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Early Rate-Lock Changes for DMS and Breakage Provisions Schedule Effective December 1

November 28, 2011

On November 7, 2011, we announced changes to improve the efficiency of the early rate-lock delivery process. These changes, which are effective December 1, 2011, will improve our speed and help you deliver results to borrowers more quickly.

As a result of the early rate-lock enhancements, there are some system changes and new items that we would like to remind you about before you submit your first early rate-lock loan. The training we are offering will also cover these items in detail. If you have not already registered for training, we invite you to attend the remaining one-hour online session to learn more about our new early rate-lock delivery process.

Wednesday, November 30, 2011 2:00 – 3:00 p.m. ET Registration Link

Consolidated Checklist

To help streamline the underwriting process, we consolidated all of our requirements into one checklist for all conventional products. You should continue using current checklists for deals already in process. You should use the new Consolidated Checklist for any new deals for which the first underwriting package is submitted on or after December 1.

Document Management System Changes

To support the consolidated checklist, we are introducing the following six new document types for the Document Management System (DMS) on December 1, 2011.

Action Document Name Grouping Name Title to be Added by Seller
New Document Organization Chart – SPE Equity Owner Seller/Servicer Underwriting Deliveries N/A
New Document Organization Chart – Borrower Principals Seller/Servicer Underwriting Deliveries N/A
New Document Low Income Housing Tax Credits (LITCH) Allocation and Certification Documentation Seller/Servicer Underwriting Deliveries N/A
New Document Ownership Interest Disclosure Seller/Servicer Underwriting Deliveries N/A
New Document Housing Assistance Payment (HAP) Contract Seller/Servicer Underwriting Deliveries N/A
New Document Conventional Checklist Seller/Servicer Underwriting Deliveries N/A

Document Mapping Resources

To align with these DMS changes, we will be updating the Master Document Listing Mapping page in the Document Management System Resources section under Tools and Resources in MultiSuite® on December 15, 2011. In the meantime, please continue to use the current Master Document Listing Mapping for all your DMS upload needs.

If you have any questions about these DMS changes, please contact your Freddie Mac regional underwriter.

Breakage Provision Changes

Our new approach to early rate-lock gives your underwriter the ability to adjust the loan amount at full underwriting after rate-lock. With this new approach, we've eliminated breakage fees for changes within five percent of the preliminary underwriting proceeds that were rate-locked. We also changed our Early Rate-Lock Application Early Rate-Lock Application (ERLA) and Breakage Provisions.

The Breakage Provisions are now on a Schedule rather than integrated into the ERLA. Please also note that the Breakage Provisions now refer to the Seller/Servicer as "Lender" and do not require the Seller to fill in its name in multiple places. It is now easier for Sellers to incorporate the breakage provisions into the Seller’s application or commitment with the borrower. It is very important that the borrower has the same obligations to the Seller as the Seller has to Freddie Mac with regard to a decrease in the loan amount.

Since the ability to increase the loan does not involve breakage, it appears in a separate provision in the body of the ERLA. Each Seller will need to make the provision for increasing the loan amount "fit" into its application or commitment with the borrower.

If Freddie Mac Underwriting receives a Preliminary Package using the new Consolidated Checklist, we will issue the ERLA on the form with the provisions for making adjustments after rate-lock.

We created a Breakage Provisions Job Aid for your review. Any additions or changes appear in larger bold type. The Breakage Provisions are basically the same as the previous provisions with changes to accommodate the potential reduction of the loan amount.

Please contact your Freddie Mac regional attorney with any questions about the Breakage Provisions.

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