Chapter 46 Small Balance Loan Repurchase, Loss, B-Piece, Collateral

Transcription

1 Chapter 46 Small Balance Loan Repurchase, Loss, B-Piece, Collateral 46.1 Overview (11/17/14) This chapter describes the collateral, loss, repurchase, servicing and securities purchase requirements for a Mortgage originated under the Multifamily Small Balance Loan (SBL) Purchase Product as described in Chapter 18. a. SBL Securitization; B-Piece (10/01/14) Freddie Mac intends to sell the SBL Mortgages to a real estate mortgage investment conduit trust ( REMIC Trust ) that will issue securities backed by the SBL Mortgages, as described in Section 46.2 below ( SBL Securitization ). Freddie Mac requires the Seller/Servicer or an affiliate of the Seller/Servicer, each of which must be acceptable to the placement agents under the SBL Securitization and to Freddie Mac (in the case of an affiliate of the Seller/Servicer) (an Approved Seller/Servicer Affiliate ), to purchase the most subordinate class of underlying securities of an SBL Securitization that has the Seller/Servicer s SBL Mortgages as underlying collateral ( B-Piece ), as described in Section 46.5 below ( SBL B-Piece Purchase Obligations ). b. Servicing (10/01/14) As described in Section 46.3 below, certain additional servicing fees will be paid effective upon Freddie Mac s purchase of the SBL Mortgage and prior to the Cut- Off Date of the applicable SBL Securitization, in the form of excess servicing. After the Settlement Date of the applicable SBL Securitization, one of the excess servicing fees will be paid in the form of an interest-only (IO) bond issued as part of the SBL Securitization. c. Repurchase (10/01/14) The Seller/Servicer is required to repurchase an SBL Repurchase Mortgage in certain situations, under the terms and conditions described in Section 46.5 below ( SBL Repurchase Obligations ). The Seller/Servicer has repurchase options as provided in Section 46.6 below. d. Pool level loss (11/17/14) The Seller/Servicer is subject to a top pool level loss from the SBL Mortgages that have been originated by the Seller/Servicer, under the terms and conditions described in Section 46.7 below ( SBL Loss Obligations ). e. Collateral (11/17/14) The Seller/Servicer is required to post collateral (the SBL Collateral ) to ensure that it is able to meet its SBL B-Piece Purchase Obligations, SBL Loss Obligations and SBL Repurchase Obligations (collectively, the SBL Obligations ). SBL Addendum Chapter 46, November 17, 2014 Page 1

2 46.2 SBL Securitization (10/01/14) Freddie Mac intends to securitize the SBL Mortgages by selling them in the capital markets as part of an SBL Securitization. The SBL Mortgages will be sold to a depositor that will deposit the SBL Mortgages into the REMIC Trust. Private label securities collateralized by the SBL Mortgages will be issued by the REMIC Trust. The B-Pieces, which are not guaranteed by Freddie Mac, will be issued by the REMIC Trusts and privately sold to the B-Piece buyer(s). Freddie Mac will purchase the bonds issued by the REMIC Trust that are offered pursuant to the terms of the applicable SBL Securitization information circular (the Freddie Mac SBL Bonds ) and deposit the Freddie Mac SBL Bonds into a Freddie Mac trust. The Freddie Mac trust will issue the Freddie Mac guaranteed structured pass-through certificates for an SBL Securitization that will be publicly offered by the placement agents. The Seller/Servicer agrees that as part of the SBL Securitization process, the Seller/Servicer will permit Freddie Mac or its representatives to provide related information to the placement agents, Rating Agencies, if any, and/or investors, and will cooperate with the reasonable requests of the placement agents, Rating Agencies, if any, and/or investors in connection with an SBL Securitization. a. SBL Pools (11/17/14) Freddie Mac will designate a pool of SBL Mortgages ( SBL Pool ) for each SBL Securitization. The minimum principal amount of the SBL Mortgages, by UPB, designated for any one SBL Pool is $100,000,000.00, plus or minus $5,000,000 ( SBL Pool Size ). The SBL Pool Size for any particular SBL Pool may be decreased in Freddie Mac s sole discretion. b. SBL Securitization disclosure (11/17/14) As part of the SBL Securitization, the Seller/Servicer will be required to provide (i) information ("Seller/Servicer's Disclosure Information") to be included in the offering documents with respect to the Seller/Servicer in its capacity as originator of the SBL Mortgages and, if applicable, in its capacity as primary servicer or subservicer of the SBL Mortgages in the SBL Securitization, including a description of the sub-servicing agreement; (ii) an indemnification with respect to the Seller/Servicer's Disclosure Information for the benefit of Freddie Mac, Issuer Person, Issuer Group and Underwriter Group for the applicable SBL Securitization; and (iii) a letter of counsel (often referred to as a 10b-5 Negative Assurances Letter) addressing whether the Seller/Servicer 's Disclosure Information contains an untrue statement of any material fact or the Seller/Servicer 's Disclosure Information omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If the Seller/Servicer, as originator of the SBL Mortgages, contributes less than 20 percent of the SBL Mortgages to an SBL Securitization or if the Seller/Servicer will service less than 20 percent of the SBL Mortgages in an SBL Securitization, then such Seller/Servicer s Disclosure Information, indemnification and letter of counsel, as applicable, may no longer be required. SBL Addendum Chapter 46, November 17, 2014 Page 2

3 c. Master Servicer and sub-servicer Servicing (10/01/14) At the time of an SBL Securitization, Freddie Mac will cease to own the SBL Mortgages and Servicing of the SBL Mortgages will be transferred to a Master Servicer. The Seller/Servicer must assist in the transfer of Servicing to the Master Servicer designated for the SBL Securitization by timely delivering to the Master Servicer all materials required by the Pooling and Servicing Agreement (the PSA ), as modified by any applicable sub-servicing agreement entered into between Seller/Servicer and such Master Servicer, for the applicable SBL Securitization. 1. Master Servicer. The Master Servicer of the SBL Securitization may be a Seller/Servicer acting in its capacity as a Master Servicer, an affiliate of such Seller/Servicer, Freddie Mac or another entity, as determined by Freddie Mac. 2. Sale or Retention of Servicing Rights. The Seller/Servicer may elect to retain certain servicing rights as a sub-servicer or primary servicer with respect to its SBL Mortgages in the SBL Securitization or may elect to sell all or certain of such servicing rights to the Master Servicer of the SBL Securitization when Freddie Mac is not the Master Servicer. Any agreements regarding the sale of servicing rights and the payments related to such sale will be negotiated and entered into between the Seller/Servicer and the Master Servicer for the SBL Securitization. d. Special Servicer (11/17/14) For an SBL Securitization, the holder of the B-Piece will select the Special Servicer in consultation with Freddie Mac. For an SBL Securitization involving SBL Mortgages originated by more than one Seller/Servicer, resulting in multiple B- Pieces, each holder of a B-Piece may designate a Special Servicer for its respective B-Piece in consultation with Freddie Mac. The Seller/Servicer or an affiliate of the Seller/Servicer may also be designated as the Special Servicer for any SBL Securitization, including an SBL Securitization where the Seller/Servicer buys its own B-Piece or an SBL Securitization where a third party buys the B-Piece. e. Operating trust advisor for SBL Securitization (10/01/14) Freddie Mac may at its election select an operating trust advisor for the SBL Securitization, which may be Freddie Mac or a third party selected by Freddie Mac Servicing fees; interest-only bond Freddie Mac will pay the Seller/Servicer certain excess servicing fees as provided below, so long as the amount of interest received on the SBL Mortgage each month is in excess of the Freddie Mac Required Net Yield and is sufficient to pay such excess servicing fees, and the application of payments of the monthly installment complies with the priority of payments required under Chapter SBL Addendum Chapter 46, November 17, 2014 Page 3

4 a. Excess servicing fee; interest-only bond (10/01/14) As consideration for the Seller/Servicer s agreement to purchase its B-Piece, in addition to the Servicing Spread set forth in Chapter 18, Freddie Mac will pay the Seller/Servicer an additional fee in the amount of 25 basis points per annum of the outstanding principal balance of each SBL Mortgage effective upon Freddie Mac s purchase of the SBL Mortgage and continuing up to and including the Cut-off Date as designated under the Mortgage Loan Purchase Agreement ( MLPA ) of the applicable SBL Securitization. Prior to the Cut-off Date of the applicable SBL Securitization, the additional fee will be paid in the form of excess servicing. After the Settlement Date of the applicable SBL Securitization, the additional fee will be paid in the form of an interest-only (IO) bond issued as part of the SBL Securitization ( IO Bond ). The IO Bond will be subordinate in payment to the Freddie Mac SBL Bonds in the SBL Securitization and will not be guaranteed by Freddie Mac, but the IO Bond will be senior in payment to the B-Piece. The IO Bond will be a tradable bond with a CUSIP. b. Aggregation period servicing fee (10/01/14) As consideration for the Seller/Servicer s posting of the SBL Collateral during the aggregation period prior to each SBL Securitization, Freddie Mac will pay the Seller/Servicer an additional 15 basis points per annum of the outstanding principal balance of each SBL Mortgage as excess servicing effective upon Freddie Mac s purchase of the SBL Mortgage and continuing up to and including the Cut-off Date as designated under the applicable MLPA of the applicable SBL Securitization. c. SBL Securitization Delayed Excess Servicing Fee (10/01/14) If the unpaid principal balance of an SBL Pool from a single Seller/Servicer reaches $125,000,000 or more and the applicable SBL Securitization has not begun, as determined by Freddie Mac, Freddie Mac will pay the Seller/Servicer an additional 20 basis points per annum of the outstanding principal balance of each SBL Mortgage in such SBL Pool as excess servicing ( Delayed Excess Servicing Fee ) as provided below. 1. When the Fee is Applicable. The Delayed Excess Servicing Fee will be applicable when the SBL Pool reaches $125,000,000. Securitization Delay Reconciliation Date.For purposes of determining when the SBL Pool reaches $125,000,000 or more, any calculations will be made as of Freddie Mac s accounting cutoff date defined in Section 50.8 (the Securitization Delay Reconciliation Date ) and using the process described in Section If the Delayed Excess Servicing Fee is applicable, Freddie Mac will provide notice to the Seller/Servicer by to the attention of the Seller/Servicer contact identified by the Seller/Servicer to receive such notifications. 3. Payment of the Fee. If the Delayed Excess Servicing Fee is applicable, the Seller/Servicer will be paid commencing in the month following the SBL Addendum Chapter 46, November 17, 2014 Page 4

5 Securitization Delay Reconciliation Date in which the Delayed Excess Servicing Fee was determined to be applicable up to and including the Cut-off Date as designated under the applicable MLPA of the applicable SBL Securitization B-Piece Purchase Obligation (10/01/14) The Seller/Servicer or an Approved Seller/Servicer Affiliate must purchase the B-Piece for each SBL Securitization that has the Seller/Servicer s SBL Mortgages as its underlying collateral. The Seller/Servicer or the Approved Seller/Servicer Affiliate, as purchaser of the B-Piece, must meet the requirements under federal securities laws and of any placement agent(s) for an SBL Securitization for a purchaser of securities, including requirements to be an institutional accredited investor or qualified institutional buyer. a. Seller/Servicer s B-Piece (11/17/14) If an SBL Securitization includes SBL Mortgages originated by more than one Seller/Servicer, the Seller/Servicer will be required to purchase only the related junior bond class(es) or B-Piece(s) secured by the Seller/Servicer s SBL Mortgages. b. B-Piece Pricing Information (10/01/14) For each SBL Pool, Freddie Mac will provide the Seller/Servicer with B-Piece bond pricing information (the B-Piece Pricing Information ) prior to rate lock of the first loan under such SBL Pool, which information will include (i) B-Piece yields and approximate prices for each SBL Mortgage Type, (ii) the assumptions used in calculating the approximate prices based on the yields and (iii) the general method to be used to calculate the final price of the B-Piece. The initial B-Piece Pricing Information will be posted on FreddieMac.com. To most accurately estimate the B-Piece price for an SBL Pool, Freddie Mac will take into account the type of each SBL Mortgage in the designated SBL Pool and will designate a yield and corresponding B-Piece price for each type of SBL Mortgage (i.e., 5/15 Hybrid ARM, 7/13 Hybrid ARM, 10/10 Hybrid ARM, 5 year fixed-rate, 7 year fixed-rate, 10 year fixed-rate, etc.) ( SBL Mortgage Types ). This information will be set forth in the B-Piece Pricing Information. c. Final size and price of B-Piece (11/17/14) For each SBL Securitization, Freddie Mac will calculate the final size and price of the B-Piece based on the applicable B-Piece Pricing Information previously provided for the applicable SBL Pool. Once the SBL Pool and SBL Securitization structure are final, the B-Piece price will be adjusted as described in the B-Piece Pricing Information. 1. Size of the B-Piece. The final size of the B-Piece is calculated as of the applicable Cut-off Date as follows: Once the aggregate UPB of the applicable final SBL Pool as of the applicable Cut-Off Date is determined ( Final SBL Pool UPB ), the final size of the B- SBL Addendum Chapter 46, November 17, 2014 Page 5

6 Piece will be calculated, and will be in a notional amount equal to 10 percent of the Final SBL Pool UPB. 2. Price of the B-Piece. The final price of the B-Piece is calculated based on the SBL Mortgages in the SBL Pool as of the applicable Cut-off Date as follows: Step 1: Calculate the weighted average yield for the applicable SBL Pool using the UPB of each SBL Mortgage and the yield for the corresponding loan type for each of the six SBL Mortgage Types set forth in the B-Piece Pricing Information. Step 2: Generate anticipated cash flows for the B-Piece in the adjusted structure with actual loan and B-Piece coupons using the pricing assumptions specified in the B-Piece Pricing Information. The anticipated cash flows for this calculation will exclude any cash flows from the XS 25 basis point interest-only strip. Step 3: Calculate the final B-Piece price by discounting the anticipated cash flows calculated in Step 2 to their present value using a discount rate equal to the weighted average yield calculated in Step 1. d. Acknowledgment of B-Piece Pricing Information (10/01/14) Upon each acceptance of a commitment from Freddie Mac for an SBL Mortgage or rate lock of an SBL Mortgage with Freddie Mac under an early rate-lock application, the Seller/Servicer acknowledges it has received and reviewed the B-Piece Pricing Information applicable to the SBL Pool, and understands and agrees that the B-Piece pricing is subject to the assumptions and adjustments set forth in the B-Piece Pricing Information and in this Chapter 46. e. Subsequent sale of B-Piece (11/17/14) Freddie Mac will not impose any restrictions on the subsequent sale or transfer of the B-Piece, except as may otherwise then be required by applicable laws and regulations SBL Repurchase Obligations (10/01/14) For each SBL Mortgage purchased, notwithstanding the endorsement to Freddie Mac of any Note or other SBL Mortgage by Seller/Servicer without recourse, Seller/Servicer will be obligated to repurchase an SBL Mortgage under the terms and conditions set forth below. The Seller/Servicer also has certain Repurchase Options as described below in Section a. Applicability of SBL Repurchase Obligation (10/01/14) For purposes of the SBL Repurchase Obligations under this Chapter only and expressly not with respect to any other Seller/Servicer obligations under the Guide or any Borrower obligations, rights or remedies under the Loan Documents, the SBL Addendum Chapter 46, November 17, 2014 Page 6

7 Seller/Servicer s SBL Repurchase Obligations apply to an SBL Repurchase Mortgage as described below: 1. Monetary Default. The Seller will be subject to an SBL Repurchase Obligation for a default due in whole or in part to the failure of the Borrower to pay or deposit when due any amount required by the Loan Documents ( Required Loan Payment(s) ) when such Required Loan Payment has been delinquent for a period of 60 consecutive days ( 60 Day Delinquency ). For purposes of determining the commencement of the 60 Day Delinquency period with respect to Required Loan Payments, notwithstanding that the Loan Documents may provide for a grace or cure period with respect to that failure, the 60 Day Delinquency period will be deemed to start on the date on which the first delinquent Required Loan Payment was due. 2. Non-Monetary Default. The Seller/Servicer s SBL Repurchase Obligations also will apply to the following non-monetary defaults under the Loan Documents, as described in Article IX of the Loan Agreement (Events of Defaults and Remedies) ( Non-Monetary Default(s) ): Section 9.01(d) (fraud, material misrepresentation or material omission) Section 9.01(f) (transfers that violate the provisions of Article VII of the Loan Agreement, including liens on the Mortgaged Property) Section 9.01(g) (forfeiture proceeding) Section 9.01(j and n) (uncured default(s) under other lien(s) on the Mortgaged Property) Section 9.01(k) (bankruptcy, insolvency and related matters) Section 9.01(p) (Guarantor bankruptcy) 3. Ineligibility for SBL Securitization. The Seller/Servicer s SBL Repurchase Obligations apply when an SBL Mortgage is deemed ineligible for SBL Securitization for any of the following reasons ( SBL Securitization Ineligibility ): Qualified Mortgage. The SBL Mortgage will be deemed ineligible for an SBL Securitization if the SBL Mortgage is not a Qualified Mortgage. For the purpose of this Section, a Qualified Mortgage is a mortgage that is principally secured by an interest in real property, and principally secured means that the fair market value of the real property collateral for the SBL Mortgage must be at least 80 percent of the outstanding principal balance of the SBL Mortgage (or a loan-to-value ratio of 125 percent or less), tested either as of the Origination Date or when the SBL Mortgage is put into the SBL Securitization. Condemnation Valuation. The SBL Mortgage will be deemed ineligible for an SBL Securitization if any portion of the Property is released from the lien SBL Addendum Chapter 46, November 17, 2014 Page 7

8 of the SBL Mortgage in connection with a Condemnation (as such terms are defined in the Loan Agreement) and the ratio of (i) the unpaid principal balance of the SBL Mortgage to (ii) the value of the Property (taking into account only the related land and buildings and not any personal property or going-concern value), as determined by Freddie Mac in its sole and absolute discretion based on a commercially reasonable valuation method permitted in connection with an SBL Securitization, is greater than 125 percent immediately after such Condemnation and before any Restoration (as defined in the Loan Agreement) or repair of the Property (but taking into account any planned Restoration or repair of the Property as if such planned Restoration or repair were completed). If Freddie Mac enforces an SBL Repurchase Obligation with respect to an SBL Mortgage for this reason, Freddie Mac will credit to the Seller/Servicer any net proceeds or awards from such Condemnation received by Freddie Mac, less any costs and expenses incurred by Freddie Mac in connection with the Condemnation and the Repurchase. b. Repurchase Period (10/01/14) For purposes of the Seller/Servicer s SBL Repurchase Obligations under this Chapter only and expressly not with respect to any other Seller/Servicer Obligations under the Guide or any Borrower obligations, rights or remedies under the Loan Documents, the Seller/Servicer s SBL Repurchase Obligations with respect to an SBL Repurchase Mortgage will remain in effect for the time periods set forth below. 1. Twelve Month Period. Except for the Limited Extended Repurchase Period described below, the Seller/Servicer s SBL Repurchase Obligations for each SBL Repurchase Mortgage will be in effect until the earlier to occur of (A) 12 months from the Origination Date of the SBL Mortgage, or (B) the Settlement Date of the SBL Securitization ( Repurchase Period ). 2. Limited Extended Repurchase Period. Notwithstanding the Repurchase Period provisions set forth above, if an event occurs during the Repurchase Period that would eventually cause an SBL Mortgage to become an SBL Repurchase Mortgage after the Repurchase Period, with or without the knowledge of the Seller/Servicer and/or Freddie Mac during such Repurchase Period, and is not cured by the expiration of the Repurchase Period, the Repurchase Period will be extended for an additional six months ( Limited Extended Repurchase Period ). For the purposes of illustration, if an SBL Mortgage delinquency starts in the 12 th month following the SBL Mortgage Origination Date, and such delinquency continues and becomes a 60 Day Delinquency thereafter, then the Limited Extended Repurchase Period will apply for that SBL Mortgage. For the purpose of references to a Repurchase Period under this Chapter, references to the Repurchase Period also will include the Limited Extended Repurchase Period, if applicable. SBL Addendum Chapter 46, November 17, 2014 Page 8

9 c. Notice (10/01/14) The Seller/Servicer will provide Freddie Mac written notice as soon as practicable but in no event later than five Business Days following its discovery of the occurrence of an SBL Repurchase Mortgage event during the Repurchase Period or the occurrence of any other event which causes an SBL Mortgage to be subject to an SBL Repurchase Obligation. Until the Seller/Servicer s Repurchase of an SBL Repurchase Mortgage, Freddie Mac, in its sole discretion, will direct and control any Loss Mitigation Activities with respect to any SBL Repurchase Mortgage. If Freddie Mac discovers the occurrence of an SBL Repurchase Mortgage event not previously identified by the Seller/Servicer, Freddie Mac will provide written notice to the Seller/Servicer of such SBL Repurchase Mortgage. d. Repurchase requirements (10/01/14) If an SBL Mortgage is subject to an SBL Repurchase Obligation during a Repurchase Period and Freddie Mac elects to require the Seller/Servicer to Repurchase the SBL Mortgage, Freddie Mac will provide written notice to the Seller/Servicer ( Repurchase Notice ). The Seller/Servicer must purchase the SBL Repurchase Mortgage within 10 Business Days after receipt of a Repurchase Notice from Freddie Mac ( Repurchase Date ) by paying to Freddie Mac the Repurchase Price for that SBL Mortgage. 1. Repurchase Price. If the Seller/Servicer receives a Repurchase Notice, the Seller/Servicer will repurchase the SBL Repurchase Mortgage by paying the Repurchase Price for the SBL Mortgage as of the Calculation Date. As of any Calculation Date, the Repurchase Price means: The amount of Freddie Mac s interest in the unpaid principal balance (UPB) of the SBL Repurchase Mortgage as of the date of Repurchase (payoff), plus accrued interest at the Accounting Net Yield rate from the Due Date of the Last Paid Installment (as described in Chapter 50) through the day before Repurchase. If Freddie Mac was obligated to advance any amounts not paid by the Borrower in a timely manner, the Repurchase Price will include such amounts. 2. Repurchase Expenses. The Seller/Servicer will be responsible for all expenses payable in connection with the transfer of the SBL Mortgage to the Seller/Servicer, including all documentary stamp taxes, recording fees, title insurance fees, transfer taxes and Legal Fees ( Repurchase Expenses ). 3. Repurchase Statement. The Repurchase Notice will include an informational statement listing the Repurchase Price information described in Section 46.5(d)(1) above. It will also include the Freddie Mac account information required for the Seller/Servicer s wire transfer and any Repurchase Expenses incurred by Freddie Mac ( Repurchase Statement ). SBL Addendum Chapter 46, November 17, 2014 Page 9

10 4. Completion of Repurchase. An SBL Repurchase Obligation with respect to an SBL Mortgage will not be completed until the Seller/Servicer has satisfied the remittance and reporting requirements of Chapters 53 and 54. Payment must be made by wire transfer of funds to such account as Freddie Mac will designate in the Repurchase Statement. 5. Calculation of Additional Loss. If the Seller/Servicer fails to repurchase the SBL Repurchase Mortgage by the Repurchase Date ( Repurchase Obligation Default ), in addition to the required Repurchase Price and any other rights and remedies Freddie Mac may have with respect to the Seller/Servicer under the Guide, Freddie Mac may charge the Seller/Servicer an interest reimbursement fee as provided in Section Repurchase Statement Recalculation. Following a Repurchase Obligation Default, Freddie Mac will recalculate the Repurchase Price and determine whether additional amounts are due. If there is an additional amount due from Seller/Servicer, Freddie Mac will provide the Seller/Servicer with a revised Repurchase Statement. The Seller/Servicer must pay any additional amounts due within five Business Days of receipt of the revised Repurchase Statement from Freddie Mac, in accordance with the payment provisions set forth above in Section 46.5(d)(4). 7. Repurchase Obligation Default Continues. If the Seller/Servicer fails to Repurchase an SBL Repurchase Mortgage within 10 Business Days following Freddie Mac s transmission of a revised Repurchase Statement to the Seller/Servicer as provided in Section 46.5(d)(6) above, in addition to the Repurchase Price, the Seller/Servicer will become obligated for all SBL Losses with respect to that SBL Repurchase Mortgage, even if the Repurchase Period for the SBL Repurchase Mortgage has expired. Upon a Seller/Servicer s failure to Repurchase an SBL Repurchase Mortgage, Freddie Mac also may exercise any rights and remedies against the Seller/Servicer allowed under the Guide, including suspension or termination of selling and servicing rights. 8. Statement Errors. The Seller/Servicer and Freddie Mac must each bring to the other s immediate attention any arithmetic or other error in any Repurchase Statement and diligently attempt to resolve any questions or claimed errors in such Repurchase Statement(s). Absent patent error, Freddie Mac s determination of the amount of the Repurchase Price due from Seller/Servicer will be final Repurchase Option (10/01/14) The Seller/Servicer has the right to repurchase an SBL Mortgage ( Repurchase Option ) as set forth below. The Seller/Servicer must provide written notice to Freddie Mac of its election of a Repurchase Option, identifying the SBL Mortgage, including the Freddie Mac loan number, the name of the Property and the Seller/Servicer s estimate of the Repurchase Price and the reason for Repurchase. Freddie Mac will verify the Repurchase Price and provide written confirmation of the Repurchase Price to the SBL Addendum Chapter 46, November 17, 2014 Page 10

11 Seller/Servicer. The Seller/Servicer must purchase the SBL Mortgage within 10 Business Days of the date of providing written notice to Freddie Mac of the Repurchase Option election. a. SBL Repurchase Mortgage during Repurchase Period (10/01/14) If an SBL Mortgage becomes an SBL Repurchase Mortgage during a Repurchase Period (or Limited Extended Repurchase Period), the Seller/Servicer may elect to purchase the SBL Mortgage during the Repurchase Period prior to receipt of a Repurchase Notice from Freddie Mac. The Seller/Servicer must pay to Freddie Mac the Repurchase Price for that SBL Mortgage, calculated as set forth in Section 46.5(d)(1) above, together with any Repurchase Expenses. b. Securitization delay (10/01/14) The Seller/Servicer may elect to repurchase an SBL Mortgage if the SBL Mortgage has not been included in an SBL Securitization within 12 months from the Origination Date of the SBL Mortgage. A Repurchase will be permitted at Freddie Mac s sole discretion. If Freddie Mac agrees to the Repurchase, the Seller/Servicer shall pay to Freddie Mac the Repurchase Price for that SBL Mortgage, calculated as set forth in Section 46.5(d)(1) above, together with any Repurchase Expenses. c. SBL Loss Obligation (11/17/14) The Seller/Servicer may elect to purchase an SBL Defaulted Mortgage if the SBL Mortgage Default occurs subsequent to the expiration of the Repurchase Period when the Seller/Servicer is or may be subject to an SBL Loss Obligation, as set forth in Section 46.7 below Pool-level loss - general (11/17/14) The Seller/Servicer will be subject to pool-level SBL Loss Obligations subsequent to the Repurchase Period. The Seller/Servicer also will be subject to SBL Loss Obligations during the Repurchase Period upon a Repurchase Obligation Default only if the Seller/Servicer does not Repurchase an SBL Mortgage subject to a Repurchase Obligation as provided in Section 46.5(d)(7). For each SBL Mortgage purchased by Freddie Mac, notwithstanding the endorsement to Freddie Mac of any Note or other Loan Document by Seller without recourse, Seller acknowledges and agrees that it will be liable for the payment to Freddie Mac of all amounts allocable to the Seller/Servicer on the SBL Loss Statement, not to exceed the Loss Reimbursement Maximum Available, as provided in this Section. a. SBL Loss Reimbursement Obligations (11/17/14) 1. SBL Loss. The amount of the SBL Loss will be determined as set forth in Section 46.7(d) below. 2. Loss Reimbursement Maximum SBL Pool. The Seller/Servicer s maximum loss for each SBL Pool will be an amount equal to ten percent of the aggregate SBL Addendum Chapter 46, November 17, 2014 Page 11

12 UPB of the SBL Pool, reduced by the UPB of any SBL Mortgage repurchased but including the UPB of any SBL Repurchase Mortgages that have not been Repurchased ( Loss Reimbursement Maximum ). 3. SBL Loss Reimbursement; Loss Reimbursement Maximum Available. The Seller/Servicer must reimburse Freddie Mac for the SBL Loss on an SBL Defaulted Mortgage in an amount that is the lesser of (x) the SBL Loss set forth on the SBL Loss Statement or (y) the Loss Reimbursement Maximum available for the SBL Pool. The Loss Reimbursement Maximum available for an SBL Pool is the amount of the Loss Reimbursement Maximum reduced by the SBL Losses that Freddie Mac has been reimbursed for by Seller/Servicer for that SBL Pool ( Loss Reimbursement Maximum Available ). When determining the amount of the Seller/Servicer s applicable SBL Loss Obligation for an SBL Mortgage, the Loss Reimbursement Maximum will not exceed the Loss Reimbursement Maximum Available. 4. SBL Loss Reimbursement Pre-Securitization. For an SBL Mortgage Default occurring after the Repurchase Period and for which Freddie Mac has issued an SBL Loss Statement on or prior to the SBL Securitization, the initial SBL Loss amount to be paid to Freddie Mac ( Initial Loss Amount ) will be based on the UPB of the SBL Pool as of the Calculation Date of the SBL Loss. At the time of the SBL Securitization, the Initial Loss Amount paid by the Seller/Servicer will be reconciled against Loss Reimbursement Maximum based on the Final SBL Pool UPB. If the Initial Loss Amount for the SBL Loss paid by the Seller/Servicer is less than the Loss Reimbursement Maximum based on the Final SBL Pool UPB, the Seller/Servicer must remit the difference (but not to exceed the Loss Reimbursement Maximum Available) to Freddie Mac within five Business Days after receipt of notification from Freddie Mac. If the Initial Loss Amount for the SBL Loss paid by the Seller/Servicer is in excess of the Loss Reimbursement Maximum Available based on the Final SBL Pool UPB, Freddie Mac will remit the difference to the Seller/Servicer within 10 Business Days after the SBL Securitization Settlement Date. 5. SBL Loss Reimbursement Post-Securitization. For SBL Mortgage Defaults occurring after the Repurchase Period and for which Freddie Mac has not issued an SBL Loss Statement as of the SBL Securitization or for which Freddie Mas has not received a reimbursement for any SBL Loss Obligations, if the SBL Defaulted Mortgage is not included or cannot be included (because it is ineligible) in the SBL Securitization, Freddie Mac will retain from the SBL Collateral Account for the purposes of satisfying the Seller/Servicer s potential SBL Loss Obligation post-securitization for such SBL Defaulted Mortgage an amount equal to the lesser of (A) 30 percent of the UPB of the SBL Defaulted Mortgage as of the SBL SBL Addendum Chapter 46, November 17, 2014 Page 12

13 Securitization Settlement Date, or (B) the Loss Reimbursement Maximum Available based on the Final SBL Pool UPB. Following the SBL Loss Calculation Date for an SBL Defaulted Mortgage, the Seller/Servicer will be entitled to the release of any SBL Collateral retained for the SBL Loss Obligation for such SBL Defaulted Mortgage which is in excess of the Seller/Servicer s SBL Loss Obligation for such SBL Defaulted Mortgage. 6. Remittance Due Date. The Seller/Servicer must remit the amount due and payable to Freddie Mac for the SBL Defaulted Mortgage within ten (10) Business Days after receipt of the SBL Loss Statement. Payment must be made by wire transfer of funds to such account as Freddie Mac designates in the SBL Loss Statement. 7. Failure to Pay Loss Obligation When Due. If the Seller/Servicer fails to pay any SBL Loss Obligation when due, Freddie Mac may exercise all rights and remedies under the Guide against the Seller/Servicer, including retention of any SBL Collateral Account funds and/or termination of the Seller/Servicer s selling approval and/or Servicing approval as provided in Chapter 4 of the Guide. b. Notice of default (11/17/14) The Seller/Servicer will provide Freddie Mac written notice as soon as practicable but in no event later than five Business Days following its discovery of the occurrence of an SBL Mortgage Default for an SBL Mortgage subject to an SBL Loss Obligation. Unless the Seller/Servicer repurchases a SBL Defaulted Mortgage as a result of exercising its Repurchase Option, Freddie Mac, in its sole discretion, will direct and control all Loss Mitigation Activities with respect to any SBL Defaulted Mortgage. If Freddie Mac discovers the occurrence of an SBL Mortgage Default not previously identified by the Seller/Servicer, Freddie Mac will provide written notice to the Seller/Servicer of such SBL Mortgage Default. c. SBL Loss Repurchase Option (11/17/14) The Seller/Servicer may elect to purchase an SBL Defaulted Mortgage or the REO Property (as defined below), as applicable, if the SBL Mortgage Default occurs subsequent to the expiration of the Repurchase Period when the Seller/Servicer is or may be subject to an SBL Loss Obligation. Any such Repurchase Option must be exercised on or prior to the initial pricing date of the SBL Securitization for the applicable SBL Pool. 1. SBL Defaulted Mortgage Repurchase Option. If the Seller/Servicer elects to repurchase an SBL Defaulted Mortgage, the Repurchase Option will be solely at the election of the Seller/Servicer if the Repurchase Option is exercised and completed within 30 days after the occurrence of a 60 Day Delinquency or within 60 days after the occurrence of a Non-Monetary Default. The Seller/Servicer must satisfy the Repurchase requirements set forth in Section 46.5(d) above. SBL Addendum Chapter 46, November 17, 2014 Page 13

14 If the Seller/Servicer does not exercise the Repurchase Option for an SBL Defaulted Mortgage within the time periods provided in subsection (c)(1) above, any Repurchase Option is subject to Freddie Mac s sole discretion. 2. REO Property Repurchase Option. If the Property securing an SBL Defaulted Mortgage becomes an REO Property ( REO Property ), the Seller/Servicer may elect to purchase such REO Property in lieu of paying the SBL Loss. The repurchase price of an REO Property for which the Seller/Servicer is subject to an SBL Loss ( SBL REO Price ) will be the amount of Freddie Mac's interest in the UPB of the SBL Mortgage as of the acquisition date or the date of acceptance of a deed in lieu of foreclosure, plus accrued interest at the Accounting Net Yield rate from the Due Date of the Last Paid Installment through the day before repurchase, plus any expenses reimbursed by Freddie Mac to the Servicer and any expenses incurred by Freddie Mac in marketing the REO Property, minus any sale proceeds, and other proceeds or refunds remitted to Freddie Mac by or on behalf of the Servicer; provided, however, that rental proceeds remitted or due to Freddie Mac must not be deducted from the SBL REO Price. At Freddie Mac's discretion, the SBL REO Price will include an amount equal to any loss, damage or expense, including court costs, costs of investigation and reasonable attorney fees, incurred by Freddie Mac in connection with its purchase, ownership and resale to the Seller/Servicer of Freddie Mac's interest in the REO Property. In addition, the Seller/Servicer must pay all documentary stamp taxes, recording fees, transfer taxes and all other expenses payable in connection with the transfer of the REO Property to the Seller/Servicer. d. Calculation of loss (10/01/14) On a Calculation Date, Freddie Mac will calculate the SBL Loss incurred by Freddie Mac in connection with an SBL Defaulted Mortgage and deliver the SBL Loss Statement pursuant to Section 46.7(e) below. 1. The terms SBL Loss or SBL Losses means with respect to any SBL Mortgage as of any Calculation Date: the UPB of the SBL Defaulted Mortgage as of the date of the SBL Mortgage Default; plus interest due from the Borrower under the Loan Documents from the date of an SBL Mortgage Default to such Calculation Date not otherwise included in the calculation of Default or Modification Resolution Costs; plus Default or Modification Resolution Costs; less Default Recoveries or Modification Recoveries, as the case may be. SBL Addendum Chapter 46, November 17, 2014 Page 14

15 2. Default or Modification Resolution Costs means with respect to any SBL Defaulted Mortgage as of any Calculation Date the sum of the following paid or incurred by or on behalf of Freddie Mac: the cost, if any, of servicing by a third-party servicer of the SBL Mortgage while an SBL Mortgage Default is continuing; all costs and expenses, including Legal Fees, and receivership fees and expenses, incurred in connection with any Loss Mitigation Activities; all costs and expenses, including Legal Fees, incurred in connection with a Bankruptcy Proceeding or a forbearance or the modification of the Loan Documents; all costs and expenses, incurred in connection with the rehabilitation, maintenance and/or operation of the Property securing the SBL Mortgage, including Legal Fees, receivership fees and expenses, taxes, insurance, management fees, maintenance salaries, utilities, leasing commissions and the cost of any repairs or improvements necessary to restore the Property to decent, habitable, safe and sanitary condition and necessary to maximize the value of the Property; all costs and expenses, including Legal Fees, sales commissions and thirdparty costs incurred in connection with the disposition of the Property or a forbearance or the modification of the Loan Documents; and any payments due and owing from the Borrower to Freddie Mac (other than payment of, or reimbursement for, those items previously listed in subsection 46.7(d)(1) above). The reasonableness and necessity of all Default or Modification Resolution Costs will be determined by Freddie Mac in its sole discretion. 3. Default Recoveries means the following amounts actually received by Freddie Mac: if the Property or Note evidencing or securing an SBL Mortgage has been sold, any amounts received from the sale of the Property or Note, net of any sales commissions, Legal Fees or costs of sale, other than those described in subsection 46.7(d)(2) above (excluding any fees, interest or other charges in connection with a mortgage made or purchased to facilitate the sale of the Property or Note); if the Property has been owned by Freddie Mac for 30 or more months, the Appraised Value of the Property (less necessary and reasonable operating costs); all rental or other income received by Freddie Mac from the operation of the Property (or from a court-appointed receiver) since the date of the SBL Mortgage Default; SBL Addendum Chapter 46, November 17, 2014 Page 15

16 any other amounts received from the Borrower on account of the SBL Mortgage since the date of the SBL Mortgage Default; any amounts received from any guarantor(s) of the Borrower s obligations since the date of the SBL Mortgage Default; any amounts received from any third party with respect to the Property, including insurance proceeds, condemnation proceeds, insurance premium rebates, property tax refunds, and vendor refunds or rebates; any escrows, reserves or previously unapplied amounts that are applied against amounts owed under the SBL Mortgage; and the proceeds of any insurance policies not applied to restoration of the Property or obligations of the Borrower. 4. Modification Recoveries means the sum of the following amounts actually received by Freddie Mac: any amounts received from the Borrower or any guarantor on account of the SBL Mortgage since the date of the SBL Mortgage Default, which amounts have not been applied to principal or interest; and the present value (calculated at the original gross interest rate of the Note secured by the SBL Mortgage) of all payments due and owing to Freddie Mac through the date of maturity of the SBL Mortgage under the original terms of the Loan Documents, as modified or forborne. e. Loss statement (11/17/14) The SBL Loss will be reflected in a loss statement delivered to Seller ( SBL Loss Statement ). The SBL Loss Statement will reflect the following information: 1. an itemized calculation of the cumulative SBL Loss with respect to an SBL Mortgage; 2. the amount of all reimbursements previously received from the Seller/Servicer with respect to that SBL Mortgage; 3. the amount of the Loss Reimbursement Maximum and the Loss Reimbursement Maximum Available for that SBL Mortgage; 4. any reimbursement due from Freddie Mac to the Seller/Servicer in accordance with the provisions of this Chapter; and 5. to the extent applicable, copies of invoices and other documentation supporting the charges and amounts reflected in clauses (1) through (4) above. f. Interim SBL Loss Information Statement (10/01/14) Upon the request of the Seller/Servicer, if an SBL Mortgage Default has occurred and is continuing, Freddie Mac will transmit to the Seller/Servicer an informational statement setting forth the accrued SBL Loss for such SBL Mortgage as of the date of such informational statement (the Interim Loss Information Statement ). The SBL Addendum Chapter 46, November 17, 2014 Page 16

17 Interim Loss Information Statement will contain the same information provided in the SBL Loss Statement as to amounts calculated as of such date of the Interim Loss Information Statement. Freddie Mac will not be required to provide the Seller/Servicer with an Interim Loss Information Statement more than once each calendar quarter. The Seller/Servicer agrees that (1) any Interim Loss Information Statement provided by Freddie Mac will not be determinative nor final as to the calculation of an SBL Loss for an SBL Mortgage, and (2) if there is a conflict between an Interim Loss Information Statement and an SBL Loss Statement, the SBL Loss Statement will control. g. SBL Loss Statement errors (10/01/14) The Seller/Servicer and Freddie Mac will each bring to the other s immediate attention any arithmetic or other error in any SBL Loss Statement and diligently attempt to resolve any questions or claimed errors in the SBL Loss Statement. Absent patent error, Freddie Mac s determination of the amount of SBL Loss reimbursement due from the Seller/Servicer will be final. h. Termination of Seller s SBL Loss Obligations (11/17/14) Notwithstanding any provision in this Chapter to the contrary, for purposes of the Seller/Servicer s SBL Loss Obligations under this Chapter only and expressly not with respect to any other Seller/Servicer Obligations or any Borrower obligations, rights or remedies under the Loan Documents, with respect to each SBL Mortgage, the Seller/Servicer s obligation to reimburse Freddie Mac for SBL Loss, and to continue to provide security for the SBL Loss Obligations pursuant to this Chapter, will continue until at least one of the following has occurred with respect to the SBL Mortgage: the SBL Securitization of the SBL Mortgage by Freddie Mac, the final payment by the Borrower of all amounts due to Freddie Mac under the Loan Documents has been received by Freddie Mac; or the consummation of the Repurchase of the SBL Mortgage by the Seller/Servicer; or purchase of the Real Estate Owned (REO) Property by the Seller/Servicer in accordance with Section 46.7(c) above; and the payment of any SBL Loss with respect to the SBL Mortgage (not to exceed the Loss Reimbursement Maximum) by Seller to Freddie Mac Collateral requirements (10/01/14) The Seller/Servicer must provide the SBL Collateral to secure its SBL Obligations for each SBL Pool designated by Freddie Mac. a. Form of SBL Collateral; SBL Collateral Account (11/17/14) The SBL Collateral may be provided in the form of cash or a Letter of Credit SBL for each SBL Pool. The Seller/Servicer must deposit and maintain cash SBL Collateral in the SBL Cash Collateral Account. The Seller/Servicer must deliver SBL Addendum Chapter 46, November 17, 2014 Page 17

18 Letter(s) of Credit SBL to Freddie Mac to hold as the SBL LOC Collateral Reserve. The SBL Cash Collateral Account and the SBL LOC Collateral Reserve are together referred to as the SBL Collateral Account. Freddie Mac may withdraw funds from the SBL Cash Collateral Account and/or draw upon all or part of a Letter of Credit SBL in the SBL LOC Collateral Reserve at any time and without notice to the Seller/Servicer if the Seller/Servicer fails to timely reimburse Freddie Mac for an SBL Obligation, as provided in this Chapter. 1. SBL Cash Collateral Account Requirements. When the Seller/Servicer uses cash to secure the Seller/Servicer s SBL Obligations (as described in Section 46.8(c) below), the funds must be remitted to and maintained in the SBL Cash Collateral Account as provided below. Although the SBL Cash Collateral Account is not a Custodial Account, the SBL Cash Collateral Account is subject to the requirements of Chapter 52 pertaining to Custodial Accounts, except as otherwise provided in this Chapter 46. Eligible Depository. The account must be established with a depository institution meeting the requirements of Chapter 52.2(4). The Seller/Servicer may not maintain the SBL Cash Collateral Account in-house or with an affiliate. Establishing the Account. The Seller/Servicer must establish the SBL Cash Collateral Account in an interest-bearing account for the benefit of Freddie Mac. The Seller/Servicer must provide an SBL Cash Collateral Pledge, Security, and Custody Agreement ( SBL Pledge Agreement ) in a form to be provided by Freddie Mac, to be executed by the Seller/Servicer, the depository institution and Freddie Mac. Any revisions to the SBL Pledge Agreement must be in form and substance acceptable to Freddie Mac. The Seller/Servicer must also provide a deposit account control agreement or other account agreement if required by the depository institution in connection with the SBL Pledge Agreement, which agreement also must be acceptable to Freddie Mac. The SBL Cash Collateral Account must be designated exactly in the following manner: Freddie Mac SBL Cash Collateral Account (Name of Seller/Servicer) Interest. The interest earned on the SBL Cash Collateral Account, less the fees and expenses for establishing and maintaining such account, will accrue and be applied to the SBL Cash Collateral Account. Reporting. The Seller/Servicer must provide to Freddie Mac, no later than the 1st day of each month, a balance for the SBL Cash Collateral Account from the depository institution. Freddie Mac must have this information in the form of Freddie Mac view access to the SBL Cash Collateral Account with the SBL Addendum Chapter 46, November 17, 2014 Page 18

19 depository institution. Freddie Mac may also request a copy of a monthly account statement or a screenshot of the SBL Cash Collateral Account. Letter Agreements Not Applicable. The forms required by Section 52.6(b) will not be applicable to the SBL Cash Collateral Accounts. 2. SBL LOC Collateral Reserve; Letter of Credit SBL Requirements. When the Seller/Servicer elects to provide a Letter of Credit - SBL to secure the Seller/Servicer s SBL Obligations, the Letter of Credit - SBL must satisfy the applicable requirements set forth in Chapter 11 of the SBL Addendum for a Letter of Credit SBL in addition to the requirements set forth below in this Section. (i) The Letter of Credit SBL must be a clean, irrevocable, unconditional standby letter of credit, or an amendment or renewal of the same, that satisfies the following conditions: It must name the Federal Home Loan Mortgage Corporation as the sole beneficiary and permit beneficiary to assign it without further consent from the Letter of Credit Issuer. It must have an initial term of not less than 12 months. It must provide that it may be drawn on by beneficiary, in whole or in part, by presentation to Letter of Credit Issuer of a sight draft without any other restrictions on the right to draw. It must provide for an option to present the sight draft electronically (by facsimile or other electronic means) with confirmation by telephone and the original sight draft to follow (e.g., an alternative to an in-person presentation of the sight draft). It must be subject to the Uniform Customs and Practices for Documentary Credits, 2007 revision, International Chamber of Commerce Publication No. 600 (UCP 600), and as to matters not governed by the UCP 600, must be subject to the laws of the State of New York (without regard to conflict of law provisions). It must be issued by a Letter of Credit Issuer meeting the Letter of Credit Issuer Requirements. (ii) The Letter of Credit - SBL must be issued in increments of not less than $1,000, Right to Draw on Letter of Credit SBL. Freddie Mac may draw upon a Letter of Credit - SBL if the Seller/Servicer fails to provide Freddie Mac with a renewal or replacement of the Letter of Credit - SBL at least 30 days prior to the expiration of the Letter of Credit SBL, and/or if the Letter of Credit Issuer is no longer an Eligible Institution. If Freddie Mac draws on a Letter of Credit SBL for either such reason, Freddie Mac will deposit the proceeds in an SBL Cash Collateral SBL Addendum Chapter 46, November 17, 2014 Page 19

20 Account if the Seller/Servicer has an existing SBL Cash Account established for the benefit of Freddie Mac, and if not, Freddie Mac will deposit the proceeds into a Freddie Mac account until such time as the Seller/Servicer establishes an SBL Cash Collateral Account with a depository institution for the benefit of Freddie Mac in accordance with the requirements set forth in Section 46.8(a(1) above. Freddie Mac may also draw upon a Letter of Credit SBL and use the proceeds to satisfy any SBL Obligations for which the Seller/Servicer has failed to timely reimburse Freddie Mac as provided in this Chapter. b. Pool Collateral Amount (11/17/14) The amount of the SBL Collateral required for an SBL Pool ( Pool Collateral Amount ) will be based upon the estimated price of the B-Piece for an SBL Securitization (as such estimated price is described in Section 46.4 above). As noted above in Section 46.4, Freddie Mac will provide the Seller/Servicer with the B-Piece Pricing Information for each SBL Pool prior to rate lock of the first loan under such SBL Pool. 1. Minimum Pool Collateral Amount. The minimum Pool Collateral Amount for an SBL Pool will not be less than the estimated amount required to purchase the B- Piece for the SBL Securitization. 2. Maximum Pool Collateral Amount. The maximum Pool Collateral Amount will not exceed 10 percent of the aggregate UPB of the SBL Mortgages in the SBL Pool. c. Delivery of SBL Collateral (11/17/14) The Seller/Servicer shall deliver the SBL Collateral to Freddie Mac as set forth below. 1. Cash Collateral. For SBL Collateral in the form of cash, the Seller/Servicer will satisfy the Pool Collateral Amount by depositing cash into the SBL Cash Collateral Account based on the Initial Loan Collateral Amount (as defined below) prior to the final delivery of each SBL Mortgage. For the Seller/Servicer s convenience, rather than calculate the SBL Collateral based on the weighted average price of the B-Piece by SBL Mortgage Type for each SBL Mortgage delivered to Freddie Mac, the amount of cash the Seller/Servicer must deposit into the SBL Cash Collateral Account at the time of delivery of the SBL Mortgage to Freddie Mac will be determined based on a fixed percentage, and will be in an amount equal to the original UPB of the SBL Mortgage times 9 percent (the Initial Loan Collateral Amount ). The Seller/Servicer must wire the funds in the Initial Loan Collateral Amount to the designated SBL Cash Collateral Account not later than one day prior to the date of delivery to Freddie Mac of the Final Delivery Package for the SBL Mortgage. SBL Addendum Chapter 46, November 17, 2014 Page 20