Chapter 45 - Real Estate Owned

Guide Bulletin Update 06/30/15 Chapter 45 – Page 1

The current official electronic version of the Guide is published by AllRegs

and accessible via either mf.freddiemac.com (for free) or the

AllRegs web site of ICE Mortgage Technology (with a paid subscription).

Chapter 45

Real Estate Owned

Multifamily Seller/Servicer Guide

45.1 General REO responsibilities (10/07/08)

45.2 Insurance (10/07/08)

45.3 Reimbursement of expenses incurred by the Servicer (06/30/15)

a. Form 104, Loan and Real Estate Owned (REO) Expenses and Income submission (06/30/15)

b. Reimbursable expenses (10/07/08)

c. Income credits (06/30/15)

d. Documentation requirements (06/30/15)

e. Form 104, Loan and Real Estate Owned (REO) Expenses and Income, audits (06/30/15)

Guide Bulletin Update 06/30/15 Chapter 45 – Page 2

The current official electronic version of the Guide is published by AllRegs

and accessible via either mf.freddiemac.com (for free) or the AllRegs

web site of ICE Mortgage Technology (with a paid subscription).

Guide Chapter 45 – Real Estate Owned

45.1 General REO responsibilities (10/07/08)

Freddie Mac alone will handle the marketing, sale and disposition of multifamily Real Estate Owned

(REO) properties for which Freddie Mac was the successful bidder at a foreclosure sale. Freddie Mac

may, from time to time, request recommendations from Servicers regarding local brokers and/or

prospective purchasers for REO. The Servicer's responsibility for servicing REO may continue at

Freddie Mac's request until final disposition of the REO and Freddie Mac's receipt of all proceeds.

45.2 Insurance (10/07/08)

Freddie Mac may require the Servicer to maintain any insurance required by the Purchase and

Servicing Documents until Freddie Mac acquires title to the REO. Freddie Mac maintains liability

insurance and will place hazard coverage for properties acquired in its name.

45.3 Reimbursement of expenses incurred by the Servicer (06/30/15)

Freddie Mac will reimburse the Servicer for reasonable expenses incurred in accordance with the

guidelines provided in Section 45.3(b) and/or specifically approved by Freddie Mac, when applicable,

during the foreclosure process and during the period pending disposition. The Servicer must

administer all funds in a Borrower's Reserve to pay expenses, but only in accordance with the terms

set forth in the Loan Documents and State and local requirements. Reimbursement of expenses by

Freddie Mac will always be proportionate to Freddie Mac's interest in the Mortgage.

Reimbursement of incurred expenses will be made by Freddie Mac upon receipt of a completed Form

104, Loan and Real Estate Owned (REO) Expenses and Income.

a. Form 104, Loan and Real Estate Owned (REO) Expenses and Income submission (06/30/15)

The Servicer must submit completed Forms 104 via the Document Management System (DMS)

using the Borrower Transactions instructions.

• The Servicer files the initial Form 104 to request reimbursement of expenses incurred up to and

during the foreclosure process (up to and including the date of acquisition). Freddie Mac must

receive the initial Form 104 within 45 days after the foreclosure sale.

• The Servicer files the final Form 104 to request reimbursement of expenses incurred by the

Servicer after the foreclosure sale. Freddie Mac must receive the final Form 104 within 30

days following the sale of the REO.

• The Servicer may also submit a supplemental Form 104 after an initial or final Form 104 is filed

to request reimbursement of any omission from either an initial or final Form 104. These

submissions must be received by Freddie Mac no later than 60 days following the sale of the

REO.

Freddie Mac reserves the right to deny reimbursement if a Form 104 is not received in accordance

with the requirements set forth in this section.

Guide Bulletin Update 06/30/15 Chapter 45 – Page 3

The current official electronic version of the Guide is published by AllRegs

and accessible via either mf.freddiemac.com (for free) or the AllRegs

web site of ICE Mortgage Technology (with a paid subscription).

Guide Chapter 45 – Real Estate Owned

b. Reimbursable expenses (10/07/08)

Freddie Mac will reimburse Servicers for reasonable expenses incurred in accordance with the

following guidelines.

The Servicer must contact the assigned Multifamily Asset Resolution Analyst before the

Seller/Servicer incurs an expense that requires Freddie Mac's prior approval. The Seller/Servicer's

Type of expenditure

Reimbursement guidelines

Trustee/legal/receiver

fees

Reimbursement will be based on limitations established by

Freddie Mac, unless the Servicer obtains prior written approval

for an increased amount from Freddie Mac.

Advertising fees

Reimbursement will be made for reasonable and customary

costs consistent with local foreclosure practices.

Sheriff fees

Reimbursement will be made for reasonable and customary

costs consistent with local foreclosure practices.

Court costs

Reimbursement will be made for reasonable and customary

costs consistent with local foreclosure practices.

Insurance premiums

Reimbursement will be made through the cancellation date of

the policy.

Taxes

Reimbursement will be made for taxes assessed and paid;

penalties and late charges will not be reimbursed by Freddie

Mac.

Maintenance

Reimbursement will be made without prior approval up to a

cumulative balance of $1,500 per Property. If total expenditures

in this category are expected to exceed $1,500 for the Property,

prior written approval from Freddie Mac is required.

Utilities

Reimbursement will be made for reasonable and customary charges

based on the occupancy status and seasonal needs.

Repairs/replacement

Reimbursement will be made only for those expenditures

receiving prior written approval from Freddie Mac unless the

costs were incurred in an emergency situation to preserve and

protect the Property and the Servicer notified Freddie Mac within

72 hours after occurrence.

Title costs

Reimbursement will be made only for title abstracts and title

commitments. Reimbursement for title policies requires Freddie

Mac's prior written approval.

Appraisals/broker

price

opinions/inspections

Reimbursement will be made only with Freddie Mac's prior

written approval.

Management/leasing

fees

Reimbursement will be made in accordance with contractual

terms.

Guide Bulletin Update 06/30/15 Chapter 45 – Page 4

The current official electronic version of the Guide is published by AllRegs

and accessible via either mf.freddiemac.com (for free) or the AllRegs

web site of ICE Mortgage Technology (with a paid subscription).

Guide Chapter 45 – Real Estate Owned

failure to obtain prior approval may, in Freddie Mac's sole discretion, result in Freddie Mac's denial

of the reimbursement request.

c. Income credits (06/30/15)

The Servicer must consult the assigned Multifamily Asset Resolution Analyst for direction regarding

the use and application of any funds remaining in the Borrower's tax, insurance, Replacement

Reserves, and other Reserves, or the proceeds of any hazard insurance claims received or rental

income received by the Servicer during the foreclosure or period pending disposition.

If Freddie Mac has provided any special advance, that advance must be credited against the

reimbursable expenses to which it relates and must be reflected on the final Form 104 submitted

with respect to the Property.

d. Documentation requirements (06/30/15)

Each Form 104 must be accompanied by the appropriate supporting documentation:

1. Copies of the original bills and invoices with copies of the related checks evidencing payment.

The Seller/Servicer must maintain the original canceled checks on the Seller/Servicer's

premises for one year.

2. A copy of the approval letter received from the Multifamily Asset Resolution Analyst

3. When loan history copies are submitted to support expenses, the appropriate codes to interpret

the loan history

4. For rehabilitation/construction work

• Copies of the construction contract

• Photographs of completed work for which the cost was in excess of $25,000

• Copies of waivers of mechanics' liens from all persons supplying labor or materials

All supporting documentation must be clearly labeled, legible and attached to Form 104 in the

same order as the items are listed in the expense and income sections of the form. Failure to

comply with the documentation requirements will delay the reimbursement request and require

resubmission of a complete and legible package by the Servicer.

e. Form 104, Loan and Real Estate Owned (REO) Expenses and Income, audits (06/30/15)

Freddie Mac will perform an audit of the Form 104 for compliance with the reimbursement,

submission and documentation guidelines. Any questionable items will be returned to the Servicer

with an explanation for the denial. Servicers may appeal the denial by resubmitting the expense to

Freddie Mac on an original Form 104 with the appropriate documentation and explanation to justify

noncompliance with the guidelines set forth in this section.