Skip to Page Content | Skip to Site Navigation | Skip to Section Navigation

Updates to Legal Documents and Processes

May 8, 2017

Over the last several months, we’ve received feedback from our Seller/Servicers’ legal counsel on various items regarding Preliminary Legal Issues Memorandum (PLIM), Title Exception and Survey Analysis (TESA) and other loan documents.

We’ve listened to your input and recently posted a few dozen updated forms to our site. Below is a summary of these changes.

Mandatory Use of the PLIM – Checklist Form

As you may recall, we introduced the PLIM Checklist Form in September 2016 for optional use. During this introductory period, we received feedback from many of you, and today we posted an updated version based on that input. 

Specifically, for those of you who have already been using the PLIM Checklist Form, you will notice the following changes in the updated form:

  • Introduction of “Common Transaction Issues” and “Other Transaction Issues” sections.  The Common Transaction Issues section contains the most common loan issues and must be included in all PLIMs. The Others Transaction Issues section includes less frequently encountered issues. If none of the items in the Other Transaction Issues section apply, Seller’s Counsel may simply check one box to confirm and omit the pages listing the Other Transactions Issues from the form.
  • Expansion and clarification of organizational chart instructions, to promote a more uniform DET identification process
  • Identification of first level, last level, and pass-through entities, to assist our underwriters with their review of the Borrower’s structure
  • Use of a check-box format where possible

Effective today, in connection with all new loan originations for which a PLIM has not yet been submitted, the PLIM(s) for such loans must be prepared using the PLIM Checklist Form.

This change will help ensure that the PLIM contains all information required by Freddie Mac and will result in a streamlined process for reviewing loan issues.

All questions regarding the updated PLIM should be directed to Leta Principe.


Updated TESA

We also made several modifications to the TESA. Highlights include:

  • Clarification of Key Loan Characteristic – Legal Conforming vs. Non-Conforming
  • Clarification of indirect access which fully complies with Section 8.8
  • Elimination of additional description of Condo Conversion Restriction compliance
  • Clarification of acceptable ALTA 9 endorsements
  • Clarification of requirement for the ALTA 28-06 vs CLTA 103.2
  • Removal of Current Survey Waiver required endorsements

Additionally, we posted a new reference document titled the Title Exception and Survey Analysis – Frequently Asked Questions. Though technically formatted as a “Legal Guidance,” we’ve located it alongside the TESA to improve its visibility and usefulness.
 
We encourage you to begin using the updated version of the TESA immediately, but we will not require its use on loans for which Freddie Mac issued the Commitment (or received the Application) on or prior to June 5, 2017.

All questions regarding the updated TESA should be directed to  Kelli Dunn or Robyn Thompson.


Updated Loan Documents

In addition to the updated PLIM and TESA (and the new TESA FAQ), we also posted updated versions of 43 loan and servicing documents and 2 new servicing documents here. Following is a summary of the most material changes.

Notes (Fixed and Floating)

  • Revised prepayment provisions to clarify how a prepayment period is calculated when the beginning of a new prepayment period or window period begins on a non-Business Day
  • Incorporated all changes reflected in the “Standard Modifications Rider” announced October 19, 2016 (the Rider is now obsolete when using this updated version)
  • Revised the Floating-Rate Note to clarify that the prepayment premium exception for financing into a Freddie Mac fixed-rate loan only applies to the current Borrower

Guaranty

  • Revised the definition of “Note” in the preamble to address transactions in which there are multiple Notes
  • Deleted requirement for notary acknowledgment (a requirement which has been waived since the October 19, 2016 “Standard Modifications” were announced)

Loan Agreement

  • Modified to permit (1) the conversion of up to 50% of the general partner interests in a partnership or the manager interests in a limited liability company existing on the Closing Date in Borrower or any Designated Entity for Transfers to limited partner or non-managing membership interests, and (2) the subsequent transfer of such converted interests in accordance with the Loan Agreement.
  • Added Green Improvements and escrows to the Page 1 loan summary
  • Limited the covenant that all commercial tenants have the necessary licenses and permits “to Borrower’s knowledge” (previously, it was an absolute covenant)
  • Deleted the requirement for commercial leases executed post-origination to contain express subordination language (as they are inherently subordinate to our mortgage by virtue of their timing)
  • Specified that an individual certifying audited financial statements does so in his/her entity role with Borrower, SPE Equity Owner, or Guarantor, and not in his/her individual capacity
  • Revised to allow Borrowers to pay insurance premiums prior to the policy expiration, rather than 30 days prior to the policy expiration
  • Clarified that business income and commercial general liability insurance policies must include terrorism coverage
  • Eliminated the requirement for insurance policies to contain a clause that the insurer will notify the lender of pending cancellations (reflecting current industry standard)
  • Revised to allow Borrowers to deliver copies of new Insurance policies to Lender prior to the policy expiration, rather than 15 days prior to the policy expiration
  • Revised the preapproved intrafamily transfers provision (which previously required no change in control) to specify that the provision is only applicable for non-managing member or limited partner interests
  • Incorporated changes reflected in the “Standard Modifications Rider” announced October 19, 2016 (the Rider is now obsolete when using this updated version)

Security Instrument

  • Revised the definition of “Note” in the Uniform Covenants to address transactions in which there are multiple Notes

Riders

  • Revised the Aluminum Wiring Riders to Note and Loan Agreement to include an option for mitigating aluminum wiring by installing new conductors on branch wiring in addition to our prior standard (full replacement of the wiring)
  • Revised all Repair Riders to Loan Agreement to give lender the option to inspect the property prior to the last disbursement from the Repair escrow (rather than specifying mandatory inspection as a prerequisite to the final disbursement)

You may begin using the updated versions of the Loan Documents immediately, but we will not require their use on loans for which Freddie Mac issued the Commitment (or received the Application) on or prior to June 5, 2017.


If you have any questions or comments on the updated Loan Documents, please email us.