Freddie Mac Single-Family Seller/Servicer Guide 8601.7 — Servicing high-risk, distressed and abandoned properties

Freddie Mac Single-Family Seller/Servicer Guide 8601.7 — Servicing high-risk, distressed and abandoned properties

Effective 2025-09-10 · Freddie Mac's stamp for this section

The brown font text used throughout this chapter denotes the special requirements for Servicing Senior Subordinate Mortgages. Text in black or green font denotes general Servicing requirements that also apply elsewhere in the Guide. This section contains requirements related to: ■ Servicing Mortgages on distressed properties and properties that pose a Risk of Property Ownership ■ Servicing Mortgages on abandoned properties (a) Servicing Mortgages on distressed properties and properties that pose a Risk of Property Ownership This section has been adapted from Section 8403.1 to reflect special Servicing requirements for Senior Subordinate Mortgages. Servicers are responsible for acting without delay and in an efficient and responsible manner to protect the Servicer, Freddie Mac and the Senior Subordinate Trust’s interests when the Servicer becomes aware of a Mortgaged Premises that becomes a distressed property. Refer to Section 9401.1(b) for information regarding Freddie Mac’s rights when the Servicer becomes aware of a distressed property and fails to act to protect the Servicer’s, Freddie Mac’s and the Senior Subordinate Trust’s interests as required by this section. A distressed property is real property subject to a Mortgage that may or may not pose a Risk of Property Ownership (see Section 9202.2(b)) to Freddie Mac or the Senior Subordinate Trust and is a property that: ■ Requires substantial repairs ■ Has sustained significant physical deterioration; or ■ Has been condemned by a local authority Even if the owner has abandoned the Mortgaged Premises, a Servicer must report all Senior Subordinate Mortgages on distressed properties that are 30 or more days delinquent via an EDR transmission within the first three Business Days of the month following the month in which the Servicer identified the problem using default reason code 011 (Property problem) and the applicable occupancy code. If the problem identified is contaminated drywall the Servicer should report default reason code 032 (Contaminated Drywall) rather than default reason code 011 (Property problem). If a property is distressed, the Servicer must conduct a search of the records of the local code authority to determine if there are any outstanding health or safety violations filed against either the Borrower or the property. If a Servicer discovers any code violations on a distressed property, the Servicer must report them to Freddie Mac (see Directory 5) within three Business Days of identifying the violation. The Servicer must attach a copy of the code violation and copies of the most recent six consecutive months (or less, depending on the level of Delinquency) of Form 1013, 1-4 Unit Property Inspection Report. In addition to any reporting requirement set forth above for distressed properties, the Servicer must: 1. Maintain a record of when the condition was discovered and take all necessary actions to protect the property from waste, damage and vandalism and prevent any loss 2. Inspect the property monthly until the condition is resolved 3. Ensure that property insurance coverage is maintained. This includes taking all actions required in the mortgage clause of all applicable property insurance policies, including, but not limited to, providing all notices to the insurer required under such clause, in order to preserve the coverage and its maximum benefits for the Servicer and/or the Senior Subordinate Trust, as mortgagee 4. File a claim with the applicable property insurer on the Senior Subordinate Trust’s behalf if the property is damaged and the Borrower has not filed a claim 5. Comply with the requirements of the VA, RHS, FHA or MI, if applicable Servicers must obtain Freddie Mac’s written pre-approval before incurring expenses on distressed properties that exceed the limits contained in Exhibit 57, 1- to 4-Unit Property Approved Expense Amounts, by submitting a request for pre-approval via PAID (Payments Automated Intelligent and Dynamic) (see Exhibit 88, Servicing Tools). If unusual or emergency circumstances do not allow a Servicer to request Freddie Mac’s prior written approval, then the Servicer must notify Freddie Mac via PAID by the next Business Day after the Servicer incurred the expense. If the Servicer’s determination to incur the expense was reasonable, as determined in Freddie Mac’s sole discretion, Freddie Mac will reimburse the expense. Servicers must obtain Freddie Mac’s prior written approval to initiate foreclosure of a Senior Subordinate Mortgage on a distressed property as required in Section 9301.3(d). Approval requests should be sent to Foreclosures@FreddieMac.com. If a property securing a Senior Subordinate Mortgage has been identified as posing a Risk of Property Ownership, the Servicer must contact and report the Senior Subordinate Mortgage to Freddie Mac (see Directory 5), even if the Senior Subordinate Mortgage is not delinquent, within three Business Days of identifying the risk. In such instances, the Servicer must attach copies of the most recent six consecutive months (or less, depending on the level of Delinquency) of Form 1013 and any other relevant information when reporting the Risk of Property Ownership to Freddie Mac. (b) Servicing Mortgages on abandoned properties The Servicer must comply with the requirements of Section 8403.1(c), except that, with respect to Senior Subordinate Mortgages, either the Servicer or the Senior Subordinate Trust would be the mortgagee and not Freddie Mac.

Source: Freddie Mac Single-Family Seller/Servicer Guide 8601.7 — Servicing high-risk, distressed and abandoned properties · source URL · snapshot 4c94f67729042dd6

Freddie Mac Single-Family Seller/Servicer Guide 8601.7 — Servicing high-risk, distressed and abandoned properties — PENDING VERSION, takes effect 2026-11-16

Not yet in force. This is the pending version of the section, which takes effect 2026-11-16. The other version on this page governs until then.

Effective 2026-11-16 · Freddie Mac's stamp for this section

Source: Freddie Mac Single-Family Seller/Servicer Guide 8601.7 — Servicing high-risk, distressed and abandoned properties · source URL · snapshot 4c94f67729042dd6

Freddie Mac Single-Family Seller/Servicer Guide 8601.7 — Servicing high-risk, distressed and abandoned properties — PENDING VERSION, takes effect 2027-09-27

Not yet in force. This is the pending version of the section, which takes effect 2027-09-27. The other version on this page governs until then.

Effective 2027-09-27 · Freddie Mac's stamp for this section

The brown font text used throughout this chapter denotes the special requirements for Servicing Senior Subordinate Mortgages. Text in black or green font denotes general Servicing requirements that also apply elsewhere in the Guide. This section contains requirements related to: ■ Servicing Mortgages on distressed properties and properties that pose a Risk of Property Ownership ■ Servicing Mortgages on abandoned properties (a) Servicing Mortgages on distressed properties and properties that pose a Risk of Property Ownership This section has been adapted from Section 8403.1 to reflect special Servicing requirements for Senior Subordinate Mortgages. Servicers are responsible for acting without delay and in an efficient and responsible manner to protect the Servicer, Freddie Mac and the Senior Subordinate Trust’s interests when the Servicer becomes aware of a Mortgaged Premises that becomes a distressed property. Refer to Section 9401.1(b) for information regarding Freddie Mac’s rights when the Servicer becomes aware of a distressed property and fails to act to protect the Servicer’s, Freddie Mac’s and the Senior Subordinate Trust’s interests as required by this section. A distressed property is real property subject to a Mortgage that may or may not pose a Risk of Property Ownership (see Section 9202.2(b)) to Freddie Mac or the Senior Subordinate Trust and is a property that: ■ Requires substantial repairs ■ Has sustained significant physical deterioration; or ■ Has been condemned by a local authority Even if the owner has abandoned the Mortgaged Premises, a Servicer must report all Senior Subordinate Mortgages on distressed properties that are 30 or more days delinquent via the Property Updates default related reporting event in accordance with Section 9102.6 and Exhibit 82, Default Reporting Dataset Guidelines. If a property is distressed, the Servicer must conduct a search of the records of the local code authority to determine if there are any outstanding health or safety violations filed against either the Borrower or the property. If a Servicer discovers any code violations on a distressed property, the Servicer must report the Property Updates default related reporting event in accordance with Section 9102.6 and Exhibit 82. The Servicer must submit a copy of the code violation(s) and copies of the most recent six consecutive months (or less, depending on the level of Delinquency) of Form 1013, 1-4 Unit Property Inspection Report. In addition to any reporting requirement set forth above for distressed properties, the Servicer must: 1. Maintain a record of when the condition was discovered and take all necessary actions to protect the property from waste, damage and vandalism and prevent any loss 2. Inspect the property monthly until the condition is resolved 3. Ensure that property insurance coverage is maintained. This includes taking all actions required in the mortgage clause of all applicable property insurance policies, including, but not limited to, providing all notices to the insurer required under such clause, in order to preserve the coverage and its maximum benefits for the Servicer and/or the Senior Subordinate Trust, as mortgagee 4. File a claim with the applicable property insurer on the Senior Subordinate Trust’s behalf if the property is damaged and the Borrower has not filed a claim 5. Comply with the requirements of the VA, RHS, FHA or MI, if applicable Servicers must obtain Freddie Mac’s written pre-approval before incurring expenses on distressed properties that exceed the limits contained in Exhibit 57, 1- to 4-Unit Property Approved Expense Amounts, by submitting a request for pre-approval via PAID (Payments Automated Intelligent and Dynamic) (see Exhibit 88, Servicing Tools). If unusual or emergency circumstances do not allow a Servicer to request Freddie Mac’s prior written approval, then the Servicer must notify Freddie Mac via PAID by the next Business Day after the Servicer incurred the expense. If the Servicer’s determination to incur the expense was reasonable, as determined in Freddie Mac’s sole discretion, Freddie Mac will reimburse the expense. Servicers must obtain Freddie Mac’s prior written approval to initiate foreclosure of a Senior Subordinate Mortgage on a distressed property as required in Section 9301.3(d). Approval requests should be sent to Foreclosures@FreddieMac.com. If a property securing a Senior Subordinate Mortgage has been identified as posing a Risk of Property Ownership, the Servicer must contact and report the Senior Subordinate Mortgage to Freddie Mac (see Directory 5), even if the Senior Subordinate Mortgage is not delinquent, within three Business Days of identifying the risk. In such instances, the Servicer must attach copies of the most recent six consecutive months (or less, depending on the level of Delinquency) of Form 1013 and any other relevant information when reporting the Risk of Property Ownership to Freddie Mac. (b) Servicing Mortgages on abandoned properties The Servicer must comply with the requirements of Section 8403.1(c), except that, with respect to Senior Subordinate Mortgages, either the Servicer or the Senior Subordinate Trust would be the mortgagee and not Freddie Mac.

Source: Freddie Mac Single-Family Seller/Servicer Guide 8601.7 — Servicing high-risk, distressed and abandoned properties · source URL · snapshot 4c94f67729042dd6