5601.9: Seller representations and warranties regarding the Mortgaged Premises (11/19/18)

(a) Collateral representation and warranties

In addition to all other representations and warranties specified in the Seller's Purchase Documents, the Seller makes the following representations and warranties as of the Settlement Date.

(i) Value warranty

The Seller represents and warrants that the appraisal accurately reflects the market value of the Mortgaged Premises. See Section 5601.8 for information regarding requirements for Mortgages with Settlement Dates more than 120 days after the Note Date.

(ii) Condition warranty

As of the Settlement Date, the Seller represents and warrants that the Mortgaged Premises is not in C5 or C6 condition. For property types not required to utilize the Uniform Appraisal Dataset (UAD) condition ratings, the Seller represents that the property is in a condition consistent with condition ratings C1 through C4.

(iii) Marketability warranty

As of the Settlement Date, the Seller represents and warrants that the Mortgaged Premises is acceptable to typical purchasers in the market in which the property is located.

(b) Value representation and warranty relief – Loan Collateral Advisor®

(i) Overview

For Mortgages that are processed by the Seller through Loan Collateral Advisor® and meet the eligibility requirements below, Freddie Mac will not exercise its remedies, including the issuance of repurchase requests, in connection with a breach of the Seller's selling representations and warranties related to the value of the Mortgaged Premises. The selling representation and warranty relief described in this subsection will be referred to as "value representation and warranty relief."

(ii) Eligible Mortgages

The following requirements must be met for Mortgages to be eligible for value representation and warranty relief:

The Mortgage must have an LTV/TLTV/HTLTV less than or equal to 95%
The Mortgage must be secured by a 1-unit dwelling, including units in a Condominium Project or a Planned Unit Development (PUD)
The Borrower must be an individual or a Living Trust
Upon assessment of the appraisal by Loan Collateral Advisor, the following message and/or indicator must be returned:
Uniform Collateral Data Portal® (UCDP®), feedback message FRE0000 must indicate the appraisal is eligible for representation and warranty relief for property value
Loan Collateral Advisor indicator that the appraisal has a Loan Collateral Advisor risk score less than or equal to 2.5 and is eligible for representation and warranty relief for property value
Note: Upon submission to Loan Product Advisor and/or Loan Quality Advisor®, a corresponding representation and warranty relief message will also be provided in the feedback certificate.

The final submission to Loan Selling Advisor® must indicate the representation and warranty relief status is "Y" or "Yes"

(iii) Ineligible Mortgages

The following Mortgages are not eligible for value representation and warranty relief:

Mortgages secured by Manufactured Homes
Mortgages secured by leasehold estates
Construction Conversion and Renovation Mortgages
Freddie Mac Relief Refinance MortgagesSM – Same Servicer or Open Access
Freddie Mac Enhanced Relief Refinance Mortgages®
Community Land Trust Mortgages
Mortgages secured by properties subject to income-based resale restrictions that terminate upon foreclosure (or expiration of any applicable redemption period) or recordation of a deed-in-lieu of foreclosure, where property value must be determined in accordance with Section 4406.1(g)(ii)

(iv) Loan Collateral Advisor value representations and warranties

For Mortgages that meet the eligibility requirements above, the Seller/Servicer remains responsible for compliance with the requirements below and will not be relieved from Freddie Mac's enforcement of remedies, even if such matters are related to value

The requirement that the Mortgaged Premises (including units in a Condominium Project or a PUD, if applicable) meets Freddie Mac's property eligibility requirements (e.g., not vacant or undeveloped land, not primarily used for agricultural or farming purposes or for a commercial enterprise, etc.) (Sections 5601.2 and 5701.2)
The requirement that the Mortgaged Premises (including units in a Condominium Project or PUD, if applicable) not be subject to a pending legal proceeding for condemnation in whole or in part (Section 5601.2)
The requirement that, when applicable, a certification of completion (Form 442) or completion report is obtained verifying that any outstanding conditions of the appraisal have been satisfied (Section 5601.11)
The requirement to ensure the appraiser's description of the subject property must be complete and accurate (e.g., accuracy of quality and condition ratings, photographs that support the quality and condition of the property, etc.) (Applicable language in Section 5601.12)

For Mortgages that are eligible for value representation and warranty relief as described above, the Seller/Servicer is not responsible for underwriting the appraisal to ensure compliance with the following requirements:

The appraisal report must justify and support the appraiser's opinion of market value and that the appraiser must explain how the final value conclusion was determined (Applicable language in Section 5601.12)
The appraiser must make appropriate adjustments (Applicable language in Section 5601.12)
The opinion of market value of the subject property must be accurate and adequately supported (Applicable language in Section 5601.12)

Nothing in this Section 5601.9(b) is meant to imply that the Seller is not responsible for compliance with other requirements of the Purchase Documents.

(c) Collateral representation and warranty relief – automated collateral evaluation

(i) Overview

For certain Loan Product Advisor Mortgages, the automated collateral evaluation provides a Seller with the option to accept an appraisal waiver and originate the Mortgage without an appraisal.

When the appraisal waiver option is accepted, Freddie Mac will accept the estimated value submitted by the Seller for the purposes of underwriting the Mortgage, and will not exercise its remedies, including the issuance of repurchase requests, in connection with a breach of the Seller's selling representations and warranties related to value, condition, and marketability of the Mortgaged Premises.

(ii) Process for qualifying for and accepting the appraisal waiver offer

For a Mortgage to qualify for an appraisal waiver:

The Seller must submit the Mortgage to Loan Product Advisor and receive a Risk Class of Accept
Upon evaluation by Loan Product Advisor, the Last Feedback Certificate must indicate that the Mortgage is eligible for collateral representation and warranty relief with an appraisal waiver (this represents the "offer"); and
The final submission of the Mortgage to Loan Selling Advisor must indicate the collateral representation and warranty relief status is "Y" or "Yes"

For Mortgages that receive the appraisal waiver offer, in order to accept the offer, the Seller must deliver the Mortgage with the ULDD Data Points described in the data delivery instructions in Section 6302.10(c).

(iii) Eligible Mortgages

The following requirements must be met for Mortgages to be eligible to receive an appraisal waiver offer:

The Mortgage must be secured by a 1-unit dwelling, including a Condominium Unit
The Mortgage must be secured by a Primary Residence or second home
The Mortgage must have a loan-to-value (LTV) ratio/total LTV (TLTV) ratio less than or equal to 80%
The Mortgage must be a purchase transaction or a "no cash-out" refinance

(iv) Ineligible Mortgages

The following Mortgages are not eligible for an appraisal waiver:

Mortgages for which an appraisal has been obtained in connection with the Mortgage
Texas Equity Section 50(a)(6) Mortgages
Mortgages secured by one of the following:
A Manufactured Home, or
A leasehold estate
Mortgages secured by Mortgaged Premises subject to resale restrictions
Construction Conversion and Renovation Mortgages
Freddie Mac Relief Refinance MortgagesSM – Same Servicer or Open Access
Freddie Mac Enhanced Relief Refinance Mortgages
Community Land Trust Mortgages
Mortgages secured by properties subject to income-based resale restrictions that terminate upon foreclosure (or expiration of any applicable redemption period) or recordation of a deed-in-lieu of foreclosure, where property value must be determined in accordance with Section 4406.1(g)(ii)
Non-arm's length transactions
Purchases of REO properties (as identified in the sales contract)
Mortgages with an estimate of value or purchase price greater than $1,000,000

In addition, Sellers may not accept the appraisal waiver offer if any of the following apply:

The Seller is required by law or regulation to obtain an appraisal
The Seller is aware of conditions it believes warrant an appraisal being obtained. Examples include, but are not limited to:
- A contaminated site or hazardous substance exists affecting the property or the neighborhood in which the property is located
- Adverse physical property conditions that are apparent based on the review of the sales contract, property inspection, disclosure from the Borrower, etc.

(v) Maintaining appraisal waiver eligibility

The appraisal waiver offer is valid for 120 days. If the offer is more than 120 days old on the Note Date, a resubmission to Loan Product Advisor is required to determine ongoing appraisal waiver eligibility.

Note: If the Seller changes loan data (e.g., address of the property, loan amount, purchase price, estimate of value, loan type, property type, occupancy of the property) in a subsequent submission, the original offer will be invalidated and Loan Product Advisor may provide a different appraisal waiver eligibility determination.

(vi) Appraisal waiver eligibility in disaster areas

Sellers may continue to accept an appraisal waiver offer if the Seller can represent and warrant the value and marketability of the Mortgaged Premises has not been adversely impacted. See Section 4407.1 for property condition requirements.

(vii) Seller representation of property review or valuation

A Seller that has accepted the appraisal waiver offer in connection with a Mortgage must not make any representation that Freddie Mac has performed a property review or obtained a valuation of the Mortgaged Premises.