Freddie Mac Single-Family Seller/Servicer Guide §3401.1 — Postfunding quality control processes (12/17/25)
Freddie Mac Guide §3401.1 (Postfunding quality control processes). Gap-fill (verbatim, ID-diff).
Verbatim regulatory text
Verbatim provisions from Freddie Mac Single-Family Seller/Servicer Guide §3401.1 — Postfunding quality control processes (12/17/25) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
Freddie Mac Guide 3401.1
(12/17/25) This section contains requirements related to: ■ Postfunding quality control ■ Credit enhancer postfunding review (a) Postfunding quality control (i) Defined terms As used in this Section 3401.1(a), the following terms have the meanings ascribed to them below: Defined terms related to postfunding quality control C Component Based Review Freddie Mac’s postfunding quality control review of certain components of the Mortgage file. A Component Based Review does not constitute a Full-File Review. Correction Action taken by the Seller/Servicer, typically through delivery of documentation or information to Freddie Mac, that demonstrates that the identified Significant Defect: ■ Did not, in fact, exist at the time of Mortgage purchase, or ■ Has been corrected in the time frame and manner specified in the Purchase Documents such that the Defect is no longer considered by Freddie Mac to be a Significant Defect Examples of Corrections include, but are not limited to, De Minimis Corrections and the acquisition of required insurance. Counterparty Status Freddie Mac’s assessment of a Seller/Servicer’s financial capacity that could determine which Remedy Freddie Mac will offer to a Seller/Servicer for a Mortgage with a Significant Defect.
Freddie Mac Guide 3401.1
401-2 Defined terms related to postfunding quality control D Defect A loan-level deficiency that breaches a term contained in the Purchase Documents in effect at the time of Mortgage purchase. De Minimis Correction Minor amount not to exceed $500 (or such higher amount as the Seller/Servicer and Freddie Mac may agree) that, when remitted, refunded or otherwise provided, corrects or otherwise resolves an identified Significant Defect. A De Minimis Correction cannot be made: ■ In connection with any Mortgage where the correction would result in a specific required minimum Borrower contribution not being met, or ■ To correct a violation of the requirements set forth in the Freddie Mac Charter Act P Price-Adjusted Loan (PAL) One or more Defects that, when considered with other Mortgage features and based on the facts of the Mortgage as delivered to Freddie Mac, result in a Mortgage that was otherwise eligible for delivery to Freddie Mac had the correct data been delivered and Credit Fees been paid to Freddie Mac by the Seller/Servicer. R Remedy An action to resolve a Significant Defect elected by Freddie Mac pursuant to the Purchase Documents in effect at the time of Mortgage purchase. Repurchase Alternative Remedies other than repurchase of the identified Mortgage. Repurchase Alternatives could include, but are not limited to: ■ Performing loans ❑ Recourse/repurchase agreement ❑ Indemnification agreement ❑ Mortgage insurance stand-in agreement ❑ Collateralized indemnification agreements (collateral in lieu of repurchase or collateralized recourse) ❑ Fee-only agreement ■ Non-performing loans
Freddie Mac Guide 3401.1
401-3 Defined terms related to postfunding quality control ❑ Make-whole payment ❑ Split loss ❑ Loss reimbursement S Significant Defect One or more Defects that either necessitate a change to the price for which the Mortgage was purchased or result in the Mortgage being unacceptable for purchase had the true and accurate information about the Mortgage been known at time of purchase. Mortgages with Findings and PALs are not Mortgages with Significant Defects. In determining whether there is a Significant Defect, Freddie Mac must give due consideration to the severity of the Defect. In addition, in order to be a Significant Defect, the Defect must relate to one of the following: ■ The underwriting of the Borrower’s creditworthiness and capacity (e.g., Borrower’s income, Borrower credit/liabilities and Borrower assets) or Borrower eligibility and qualification (e.g., Area Median Income, First-Time Homebuyer, lawful presence in the United States) ■ The underwriting criteria related to property or project eligibility (e.g., residential use and condominium eligibility), the property appraisal or the physical condition of the Mortgaged Premises ■ Mortgage or product terms and criteria (e.g., products that may require special Seller/Servicer approval as a prerequisite for delivery and the criteria described in the Purchase Documents such as loan-to-value (LTV) ratio, occupancy, Credit Score, Mortgage purpose and Mortgage Product, and terms such as ineligible transaction types and limitations on cash out to the Borrower that determines the type of refinance) or any terms and criteria set forth in any negotiated provision) ■ A life-of-loan representation and warranty (as described in Section 1301.6) ■ Requirements applicable at time of Mortgage purchase (e.g., no defaults, all taxes and insurances have been paid or escrows established and no modification, encumbrance, subordination or release of Mortgage) ■ The warranties and obligations of Seller/Servicer set forth in Section 3101.1 regarding the Freddie Mac Exclusionary List,
Freddie Mac Guide 3401.1
401-4 Defined terms related to postfunding quality control available via Freddie Mac Gateway, or in Section 3101.2 regarding the FHFA Suspended Counterparty Program ■ The existence, sufficiency or enforceability of any required insurance or guaranty, or ■ The form and/or execution of Freddie Mac-required Mortgage documents that without which make the Mortgage ineligible for sale or limit the enforceability of the required Mortgage terms (e.g., Uniform Residential Loan Application, power of attorney, Texas 50(a)(6) Mortgage documents or nonstandard and special purpose documents such as Living Trusts) (ii) General quality control policy Freddie Mac reserves the right to conduct a postfunding quality control review of any Mortgage sold to Freddie Mac. This review may be a Component Based Review or a Full-File Review. Freddie Mac will underwrite each Mortgage selected for postfunding quality control review to verify that the Mortgage: ■ Is of investment quality (as defined in Section 4201.1), ■ Is based on a determination that the Borrower has acceptable credit reputation and capacity, ■ Is secured by collateral that is adequate for the transaction, and ■ Otherwise complies with Freddie Mac’s underwriting guidelines and other requirements set forth in the Purchase Documents, including compliance with applicable anti-predatory lending laws Freddie Mac’s determination of whether a Mortgage is of investment quality and otherwise complies with all requirements of the Purchase Documents is conclusive, unless the IDR Process described in Section 3602.4(b) is elected, in which case the decision of the Neutral (as such term is defined in the IDR Document) shall be binding. (iii) FICO® scores
Freddie Mac Guide 3401.1
401-5 Freddie Mac obtains FICO scores for Mortgages purchased and uses such scores and the accompanying reason codes as one of the sampling criteria for postfunding quality control reviews. If the Seller delivers and documents an Indicator Score in accordance with the provisions of Section 5202.1, Freddie Mac will use the Seller-delivered score. (iv) Reviewing Accept Mortgages For Accept Mortgages, the Borrower will be considered creditworthy and no further assessment of Borrower creditworthiness will be made in the postfunding review if: ■ The Seller has submitted to Loan Product Advisor® all required information and has complied with the terms applicable to Accept Mortgages in the Guide ■ The information submitted is true, complete, accurate and documented in the loan file (v) Mortgage file submission requirements Freddie Mac will notify the Seller/Servicer via e-mail that certain Mortgages have been selected for postfunding quality control review and will provide a checklist of documents that must be submitted to Freddie Mac for each selected Mortgage. Unless otherwise instructed by Freddie Mac, the Seller/Servicer must submit: ■ All credit, income, employment, collateral and asset documentation used by the Seller to make the Mortgage underwriting decision, ■ The documents listed in Sections 3401.2(a) through 3401.5(c), as applicable, ■ The source documentation for any Indicator Score, ■ Any other documents listed on the checklist, and ■ If requested by Freddie Mac, any other Mortgage-related documents that the Seller/Servicer is required to maintain in the Mortgage file, including any documents required under the Guide or other Purchase Documents In addition, for nonperforming Mortgages requested for postfunding quality control review, the checklist includes records of all collection efforts. This includes Borrower contacts, property inspections, attempts to develop a workout plan and bankruptcy and/or foreclosure tracking logs and notes.
Freddie Mac Guide 3401.1
401-6 The Seller/Servicer must provide all documents indicated on the applicable postfunding quality control checklist in an electronic media format and file size as specified on the Freddie Mac Quality Control webpage located at https://sf.freddiemac.com/general/specifications-for-electronic-file-delivery-for-qc- loan-file-reviews. Freddie Mac reserves the right, at its sole discretion, to take appropriate action if a Seller/Servicer fails to deliver the required documents in the specified media format and file size. Such action may include, but is not limited to, assessing a noncompliance fee to cover costs incurred by manually processing file deliveries. Although all documentation sent to Freddie Mac may be considered in the postfunding quality control review, trended credit data (as described in Section 5202.1(c)) will not be considered. The Seller/Servicer is responsible for ensuring the accuracy and authenticity of all documentation in the Mortgage file. Freddie Mac must receive requested Mortgage files, containing all specified documentation, within 30 days after the request for postfunding quality control review. If the requested Mortgage file is not received within this time frame, Freddie Mac may issue a repurchase request. Failing to submit the Mortgage file as requested may result in a Seller’s or Servicer’s suspension or disqualification. However, Freddie Mac may, at its discretion, specify a shorter or longer period for the receipt of the requested Mortgage files. Finally, an offer by the Seller/Servicer to repurchase the Mortgage does not exempt them from submitting the required documents for postfunding quality control. (vi) Process for remedying selling and origination defects The steps below describe the process that Freddie Mac will follow to categorize Defects, allow Corrections to Defects and remedy Defects through either a repurchase request or Repurchase Alternative. 1. Identification of Defects After a postfunding quality control review is completed, Freddie Mac will designate any Defect(s) as resulting in one of the following: ■ A Finding ■ A PAL
Freddie Mac Guide 3401.1
401-7 ■ A Significant Defect Freddie Mac’s Remedy letters will detail the specific Significant Defects found during the quality control review. If Freddie Mac designates the Defect as resulting in a Finding, Freddie Mac will not require a Correction or a Remedy from the Seller/Servicer. However, Freddie Mac may request a data update from the Seller/Servicer. If Freddie Mac designates the Defect as resulting in a PAL, the Seller/Servicer must pay to Freddie Mac the applicable Credit Fees that should have been paid when the Mortgage was purchased by Freddie Mac had the true and accurate facts about the Mortgage been known at the time of purchase, which will be paid in accordance with Section 6303.2(a). Freddie Mac may not demand repurchase of a PAL. Note: The Seller/Servicer may not voluntarily repurchase a PAL. If Freddie Mac identifies a Significant Defect, Freddie Mac will require repurchase of the Mortgage or may offer the Seller a Repurchase Alternative. Freddie Mac also checks for data discrepancies (which could be independent of a Full-File Review) that may result in the assessment of or an adjustment to a Credit Fee. 2. Correcting certain significant Defects During the Appeal Process described in Section 3602.4(b), a Seller/Servicer has the right to provide a Correction of any Significant Defects. Any additional documentation or information that the Seller/Servicer provides is subject to the same standard of quality control review as the initial Mortgage file documentation. The documentation submitted to correct a Significant Defect must be based on information or data that either: ■ Was available at the time of underwriting (and no later than the Note Date), or ■ Covers the time of underwriting so long as such evidence meets the applicable documentation requirements set forth in the Purchase Documents During the appeals process, Seller/Servicers have the ability to correct Defects related to property, flood or mortgage insurance. If a Seller/Servicer does not repurchase the Mortgage or perform any Repurchase Alternative in accordance with the Purchase Documents, such Seller/Servicer continues to have the obligation to correct any Significant Defect in accordance with the Purchase Documents.
Freddie Mac Guide 3401.1
401-8 3. Freddie Mac review of Seller response and Mortgage reassessment During the Appeal Process described in Section 3602.4(b), Freddie Mac reassesses a Mortgage by reviewing any Corrections submitted by the Seller/Servicer according to the applicable Purchase Documents to determine if a Significant Defect remains. If the Seller/Servicer provides additional documentation or information or takes necessary steps that correct all Significant Defects per the Purchase Documents, Freddie Mac will rescind the Remedy request. However, if after reassessment any Significant Defects have not been corrected according to the Purchase Documents, the Seller/Servicer must promptly comply with the Remedy request. If the reassessment leads Freddie Mac to classify the Mortgage as a PAL, the Seller/Servicer must remit the applicable Credit Fees to Freddie Mac per Section 6303.2. These fees reflect what should have been paid at the time of Mortgage purchase had the true facts been known. Throughout the appeals process, the Seller/Servicer can propose a Repurchase Alternative upon identification of a Significant Defect. Freddie Mac will consider this proposal in good faith and respond accordingly. Nonetheless, Freddie Mac can offer or decline Repurchase Alternatives depending on the Seller/Servicer’s Counterparty Status, especially where future obligations are involved. Other factors for consideration may include the Seller/Servicer’s quality of loan origination and their capacity and willingness to honor other Purchase Document provisions. If a Mortgage has multiple Significant Defects and the Seller/Servicer manages to correct only some, Freddie Mac may pursue repurchase or other alternatives as a Remedy if Significant Defects persist after reassessment. Conversely, if all Significant Defects are rectified, yet a defect still classifies the Mortgage as a PAL post-reassessment, Freddie Mac will notify the Seller/Servicer of the due Credit Fee, which must be paid in alignment with Section 6303.2. 4. Range of possible outcomes (A) Finding If the Mortgage has had a Full-File Review completed with only Findings discovered, the Seller/Servicer will be relieved from Freddie Mac’s enforcement of certain selling representations and warranties related to such Mortgage (as described in Section 1301.6(a)), provided all other requirements in Section 1301.6 are met. If a Mortgage has not had a Full-File Review, the Seller/Servicer may still be relieved from Freddie Mac’s enforcement of certain selling representations and
Freddie Mac Guide 3401.1
401-9 warranties through other provisions under the selling representation and warranty framework described in Section 1301.6. (B) PAL The appeals process for a PAL will result in one of the following outcomes: ■ Rescission of the request for the payment of the Credit Fee, or ■ Payment of the Credit Fee If a PAL has undergone a Full-File Review and no Significant Defects have been identified, the Seller/Servicer will be relieved from Freddie Mac’s enforcement of certain selling representations and warranties related to that Mortgage (as outlined in Section 1301.6(a)) once the Seller/Servicer pays the Credit Fee and meets all other requirements specified in Section 1301.6. Conversely, for a PAL that has not had a Full-File Review, the Seller/Servicer will not be relieved from Freddie Mac’s enforcement of the aforementioned selling representations and warranties upon payment of the Credit Fee. However, the Seller/Servicer may still achieve relief from enforcement of certain selling representations and warranties through other provisions within the selling representation and warranty framework described in Section 1301.6. (C) Significant Defects The appeals process for Mortgages with Significant Defects may result in a range of outcomes, including: ■ Rescission of the Remedy request, ■ Agreement on a Repurchase Alternative, or ■ Fulfillment of the Remedy request If Freddie Mac offers a Repurchase Alternative after a repurchase demand has been issued, the Seller/Servicer has the option to repurchase the Mortgage instead of accepting the Repurchase Alternative. If a Mortgage with a Significant Defect has had a Full-File Review, the Seller/Servicer will be relieved from Freddie Mac’s enforcement of certain selling representations and warranties related to such Mortgage (as described in Section 1301.6(a)) if: ■ All Significant Defects have been corrected, or
Freddie Mac Guide 3401.1
401-10 ■ A Repurchase Alternative has been offered, accepted and fully executed and completed by the Seller/Servicer in compliance with any related terms, including the expiration of all applicable time frames, provided all other requirements set forth in Section 1301.6 are met At its sole discretion, Freddie Mac, in addition to its other contractual and legal remedies, will require repurchase of each Mortgage that does not comply with the requirement(s) set forth in the Purchase Documents to submit requested Mortgage documentation for postfunding quality control review within the allotted time, unless the IDR Process is elected, in which case the decision of the Neutral (as such term is defined in the IDR Document) shall be binding. (b) Credit enhancer postfunding review Freddie Mac may choose to obtain a credit enhancement on some or all of the Mortgages it purchases, either concurrently with or after the Mortgage purchase. In such cases, the Seller, as the Servicer, or any transferee Servicer may receive an electronic request from Freddie Mac to supply the credit enhancer with Mortgage files or other Mortgage information or documentation (“Mortgage information”) for the credit-enhanced Mortgages. Freddie Mac’s request will: 1. Identify the credit enhancer requesting the Mortgage information 2. Authorize the release of specific Mortgage information 3. Provide the name and contact details for the individual at the credit enhancer to whom the Mortgage information should be directed The Seller or transferee Servicer must provide the Mortgage information by either: ■ 30 days after receiving the request, or ■ The written deadline agreed upon between the credit enhancer and the Seller or transferee Servicer For each request for Mortgage information: ■ The Seller or transferee Servicer will not receive notice regarding any action taken by the credit enhancer ■ If the Seller or transferee Servicer fails to cooperate with the credit enhancer and this jeopardizes Freddie Mac’s ability to maintain the credit enhancement, Freddie Mac may exercise any rights and remedies under the relevant Purchase Documents