the inconsistencies.

The Servicer may not require the Borrower to pay in advance for the valuation, but the Servicer may add the cost to the amount owed under the Mortgage to the extent permitted by the Note, Security Instrument and applicable law.

(iii) Mortgage insurer approval

If the Mortgage is covered by mortgage insurance, the Servicer must receive at least preliminary approval for the HAFA Short Sale as described in Section D65.7(e) prior to entering into an SSA with the Borrower.

(iv) Title criteria

The Servicer must review readily available information provided by the Borrower, the Borrower's credit report, the Mortgage file, the foreclosure file, if any, and other available sources to identify subordinate liens and other claims on title to the Mortgaged Premises to determine if the Borrower will be able to deliver clear, marketable title to a prospective purchaser or Freddie Mac. If the Servicer's review of the title information reveals a lien, claim,



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.5: HAFA Short Sale (06/01/10)

D65.5: HAFA Short Sale (06/01/10)

encumbrance or defect that prevents the Borrower from conveying clear, marketable title to the Mortgaged Premises that cannot be satisfied by payment to subordinate lien holders in accordance with Section D65.7 herein, or cannot be resolved without litigation or court order, then the Borrower is ineligible for a HAFA Short Sale or a HAFA Deed-in-Lieu.

(c) Borrower Notice and transition to B65 Short Payoff

If the Servicer determines that the Borrower is ineligible for HAFA after being evaluated, the Servicer must evaluate the Borrower for a B65 Short Payoff, unless the reason for ineligibility was for title reasons under Section D65.4(b)(iv). Within 10 calendar days after the Servicer evaluates a Borrower for HAFA and determines that the Borrower is ineligible, the Servicer must send a Borrower Notice that meets the requirements of Section D65.3(b). If the Servicer determines that the Borrower is ineligible for a B65 Short Payoff, then the Servicer must (i) continue with delinquency collection efforts pursuant to Chapter 64, or (ii) initiate or continue foreclosure pursuant to Chapter 66, as applicable.

(a) Preparing and offering the SSA

If the Servicer evaluates the Borrower and determines that the Borrower is eligible for a HAFA Short Sale pursuant to this chapter, the Servicer must comply with the following steps to prepare and offer the Form 1135, Short Sale Agreement, (SSA) to the Borrower. The Servicer is not required to obtain Freddie Mac's prior approval to enter into an SSA with the Borrower, provided that the Servicer complies with the following:

(i) Minimum acceptable net proceeds

The Servicer must document the minimum acceptable net proceeds from the sale of the Mortgaged Premises in the Mortgage file prior to preparing and offering an SSA to the Borrower. The minimum acceptable net proceeds for a HAFA Short Sale are the 90 day "as is" marketing value as determined by the Broker's Price Opinion (BPO) or appraisal minus (1) the Allowable Transaction Costs as determined below, (2) the maximum amount payable to subordinate lien holders under Section D65.7(b), and (3) the Borrower relocation incentive paid under Section D65.8(a). For example, if the valuation of the Mortgaged Premises are $100,000, then the minimum acceptable net proceeds will be $82,000:

After signing an SSA, the Servicer must not:

$100,000 (gross sales price)

- $9,000 (maximum Allowable Transaction Costs)

- $6,000 (maximum aggregate payment to subordinate lien holders)

- $3,000 $82,000

(Borrower relocation incentive) (minimum acceptable net proceeds)

• Increase the minimum acceptable net proceeds until the initial SSA termination date is reached and only if authorized by Freddie Mac

• Decrease the minimum acceptable net proceeds unless authorized by Freddie Mac



• Disclose the minimum acceptable net proceeds amount to any party, including but not limited to the Borrower, the real estate broker and any prospective buyer, except as authorized by Freddie Mac

(ii) Allowable Transaction Costs

Freddie Mac will pay up to a total of 9% of the final sales price towards (1) reasonable closing costs customarily paid by a seller in the jurisdiction where the Mortgaged Premises are located of up to 3% of the final sales price, and (2) real estate brokerage commissions of up to 6% of the final sales price. Any closing costs or commissions that exceed these percentages will not be paid by Freddie Mac.

(iii) SSA

The SSA outlines the roles and responsibilities of the Servicer and the Borrower in the HAFA Short Sale process and provides key marketing terms. After the Servicer has performed an evaluation pursuant to Section D65.4 and determined that the Borrower is eligible for a HAFA Short Sale, the Servicer must prepare and send an SSA to the Borrower. The Servicer must also send the Borrower Form 1136, Request for Approval of Short Sale (RASS), pre-populated with the Servicer's contact information, the address of the Mortgaged Premises and the Servicer loan number. Prior to sending the SSA and RASS to the Borrower, the Servicer must complete all missing information and delete all inapplicable language in accordance with this section as follows:

• A fixed termination date that is 120 calendar days from the effective date of the SSA ("Effective Date"). The Effective Date must be stated in the SSA and is the date the SSA is mailed to the Borrower. The Servicer must not extend the termination date of the SSA without authorization from Freddie Mac as described in Section D65.5(h).

• The minimum list price which shall be the 90 day "as is" marketing value as determined by the BPO or appraisal, as applicable. See Section D65.4(b)(ii) for additional information.

• The Allowable Transaction Costs which may be deducted from the gross sale proceeds are (1) the reasonable closing costs customarily paid by a seller in the jurisdiction where the Mortgaged Premises are located of up to 3% and (2) real estate brokerage commissions of up to 6%, for a total of 9% of the final sales price paid by the buyer at closing

• If the Servicer retains a vendor to facilitate the transaction, including a vendor retained by the Servicer to assist the listing broker, the Servicer must indicate that fact in the SSA. The Servicer may not require the vendor be paid from a portion of the brokerage commission or by the Borrower, but the Servicer may pay the vendor from the Servicer incentive payment received under Section D65.8(b).

• The amount of the monthly mortgage payment the Borrower will pay during the term of the SSA, which shall be equal to 31% of the Borrower's verified gross monthly income

• A closing date that is no less than 45 calendar days from the date of the sales contract without the consent of the Borrower and no more than 60 calendar days from the date of the sales contract without the consent of Freddie Mac

(b)Borrower obligations

The Borrower must sign and return the SSA within 14 calendar days from its Effective Date, along with a copy of the real estate broker listing agreement, which expires no earlier than the termination date of the SSA, a copy of the multiple listing service ("MLS") listing advertising the Mortgaged



Premises, if available, and information regarding any subordinate liens. In returning and signing the SSA the Borrower agrees to the following:

• Provide all information and sign documents required to verify HAFA eligibility

• Cooperate with the listing broker to actively market the Mortgaged Premises and respond to Servicer inquiries

• Maintain the interior and exterior of the Mortgaged Premises in a manner that facilitates marketability

• Work to clear any liens or other impediments to title that would prevent conveyance of clear, marketable title to the Mortgaged Premises

• Make the monthly payment stipulated in the SSA

(c) Monitoring marketing activity; cause for termination

The Servicer must terminate the SSA before its expiration if any of the following events occur:

The Borrower's failure to make monthly payments on the Mortgage during the marketing period under the SSA is not a cause for termination, unless it is accompanied by another breach of the SSA.

• The Borrower's financial situation improves significantly, the Borrower qualifies for and accepts a modification of the Mortgage, or the Borrower brings the Mortgage current or pays the Mortgage in full

• The Borrower or the listing broker fails to act in good faith in listing, marketing and/or closing the sale, or otherwise fails to abide by the terms of the SSA or applicable law

• A significant change occurs to the condition and/or value of the Mortgaged Premises

• There is evidence of fraud or misrepresentation, including, but not limited to, any evidence of a non-arms length relationship between any parties involved in the transaction (e.g., the Borrower, real estate broker, any prospective buyer, transaction facilitator, BPO provider or appraiser)

• The Borrower files for bankruptcy and the court declines to approve the SSA

• Litigation is initiated or threatened that could affect title to the Mortgaged Premises or interfere with a valid conveyance of clear, marketable title to the Mortgaged Premises

(d)Title work and identification of claims on title

After receipt of the signed SSA from the Borrower, the Servicer must order title work to identify subordinate liens and other claims on title to the Mortgaged Premises, unless the Servicer is certain based on its examination under Section D65.4(b)(iv) that the Borrower will be able to deliver clear, marketable title to a prospective purchaser or Freddie Mac. If the Servicer has previously ordered title work or obtained title work from the foreclosure file then the Servicer need only order updated title work. The Servicer must share the title work with the Borrower and/or the listing broker as necessary to assist them in communicating with subordinate lien holders or to resolve title issues, if any.

The Servicer may not require the Borrower to pay in advance for the title work, but the Servicer may add the cost to the amount owed under the Mortgage to the extent permitted by the Note, Security Instrument and applicable law in the event that the HAFA Short Sale or HAFA Deed-in-Lieu is not



completed. If a HAFA Short Sale or Deed-in-Lieu is completed, the Servicer may request reimbursement of the expense for the title work, subject to the limits provided in Exhibit 57A, Approved Attorney Fees and Title Expenses, by submitting a Form 104SF, Statement of Loan, Workout and REO Expenses and Income. Refer to Chapter 71 for additional information on submitting a request for reimbursement.

Refer to Section D65.10 for reporting requirements during the marketing period.

(e) Request for approval of a HAFA Short Sale

The Borrower must submit the RASS to the Servicer when an offer for the Mortgaged Premises is received. The RASS provides the terms and conditions of the HAFA Short Sale and together with the sales contract, provides settlement instructions to the settlement agent. Within three Business Days following receipt of an executed sales contract, the Borrower or the listing broker must deliver to the Servicer a completed RASS describing the terms of the sale transaction, along with the following:

• A copy of the executed sales contract and all addenda

• Buyer's documentation of funds or buyer's pre-approval or commitment letter on letterhead from a lender

• Copies of all documentation indicating that subordinate lien holders have agreed to release their liens and the Borrower from liability

• A preliminary HUD-1 Settlement Statement

(f) Approval or disapproval of a HAFA Short Sale

(i) Net sale proceeds equal or exceed minimum acceptable net proceeds

Within ten (10) Business Days of receipt of the RASS and all required attachments, the Servicer must indicate its approval of the proposed sale by signing Form 1137, Approval of Short Sale, and mailing it to the Borrower, provided the terms of the net sale proceeds equal or exceed the minimum acceptable net proceeds determined by the Servicer prior to execution of the SSA and all other terms and conditions in the SSA have been met.

Within one (1) Business Day of approval of a RASS, the Servicer must enter all terms of the

transaction and other required information into Workout Prospector® and transmit the model to Freddie Mac. When entering the transaction terms into Workout Prospector, Servicers must:

• Enter information related to the Borrower relocation incentive and the payment(s) to subordinate lien holders on the HUD-1 screen of Workout Prospector as follows:

• Line 1306: Enter the $3,000 Borrower relocation incentive with a note to indicate "Borrower Relocation Incentive." (Note: The instructions for how to account for the Borrower relocation incentive on the HUD-1 Settlement Statement at closing differ from the instructions for entering this incentive payment in Workout Prospector. Refer to Section D65.8(a) for additional information.)

• Line 505: Enter the total amount of payments made to subordinate lien holders

• In the "Recommendations" section of the Warnings and Comments screen, indicate the following in all caps: HAFA SHORT SALE

• Send an email to [email protected] and in the subject line of the e-mail provide the Freddie Mac loan number and notation "HAFA Short Sale – Approval"



The Servicer may not require, as a condition of approving a HAFA Short Sale, a reduction in the real estate commission below the commission stated in the listing agreement.

The Servicer may require that the closing take place within a reasonable period following acceptance of the RASS, but in no event may the Servicer require that the closing occur in less than 45 calendar days from the date of the sales contract without the consent of the Borrower or in more than 60 calendar days from the date of the sales contract without the consent of Freddie Mac.

(ii) Net sale proceeds less than minimum acceptable net proceeds

Within ten (10) Business Days of receipt of the RASS and all required attachments, the Servicer must indicate its disapproval of the proposed sale by signing Form 1138, Disapproval of Short Sale, if the terms of the sale would yield net sale proceeds to Freddie Mac that are less than the minimum acceptable net proceeds. The Servicer must make a counteroffer on the form or in an accompanying attachment for an amount that would meet the minimum acceptable net proceeds.

The Servicer must also evaluate the terms of the offer to determine if the Borrower would be eligible for a B65 Short Payoff and discuss that option with the Borrower. The Servicer must clearly communicate to the Borrower that he or she would not be entitled to any incentives under a B65 Short Payoff. If the Borrower agrees to a B65 Short Payoff, the Servicer must process the offer pursuant to the requirements of Sections B65.35 through B65.41.

(g) HAFA Short Sale request received, but Borrower not previously evaluated for HAMP

If the Borrower has an executed sales contract that would result in a short payoff of the Mortgage and requests that the Servicer approve a HAFA Short Sale before an SSA has been executed, then the Servicer must inform the Borrower that he or she will be considered for a B65 Short Payoff instead of a HAFA Short Sale. The Servicer must clearly communicate to the Borrower that he or she would not be entitled to any incentives under a B65 Short Payoff. The Servicer must then process the sales contract in accordance with Sections B65.35 through B65.41 before the sales contract expires.

(h) Extensions of SSA

If an acceptable purchase offer has not been received prior to the expiration date of the SSA, the Servicer may submit a recommendation to Freddie Mac to extend the SSA if (i) the Borrower has fully complied with the SSA and the Borrower was not the cause of the failure of the Mortgaged Premises to sell, and (ii) the Servicer believes that an extension of the SSA is likely to result in an offer that meets the minimum acceptable net proceeds requirement.

The Servicer must submit a recommendation for an extension no fewer than 15 calendar days prior to the expiration of the SSA via e-mail with the subject line "Request for Extension of SSA" to [email protected]. The Servicer must also provide any recommendations relating to the marketing of the Mortgaged Premises, such as the number of days the SSA should be extended, adjustments to the listing price and choice of real estate broker.

If Freddie Mac approves the extension, the Servicer must prepare a written extension agreement extending the SSA in accordance with Freddie Mac's instructions. The extension agreement must also amend other terms of the SSA, as necessary, and be executed by the Borrower before the expiration date of the SSA. If an extension is not recommended by the Servicer or not approved by Freddie Mac, the Servicer must consider the Borrower for a HAFA Deed-in-Lieu pursuant to Section D65.6.

(i)Closing, reporting and remitting requirements



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.6: HAFA Deed-in-Lieu (06/01/10)

D65.6: HAFA Deed-in-Lieu (06/01/10)

The Servicer must consider a Borrower for a HAFA Deed-in-Lieu upon the following terms:

Within five Business Days after settlement of the HAFA Short Sale, the Servicer must submit copies of the following documents to Freddie Mac via fax at (571) 382-4910 (or as otherwise directed by Freddie Mac):

In addition, the Servicer must comply with the reporting and remitting requirements of Section B65.41; however, the Servicer must advance from its own funds, and include with its remittance, the $3,000 Borrower relocation incentive. (Refer to Section D65.8 for additional information.)

Servicers must refer to and comply with the additional requirements of Section B65.41 with respect to charging off the deficiency, remitting additional proceeds and requesting reimbursement for expenses.

• Proceeds check or wire communication notice, which must include the Freddie Mac reference number

• Copy of the final sales contract, including any addenda to the sales contract

• Final HUD-1 Settlement Statement, which must be certified true if not the original and signed by the Borrower and the purchaser(s)

• Proof that subordinate liens have been paid and commitment from the subordinate lien holder(s) to release the lien(s)

(a) Submitting requests for a HAFA Deed-in-Lieu

The Servicer must not offer a HAFA Deed-in-Lieu unless the Borrower has previously marketed the Mortgaged Premises under the HAFA Short Sale process. If an SSA has expired without completing a sale of the Mortgaged Premises, there are no impediments to the Borrower conveying clear, marketable title to Freddie Mac and all subordinate lien holders, if any, have agreed to release their liens in accordance with Section D65.7(b), the Servicer must request permission from Freddie Mac to enter into a HAFA Deed-in-Lieu as soon as possible but no later than 10 calendar days after the expiration of the SSA by complying with the following requirements:

• Completing all required fields in Workout Prospector® and transmitting the model to Freddie Mac. When entering the transaction terms into Workout Prospector, Servicers must enter information related to the Borrower relocation incentive and the payment(s) to subordinate lien holders in the following expense fields on the Deed-in-Lieu Overrides screen:

In addition, in the "Recommendations" section of the Warnings and Comments screen, the Servicer must indicate the following in all caps: HAFA Deed-in-Lieu.

• Miscellaneous Expenses: Enter the $3,000 Borrower relocation incentive with a note to indicate "Borrower Relocation Incentive"

• Liens (Junior and Senior): Enter the total amount of payments made to subordinate lien holders



If the Mortgage is covered by mortgage insurance, the Servicer must contact and receive approval for the HAFA Deed-in-Lieu as described in Section D65.7(e) prior to submitting the request to Freddie Mac. Freddie Mac will notify the Servicer if it approves or disapproves the HAFA Deed-in-Lieu request via Workout Prospector within seven Business Days of receipt of all required information.

• Sending an email to [email protected] and in the subject line of the e-mail provide the Freddie Mac loan number and notation "HAFA Deed-in-Lieu – Approval"

• Ordering a new Broker's Price Opinion (BPO) or appraisal from https://www.bpodirect.com

• Faxing copies of the following documentation to Freddie Mac at (571) 382-4910

• RMA, MHA Hardship Affidavit or equivalent servicer proprietary form

• All documentation collected under Section D65.4

• Listing agreement

• MLS listing, if available

• Title work

• Approval from the mortgage insurer, if applicable

• Approval from the subordinate lien holder(s), if applicable

(b) DIL Agreement and terms

If Freddie Mac approves the Borrower for a HAFA Deed-in-Lieu, the Servicer must use Form 1139, Deed-in-Lieu Agreement ("DIL Agreement"), to offer a HAFA Deed-in-Lieu to the Borrower. Within three Business Days of receiving Freddie Mac's approval, the Servicer must complete the DIL Agreement in accordance with this section and send it to the Borrower. The Borrower must sign and return the DIL agreement within 14 calendar days from the date of the agreement. Servicers should modify the DIL Agreement to include the date by which the agreement must be returned to the Servicer.

The DIL Agreement contains the following terms, which the Servicer should attempt to discuss with the Borrower prior to sending the DIL Agreement:

• Marketable Title: The Borrower must be able to convey clear, marketable title to Freddie Mac. Freddie Mac will pay the amounts to release subordinate liens as described in Section D65.7(b).

• Written Agreement: The DIL Agreement must set forth the conditions for acceptance of a HAFA Deed-in-Lieu and be signed by the Servicer and the Borrower

• Monthly Payment: The amount of the monthly mortgage payment the Borrower will pay during the term of the DIL Agreement, which shall be equal to 31% of the Borrower's verified gross monthly income. The Borrower's failure to make monthly payments on the Mortgage during the term of the DIL Agreement is not a cause for termination, unless it is accompanied by another breach of the DIL Agreement.

• Vacancy Date: The DIL Agreement must specify the date by which the Borrower must vacate the Mortgaged Premises, which shall be no less than 30 calendar days nor more than 60 calendar days, from the date of execution of the DIL Agreement, unless the Borrower voluntarily agrees to an earlier date



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.7: General terms and conditions (06/01/10)

• Relocation Assistance: Borrowers who execute a HAFA DIL Agreement are eligible for $3,000 in relocation assistance as described in Section D65.8(a)

(c) Closing, reporting and remitting requirements

To close the HAFA Deed-in-Lieu, the Servicer must complete the following steps upon receipt of the executed deed:

(i) Reporting requirements

1. Report the transaction via MIDANET®, using the Foreclosure Sale/DIL transmission, within one Business Day of receiving the executed deed. The date the Servicer received the executed deed is the date used for the Sale Reported Date.

2. Within five Business Days of receiving the executed deed, submit the following to Freddie Mac via fax at (571) 382-4905 (or as otherwise directed by Freddie Mac):

• Proof that subordinate liens have been paid or released

• Copy of the executed deed showing conveyance between the Borrower and Freddie Mac

3. Report the Mortgage as a Transfer to REO via MIDANET. Ensure that the:

• Ending unpaid principal balance is the ending balance of the Mortgage

• Principal collected field is zero

• REO acquisition date is the date the deed was executed

• Due Date of Last Paid Installment reflects the due date of the last fully paid installment

(ii) Other requirements

1. Secure the Mortgaged Premises at time of possession and take all necessary actions to protect the Mortgaged Premises from waste, damage and vandalism

2. Request reimbursement for any applicable expenses, in accordance with Sections B65.54 through B65.58

3. Report the acquisition of the Mortgaged Premises to the Internal Revenue Service according to the requirements in Section 55.3 on Form 1099-A, Acquisition or Abandonment of Secured Property

(d) Borrower ineligible

If the Borrower is ineligible or Freddie Mac does not authorize the Servicer to offer a HAFA Deed-in-Lieu, the Servicer must consider the Borrower for a B65 Deed-in-Lieu. If the Borrower is ineligible for a B65 Deed-in-Lieu, the Servicer must (i) continue with delinquency collection efforts pursuant to Chapter 64, or (ii) initiate or continue foreclosure pursuant to Chapter 66, as applicable.



D65.7: General terms and conditions (06/01/10)

(a) Suspension of foreclosure sales

The Servicer must continue with an existing foreclosure proceeding during the HAFA process. However, the Servicer must not refer a Mortgage to foreclosure or complete a foreclosure sale in the following situations:

• While determining the Borrower's eligibility and qualification for HAFA

• While awaiting the timely return of a fully executed SSA

• During the term of a fully executed SSA

• While awaiting approval from Freddie Mac to offer the Borrower a HAFA Deed-in-Lieu

• Pending transfer of title to the Mortgaged Premises based on an approved sales contract per the RASS

• Pending transfer of title to the Mortgaged Premises via a HAFA Deed-in-Lieu by the date specified in the DIL Agreement

(b)

Release of subordinate liens

It is the responsibility of the Borrower to deliver clear, marketable title to the purchaser (in the case of a HAFA Short Sale) or Freddie Mac (in the case of a HAFA Deed-in-Lieu) and to work with the listing broker, settlement agent and/or lien holders to clear title impediments. The Servicer may, but is not required to, negotiate with subordinate lien holders on behalf of the Borrower. Prior to releasing any funds to a subordinate lien holder, the Servicer or real estate broker must obtain written commitment from the subordinate lien holder that it will fully release the Borrower from all claims and liability relating to the lien in exchange for payment received at the HAFA Short Sale closing. The Servicer will be in compliance with this Chapter if the Servicer requires the closing attorney or agent to confirm receipt of the written commitment from each subordinate lien holder on the HUD-1 Settlement Statement, or requires that a copy of the written commitment provided by the subordinate lien holder be sent to the Servicer with the HUD-1 Settlement Statement in advance of the closing.

Subordinate lien holder(s) may not require contributions from either the real estate agent or Borrower as a condition for releasing its lien and releasing the Borrower from personal liability. In addition, any payments to subordinate lien holder(s) related to the HAFA Short Sale must be reflected on the HUD-1 Settlement Statement, as applicable.

The Servicer, on behalf of Freddie Mac, will authorize the settlement agent to allow up to an aggregate of $6,000 as payment(s) to subordinate lien holder(s) in exchange for a lien release and full release of Borrower liability. Each lien holder, in order of lien priority, may be paid up to 6% of the unpaid principal balance of their loan, until the $6,000 aggregate cap is reached.

For a HAFA Short Sale, payments to the subordinate lien holders must be made at closing from the gross proceeds and must be reflected on the HUD-1 Settlement Statement.

For a HAFA Deed-in-Lieu, the Servicer must advance the payments to subordinate lien holders, if any, to the appropriate parties prior to receipt of the deed. Servicers will be reimbursed for such advances via Fannie Mae's payment process, in its capacity as program administrator for the United States Department of the Treasury ("Program Administrator"), once the Servicer has reported the transfer of title to the Mortgaged Premises to the Program Administrator. Refer to Section D65.10 for additional information.



A Borrower does not qualify for a HAFA Short Sale and HAFA Deed-in-Lieu unless all subordinate lien holders waive any right to require additional sums (either as a cash contribution or by a promissory note) from the Borrower as a collection for deficiencies. The subordinate lien holders may not request or receive payments from the Borrower directly in exchange for an agreement to the HAFA Short Sale or HAFA Deed-in-Lieu. Any such request or receipt violates the terms of the SSA or DIL Agreement and this chapter and, in the event the Servicer becomes aware of such act, the Servicer must report it to Freddie Mac in accordance with the Guide.

(c) Release of First Mortgage Lien

The Servicer must release its First Lien within the time required by applicable local or State law after receipt of sale proceeds from a HAFA Short Sale or delivery of the deed and Mortgaged Premises in a HAFA Deed-in-Lieu transaction. If local or State law does not require release within a specified time, the Servicer must release its First Lien within 30 Business Days after receipt of the sale proceeds from a HAFA Short Sale or delivery of the deed and Mortgaged Premises in a HAFA Deed-in-Lieu. Additionally, with respect to a HAFA Short Sale or HAFA Deed-in-Lieu, the Servicer, for itself and on behalf of Freddie Mac, must waive all rights to seek a deficiency judgment and may not require the Borrower to sign a promissory note or make a cash contribution for the deficiency.

(d) Borrower fees

The Servicer may not charge the Borrower any administrative processing fees in connection with HAFA. The Servicer must pay all out-of-pocket expenses, including, but not limited to: notary fees, recordation fees, release fees, title costs, property valuation fees, credit report fees or other allowable and documented expenses. The Servicer, however, may add these costs to the outstanding debt to the extent permitted by the Note, Security Instrument and applicable laws in the event the HAFA Short Sale or Deed-in-Lieu is not completed. If a HAFA Short Sale or HAFA Deed-in-Lieu is completed, the Servicer may request reimbursement for reimbursable expenses in accordance with Exhibit 57, 1- to 4- Unit Property Approved Expense Amounts; Exhibit 57A, Approved Attorney Fees and Title Expenses; and Chapter 71.

The Servicer must require the Borrower to waive reimbursement of any remaining Escrow, buy down funds or prepaid items, and assign any insurance proceeds to Freddie Mac, if applicable. Those funds will not be applied to reduce the total net proceeds from the sale.

(e) Mortgage insurer approval

For Mortgages that have mortgage insurance coverage, the Servicer must comply with all requirements of the mortgage insurer and the terms of coverage. The Servicer must obtain preliminary mortgage insurer approval for a HAFA Short Sale prior to the execution of the SSA. The Servicer must also request and obtain final approval from the mortgage insurer prior to executing and returning the Approval of Short Sale form, if required by the mortgage insurer. Additionally, the Servicer must receive mortgage insurer approval prior to entering into the DIL Agreement. If the mortgage insurer denies approval at any time, then the Borrower will be ineligible for HAFA. The Servicer is encouraged to obtain blanket or delegated approval from mortgage insurers, if possible. A Mortgage does not qualify for HAFA unless the mortgage insurer waives any right to collect additional sums (cash contribution or a promissory note) from the Borrower.

(f) Workout Prospector

The Servicer must use Workout Prospector® for all Mortgages being considered for HAFA under this chapter. The Servicer represents and warrants that it will only use Workout Prospector for Mortgages serviced for Freddie Mac, and not for mortgages owned by other investors. Moreover, both the input and output of Workout Prospector are considered Freddie Mac confidential information that the Servicer agrees not to disclose to third parties, except as authorized by Freddie Mac. When the Servicer uses Workout Prospector, the Servicer is deemed to be bound by all of the provisions of Exhibit 86, Workout Prospector User Agreement, to the same degree as if they had signed such



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.8: Incentive compensation (06/01/10)

D65.8: Incentive compensation (06/01/10)

A Borrower and a Servicer will be eligible for HAFA incentives upon successful completion of the HAFA Short Sale or HAFA Deed-in-Lieu if an SSA or DIL Agreement, as applicable, was executed by the Borrower and received by the Servicer on or before December 31, 2012 and complies with all the requirements of this chapter. The amount of any contribution paid by a mortgage insurer or other provider of credit enhancement shall not be considered in determining whether the Mortgage was paid in full and whether the Servicer is eligible for such incentive compensation.

For a HAFA Short Sale or HAFA Deed-in-Lieu, incentives will be paid as follows.

Agreement as a user.

Workout Prospector requires the submission of specific data elements in order to return a complete workout solution. The Servicer must ensure that all data input into Workout Prospector is true, complete and accurate and that all data is entered correctly.

(g) Reservation of rights to invoke remedies

Notwithstanding the terms of this chapter and Freddie Mac’s delegation of authority to Servicer to approve a HAFA Short Sale or HAFA Deed-in-Lieu, Freddie Mac reserves its rights to exercise any remedies provided by the Guide and the other Purchase Documents including, but not limited to, a repurchase of the Mortgage, a call on a credit enhancement and/or indemnification by the Servicer for any loss, damage or expense, including court costs and attorneys fees, suffered by Freddie Mac in the event Freddie Mac determines that there has been a failure to comply with any selling or Servicing representation, warranty or requirement of the Guide or other Purchase Documents.

(a)Borrower relocation incentive

Following the closing of a HAFA Short Sale or HAFA Deed-in-Lieu in accordance with the requirements of this chapter, the Borrower shall be entitled to an incentive payment of $3,000 to assist with relocation expenses.

For a HAFA Short Sale, the Servicer must instruct the settlement agent to pay the Borrower from sale proceeds at the same time that all other payments, including the payoff to the Servicer, are disbursed by the settlement agent. The amount paid to the Borrower must appear on the HUD-1 Settlement Statement as $3,000 in line 403 (Cash to Seller) with a note to indicate "HAFA Relocation Assistance" and the closing agent must adjust line 504 (Payoff to first mortgage loan) to reflect a reduction for the same amount. In all cases, the cash to the Borrower (i.e., Seller) shown on line 603 must be exactly $3,000.

The Servicer must advance the amount of the Borrower relocation incentive to Freddie Mac by including it with the payoff remittance. The Servicer will be reimbursed for the full amount of the Borrower relocation incentive via Fannie Mae's payment process, in its capacity as program administrator for the United States Department of the Treasury ("Program Administrator"), after the Servicer has reported the HAFA Short Sale transaction to the Program Administrator.

For a HAFA Deed-in-Lieu, the Servicer must mail a check for the relocation incentive to the Borrower within five Business Days from the date of the Borrower's execution of the deed conveying title to the Mortgaged Premises or the Borrower's vacancy and delivery of keys to the Servicer or the Servicer's agent, whichever is later, in accordance with the DIL Agreement. The Servicer will be reimbursed for



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.9: Standard form documents (06/01/10)

D65.9: Standard form documents (06/01/10)

the full amount of the relocation incentive via the Program Administrator's payment process after the Servicer has reported the transfer of title to the Mortgaged Premises to the Program Administrator.

Refer to Section D65.10 for additional information on reporting to the Program Administrator.

(b) Servicer incentive

Freddie Mac will pay the Servicer the amount of $2,200 to cover administrative and processing costs for each HAFA Short Sale completed in accordance with this chapter. Freddie Mac will pay the Servicer the amount of $1,500 to cover administrative and processing costs for each HAFA Deed-in-Lieu completed in accordance with this chapter. The Servicer incentive fees will be paid via the Program Administrator's payment process after the Servicer reports the completed HAFA transaction to the Program Administrator as described in Section D65.10.

(a) Use of standard form documents

Servicers must use the forms identified in Section D65.1 for HAFA. Refer to Section D65.1 for additional information on the use of standard HAFA forms.

(b) Document retention

In addition to complying with the requirements for Mortgage file retention described in Chapter 52, the Servicer must retain all documents and information received during the process of determining Borrower eligibility and qualification for HAFA. The Servicer must retain detailed records of Borrower solicitations or Borrower-initiated inquiries regarding HAFA, the outcome of the evaluation for foreclosure alternatives under HAFA and specific justification with supporting details if foreclosure alternatives were denied. Records must also be retained to document the reasons for termination of the SSA or expiration of HAFA transactions without a completed short sale or acceptance of a HAFA Deed-in-Lieu. The Servicer must retain required documents for the period set forth in Section 52.3.

(c)Signatures and electronic documents

All HAFA documentation must be signed by an authorized representative of the Servicer and reflect the actual date of signature by the Servicer's representative. All Borrowers and any other signatory to the Security Instrument must sign all the required HAFA documents. However, in instances where a Borrower, co-Borrower, or other signatory to the Security Instrument has divorced, separated from, or, if unrelated by marriage, civil union or similar domestic partnership under applicable law, vacated the Mortgaged Premises, only those Borrower(s) and signatories to the Security Instrument who currently occupy the Mortgaged Premises are required to sign the required HAFA documents provided the Borrower submits, as applicable, a copy of the divorce decree, court filed separation agreement or a copy of a recorded quit claim deed evidencing that the departed signatory has relinquished all rights to the Mortgaged Premises.

Servicers may evaluate requests on a case-by-case basis when the Borrower is unable to sign due to circumstances such as mental incapacity, military deployment, etc.

For Mortgages secured by Mortgaged Premises owned by an eligible inter vivos revocable trust, the Borrower must sign all HAFA-related documents in both an individual capacity and as trustee of the inter vivos revocable trust.



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.10: Reporting requirements (06/01/10)

D65.10: Reporting requirements (06/01/10)

All documents required under HAFA, except a deed, are considered "loss mitigation documents" under Sections 50.3.1 and C65.5 and must comply with those sections applicable to loss mitigation documents sent and/or signed electronically. All electronic loss mitigation documents, and any other electronic Mortgage file documents ("Electronic Records") must be capable of being retrieved and printed in a manner that accurately reflects the information originally contained in the Electronic Records. All Electronic Records must be accessible (either electronically or on paper) and promptly made available to Freddie Mac, as investor and in its role as HAMP Compliance Agent for Treasury, upon request.

(a) Reporting to the program administrator

The Servicer must collect and report the information required under HAMP prior to reporting any HAFA information required under this section. In addition to reporting to Freddie Mac, the Servicer is required to provide periodic HAFA loan level data to Fannie Mae, in its capacity as program administrator for the United States Department of the Treasury ("Program Administrator"), as a condition to receiving the incentive payments offered through HAFA. The data submitted must be accurate, complete, timely, and agree with the Servicer's records. Data must be reported by the Servicer at the following key milestones in the transaction, as applicable:

Each milestone is a separate data transmission and must be reported no later than the fourth Business Day of the month following the event. A Servicer should refer to the reporting requirements published by the Program Administrator on http://www.HMPAdmin.com for the required data elements associated with each data file and detailed guidelines for submitting the data files.

• Notification – When the SSA or the DIL Agreement is signed and executed, or updated following an extension of the marketing terms

• Short Sale/Deed-in-Lieu loan set up – At the transfer of ownership of the Mortgaged Premises (closing of a HAFA Short Sale or acceptance of a HAFA Deed-in-Lieu)

• Termination – When the SSA or DIL Agreement expires or when the SSA or DIL Agreement is terminated by the Servicer

(b) Reporting to Freddie Mac

Monthly Electronic Default Reporting

Servicers must report the following codes, as applicable, in their monthly Electronic Default Reporting (EDR):

Description EDR Code Reporting Requirements

Short Sale in Review Event code HB Report code HB to notify us that you are reviewing the Mortgage for a short sale, pursuant to the Borrower's request or response to your solicitation. Report code HB and the date on



Temporary reporting requirements

Until notified otherwise by Freddie Mac, Servicers must track certain key loan-level HAFA activity and data in a Microsoft Excel spreadsheet and submit the spreadsheet to Freddie Mac on a monthly basis. The spreadsheet must be submitted via e-mail to Freddie Mac with the subject line "HAFA Monthly Activity Report" at [email protected] within the first three Business Days of each month. Servicers must begin reporting their loan-level HAFA activity utilizing the spreadsheet beginning in the first month after the Servicer's implementation.

The template and instructions for completing the spreadsheet will be available on the Reporting and

which you began the review for the short sale, one time, in the first EDR cycle following the date the event took place.

Ineligible for Short Sale Event code HC Report code HC to notify us that the Mortgage is ineligible for a short sale. Report code HC and the date on which the request was denied, one time, in the first EDR cycle following the date the event took place.

Forbearance Plan Default action code 09 and Reason code 015

Report codes "09" and "015" in the first EDR cycle following the Effective Date of the SSA, and each month thereafter, for as long as the Mortgaged Premises is being marketed for a HAFA Short Sale. (The Effective Date of the SSA is the date the SSA is mailed to the Borrower.)

Servicers will be required to report the following codes at a later date:

Short Sale Agreement (SSA) - Borrower Execution

Default action code HF Report code HF to notify us that the Borrower has executed the HAFA SSA. Report code HF and the date the Borrower executed the SSA, one time, in the first EDR cycle following the date the event took place.

Home Affordable Foreclosure Alternative

Reason code HAF Report reason code HAF ("Home Affordable Foreclosure Alternative") together with default action code "09" in the month following the Effective Date of the SSA, and each month thereafter, for as long as the Mortgaged Premises are being marketed for a HAFA Short Sale. (The Effective Date of the SSA is the date the SSA is mailed to the Borrower.)



Freddie Mac Single-Family Seller/Servicer Guide/Single-Family Seller/Servicer Guide, Volume 2/Chs. 64-69: Servicing Nonperforming Mortgages/Chapter D65: Home Affordable Foreclosure Alternatives/D65.11: Compliance (06/01/10)

D65.11: Compliance (06/01/10)

The Servicer must comply with the HAFA Short Sale and HAFA Deed-in-Lieu requirements specified in this chapter. The Servicer must have adequate staffing and resources for responding to Borrower requests for participation, for receiving and processing HAFA documents in accordance with pertinent guidelines and for ensuring that inquiries and complaints about HAFA receive fair consideration, along with timely and appropriate response and resolution. The Mortgage file and all applicable documentation, system notes and other information about the Mortgage and the subject HAFA transaction must be retained by the Servicer and provided to Freddie Mac or its designated vendor for file quality review and audit purposes upon request.

Incentives tab of our HAFA web page at http://www.freddiemac.com/singlefamily/service/hafa.html.

(c) Credit bureau reporting

The Servicer should continue to report a "full file" status to the four major credit repositories for each loan processed under HAFA in accordance with the Fair Credit Reporting Act and credit bureau standards as provided by the Consumer Data Industry Association's (CDIA) Metro 2 Format credit bureau requirements. "Full file" reporting means that the Servicer must describe the exact status of each Mortgage it is servicing as of the last Business Day of each month. More detailed information on these reporting standards will be published by the CDIA.

