FHLMC: HAFA Overview

1. FHLMC: HAFA Overview

2. Definitions • There are several Freddie Mac Definitions one should be familiar with as they relate to HAFA loans. • These will be explained in the following slides

3. Definitions • Borrower: The party obligated to repay the indebtedness secured by the Mortgaged Premises. They must be one of the following: an individual or individuals, a living trust, an Illinois land trust. • Business Day: a day other than a Saturday or Sunday, A day on which the Federal Reserve Bank of New York is authorized or obligated to remain closed. • Condominium Unit: a one-unit dwelling located in a Condominium Project.

4. Definitions • Cooperative Share Mortgage: this type of mortgage is ineligible for HAFA • Conforming Jumbo Mortgage: Conventional mortgages originated between July 1, 2007 and December 31, 2008 with original unpaid principal balances (UPB) that exceed Freddie Mac's base conforming loan limits ($417,000 for a 1-unit property). The original UPB of a conforming jumbo mortgage may not exceed the lesser of (i) 125 percent of the “area median house price of a residence of applicable size or (ii) 175% of the base conforming loan limit - $729,750 for a 1-unit property

5. Definitions • First Lien: Any lien that meets both of the following requirements • The lien is acceptable to private institutional first-mortgage investors in the area where the Mortgaged Premises are located. • The lien grants to the lienholder a claim against the property that, under the law of the jurisdiction where the Mortgaged Premises are located, is prior to the rights of all others, subject only to prior liens and encumbrances expressly waived by Freddie Mac pursuant to Section 39.4.

6. Definitions • Mortgaged Premises: the land and improvements thereon subject to the lien of a Mortgage. • Mortgage: a loan secured by a lien on real estate held in fee simple or on an acceptable leasehold estate. • Note: The instrument evidencing the indebtedness secured by a Security Instrument. In the context of document custody, the term "Note" may be construed to include any power of attorney or any applicable modifying instrument, such as a modification, a conversion agreement or an assumption of indebtedness and release of liability agreement.

7. Definitions • Primary Residence: The residential property physically occupied by an owner as the principal home domicile. Among the criteria that should consider in evaluating whether a property is a principal home domicile are the following • It is occupied by the owner for the major portion of the year. • It is in a location relatively convenient to the owner's principal place of employment. • It is the address of record for such activities as federal income tax reporting, voter registration, occupational licensing and similar functions. • It possesses the physical characteristics to accommodate the owner's immediate dependent family. These characteristics are those traditional to both the owner and the neighborhood. • The Borrower states an intention to occupy the property as a Primary Residence.

8. Definitions • Purchase Documents: Consists of the Purchase Contract, Bulletins, Any agreement pursuant to which a Seller provides a guaranty or any form of credit enhancement in connection with the sale of Mortgages to Freddie Mac, Servicer Success Scoreboard, Any other document designated to be a Purchase Document by Freddie Mac, and any other additional terms applicable to the sale of Mortgages. • Security Instrument: the instrument (Mortgage, deed of trust, deed to secure debt) creating a valid lien on real estate.

9. Further Definitions • When working Freddie Mac Loans, servicers should also be familiar with the terms in the following slides as they relate to HAFA.

10. HAFA Terms • 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 HAFA short sales.

11. HAFA Terms • 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 for which the price can be readily verified through financial publications.

12. HAFA Terms • 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 • 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.

13. HAFA Terms • HAMP: Home Affordable Modification Program • HAMP Modification: A loan modification pursuant to HAMP • B65 Deed-in-Lieu: A deed-in-lieu pursuant to approval authority • B65 Modification: a loan modification that is subject to Workout Options • B65 Short Payoff: A short Payoff pursuant to Workout Options

14. HAFA Forms • There are several forms that needed for HAFA, which can be located at http://www.freddiemac.com/singlefamily/service/hafa.html under the Borrower Solicitation and Documentation tab. • The forms will be explained in the following slides

15. HAFA Forms • 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 • 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, once the Borrower has received a purchase offer

16. HAFA Forms • 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 • Approval 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

17. HAFA Forms • Deed-in-Lieu: 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

18. Foreclosure Alternatives • 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 • 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.

19. Foreclosure Alternatives • Under Freddie Mac's HAFA requirements, eligible Borrowers must be offered a HAFA Short Sale • Servicers must adopt a written policy for the consideration, evaluation and processing of Borrowers for HAFA.