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Nancy Duffy McCarron, CBN 164780 Law Office of Nancy Duffy McCarron 950 Roble Lane Santa Barbara, CA 93103 805-450-0450 fax 805-965-3492 firstname.lastname@example.org Real Estate Broker Lic. 853086 Attorney for Plaintiff Carole S. Alles
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA [EASTERN DIVISION]
CAROLE S. ALLES Plaintiff, v. WELLS FARGO BANK, NA; dba Wells Fargo Home Mortgage FEDERAL HOME LOAN MORTGAGE CORPORATION, aka FHLMC; aka Freddie Mac; in its corporate capacity, as trustee of an unidentified REMIC trust holding plaintiff’s debt obligation as security without her knowledge or consent to securitization; as conservatee under the conservatorship of defendant Federal Home Finance Agency [FHFA] as its conservator of unknown duration; DIRECTOR OF FEDERAL HOME FINANCE AGENCY, aka FHFA, as conservator for defendant Freddie Mac Case No. 5:12-cv-02095-MWF-DTB filed 11/29/12
FIRST AMENDED COMPLAINT [“FAC”] (1) Declaratory Relief (2) Cancellation of Instrument & Injunction [Civil §3412-3422] (3) Slander of Title (4) Quasi Contract & Unjust Enrichment (5) Violation of 15 USC §1641(g) TILA §131(g) (6) Quiet Title (7) B&P §1700 et seq. (8) Breach of Contract (9) Violation-Civil §2923.5 Unlawful Pre-Foreclosure Acts (10) Civil Conspiracy-Defraud, violate codes & Due Process (11) Fraud (Actual & Constructive) Civil Code §§1572-1575 (12) 5th. & 14th. Amendment Due Process Violations and FHFA (Freddie Mac) federal actors
(13) Violations of ECOA discrimination [Age & Disability] CAL-WESTERN RECONVEYANCE § 15USC 1691-Unruh-Civil §51 et seq.; 42 USC §1983 CORPORATION, aka CWRC in its corporate capacity and as the foreclosing (14) Violations of California Homeowners Bill of Rights trustee on plaintiff’s real property DEMAND FOR ATTORNEY FEES AS ENTITLED DOES 1-100 Defendants DEMAND FOR JURY TRIAL, RULE 38(B)
FIRST AMENDED COMPLAINT FAC is timely filed on 5/9/13 as the court gave plaintiff 14 days to amend after a 4/25/13 order. -1FAC filed 5/9/2013
JURISDICTION AND VENUE 1. This Court has jurisdiction under 28 U.S.C.§§1331, 1332, 1343, 1367, 42 U.S.C.§1983 to
3 address deprivation of rights secured by federal law & matters between diverse citizens involving 4 an amount in controversy exceeding $75,000. This Court has supplemental jurisdiction under 5 28 U.S.C. §1367 to address related common law torts and claims, including unjust enrichment, 6 fraud, and multiple violations of California’s Codes and Regulations, which are state law claims. 7 2. Venue is appropriate in this judicial district under 28 U.S.C. §1391(h) because the events
8 which gave rise to this Complaint occurred in this judicial district, specifically Riverside County. 9 10 THE PARTIES 3. Plaintiff CAROLE S. ALLES [“ALLES”] is a United States citizen residing in Riverside
11 County at 43060 Illinois Avenue, Palm Desert, California, 92211 within this judicial district. 12 At 71 she is an unemployed homeowner, disabled with an inoperable, incurable lung disease, 13 who receives $857 monthly in earned Social Security Benefits. Plaintiff supplements her income 14 by leasing two rooms in her residence for $1275 month total to help make mortgage payments. 15 Plaintiff brought this action to prevent the fraudulent foreclosure of her home by a party who had 16 no standing to foreclose, prosecuted by a conspiring foreclosure trustee and to address intentional 17 concealment of the true beneficiaries who own the security interest recorded against her property. 18 4. Defendant WELLS FARGO BANK, NA [“WELLS”] is a National Association of bankers,
19 with a principal place of business in San Francisco, California. WELLS is the primary operating 20 subsidiary of Wells Fargo & Company [WFC] a company engaging in international banking, as 21 well as sales and marketing of insurance, securities and investments in a worldwide market. 1 22 23 24 25 26 27 28
Fargo & Co. (WFC) is a diversified financial services company providing banking, insurance, investments, mortgage and consumer finance through almost 9,000 stores, 12,000 ATMs, the internet and other distribution channels across North America and internationally. Total assets: US$ 1.404 trillion (as of March 31, 2013). Net income: US $12.4 billion (2010), US $ 15.9 billion (2011), US $18.9 billion (2012). Wells Fargo is the 4th largest bank in the US by assets and the 1st largest bank by market capitalization. Wells Fargo operates stores and ATMs under the Wells Fargo and Wachovia names. The firm's primary U.S. operating subsidiary is national bank Wells Fargo Bank. Wells Fargo is a result of an acquisition of Wells Fargo & Company by Norwest Corporation in 1998 and the subsequent 2008 acquisition of Wachovia Corporation” quoted directly from: http://www.banksdaily.com/info/wells-fargo -2FAC filed 5/9/2013
5. WELLS is deemed to be a corporation under California’s Corporations Code §4820. 2
2 WELLS conducted business under fictitious names, including, “Wells Fargo Home Mortgage” 3 [WFHM] whose name appeared on the top of nearly all articles of correspondence plaintiff has 4 received since August 2006, reciting the same address where plaintiff sent her monthly mortgage 5 payments since 2006. In its Answer to the verified complaint WELLS alleged that Wells Fargo 6 Home Mortgage merged into Wells Fargo Bank, NA. This could only have occurred under Corp. 7 §4805.13. WFHM could only have merged as a disappearing state depository corporation under 8 Corp. §§4805.17;4820.5. WELLS, surviving federal depository corporation doing business in 9 California is subject to its banking laws [Corp. §99 et seq.] under Corp. §163 unless preempted. 10 6. WELLS was the wholesale originator of plaintiff’s loan, acting only as a nominal lender, but 11 was not the actual investor who funded the loan. Plaintiff’s loan was pre-sold during her escrow 12 on the secondary mortgage market to defendant Freddie Mac [identified below] during escrow, 13 to be securitized by Freddie Mac into a large loan pool, without plaintiff’s knowledge or consent. 14 WELLS pre-sale of the ALLES to Freddie Mac purportedly closed escrow on 9/13/2006. 15 WELLS has always represented that it was/is the “loan servicer” of ALLES’ home loan and has 16 always collected ALLES’ monthly payments since her purchase escrow closed on August 1, 2006 17 7. Defendant FEDERAL HOME LOAN MORTGAGE CORPORATION, aka FHLMC, 18 aka FREDDIE MAC [“Freddie Mac”] is a public government-sponsored enterprise [GSE], 19 headquartered in the Tyson's Corner CDP in unincorporated Fairfax County, Virginia. Congress 20 created Freddie Mac in 1970 to expand the secondary mortgage market in the United States. 21 With other GSEs Freddie Mac bought/buys mortgages on the secondary market, pooled/pools 22 them and sold/sells fractional interests in intangible debt obligations created by tangible notes in 23 the pools as Mortgage Backed Securities [MBS] [bonds], to investors in an international market. 24 This secondary mortgage market increases the supply of money available for mortgage lending 25 and increases the money available for new home purchases, a valid government goal since 1938. 26 To this end, in 1970 Congress intended to stimulate the economy by creating new jobs in the 27 construction industry while encouraging home ownership across the United States of America. 28
Any further references to California’s Corporations Code will be cited at Corp.§
-3FAC filed 5/9/2013
8. On September 7, 2008 Defendant Federal Housing Finance Agency aka FHFA [identified
2 below] director James B. Lockhart III announced he had put Fannie Mae and Freddie Mac under 3 FHFA conservatorship. His action has been described as "one of the most sweeping government 4 interventions in private financial markets in decades." Moody's gave Freddie Mac's preferred 5 stock an investment grade rating of A1 until August 22, 2008 when Warren Buffett said publicly 6 that both Freddie Mac and Fannie Mae had tried to attract him and others. Moody's changed 7 the credit rating on that day to Baa3, the lowest investment grade credit rating. 8 9. Freddie Mac's senior debt credit rating remains Aaa/AAA from each of the major ratings
9 agencies Moody's, S&P, and Fitch. The United States Department of the Treasury contracted to 10 acquire U.S. $1 billion in Freddie Mac senior preferred stock paying at a rate of 10% per year, 11 and the total investment may subsequently rise to as much as US $200 billion. Home loan 12 interest rates may go down as a result and owners of Freddie Mac debt and the Asian central 13 banks who had increased their holdings in these bonds may be protected. Shares of Freddie Mac 14 stock, however, plummeted to about one U.S. dollar on September 8, 2008, and dropped a further 15 50% on June 16, 2010, when FHFA ordered the stocks delisted. In 2008 the yield on U.S 16 Treasury securities rose in anticipation of increased U.S. federal debt. 17 10. Defendant DIRECTOR OF FEDERAL HOUSING FINANCE AGENCY, aka FHFA,
18 was created by Congress on 7/30/2008 to act as the conservator for Freddie Mac and Fannie Mae 19 [two Government Sponsored Enterprises, nearly insolvent] as explained on FHFA’s website. 3 20 21 22 23 24 25 26 27 28
“Federal Housing Finance Agency (FHFA) was created on July 30, 2008, when the President signed into law the Housing and Economic Recovery Act of 2008. The Act gave FHFA the authorities necessary to oversee vital components of our country’s secondary mortgage markets – Fannie Mae, Freddie Mac, and the Federal Home Loan Banks … FHFA's mission is to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market. As of September 2010, the combined debt and obligations of these GSEs totaled $6.7 trillion, which is $2.7 trillion below the total publicly held debt of the USA. Freddie Mac and Fannie Mae also purchased or guaranteed 65% of new mortgage originations. Considering the impact of these GSEs on the U.S. economy and mortgage market, it is critical that we intensify our focus on oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.” see www.fhfa.gov [about us] -4FAC filed 5/9/2013
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11.
Defendant CAL-WESTERN RECONVEYANCE CORPORATION, aka CWRC, is a the trustee who is foreclosing ALLES loan for WELLS as its substituted trustee. CWRC advertised a trustee sale for 12-19-12 and has postponed the sale several times. CWRC most recently advertized a trustee sale for 6/4/2013 at a website posting notices for all CWRC trustee sales: http://www.rppsales.com/index.php?option=com_wrapper&view=wrapper&Itemid=144 DOE DEFENDANTS, AGENCY, CONSPIRACY, JOINT & SEVERALLIABILITY DOES 1-100 inclusive: use of the term “Defendants” in any FAC allegations, unless
otherwise set forth, includes and charge all defendants jointly and severally, not only the named Defendant, but all Defendants designated as DOES 1-100. Plaintiff is informed and believes, and thereon alleges at all times mentioned herein, DOE Defendants were agents, servants, employees, alter egos, superiors, successors in interest, joint venturers and/or co-conspirators of each of their co-defendants, and in doing the things mentioned, or acting within the course and scope of their authority of such agents, servants, employees, alter egos, superiors, successors in interest, joint venturers and/ or co-conspirators with permission & consent of co-defendants and, consequently, each Defendant named, and Defendants named as DOES 1-100, inclusive, are jointly & severally liable to Plaintiff for damages & harm sustained as a result of alleged wrongful acts. Defendants, and each of them, aided & abetted, encouraged, & rendered substantial assistance to the others in breaching obligations to Plaintiff, as alleged. In taking alleged actions to aid,abet & substantially assist commissions of wrongful acts & other wrongs complained of, each of the Defendants acted with an awareness of its primary wrongdoing & realized its conduct would substantially assist in accomplishment of wrongful conduct, wrongful goals, and wrongdoing. Defendants, and each of them, knowingly & willfully conspired, engaged in a common enterprise & in a common course of conduct to accomplish alleged wrongs. The purpose & effect of the conspiracy, common enterprise & common course of conduct complained of was, inter alia, to financially benefit them at Plaintiff’s expense by engaging in fraud & concealment of material facts before & after escrow closed, and to date. Defendants accomplished their conspiracy, common enterprise & course of conduct by misrepresenting and concealing material information regarding the servicing of loans, and by taking steps and making statements in furtherance of wrongdoings as specified herein. -5FAC filed 5/9/2013
Each Defendant was a direct, necessary & substantial participant in a conspiracy, common
2 enterprise & common course of conduct as alleged, and was aware of its overall contribution to 3 & furtherance thereof. Defendants’ wrongful acts include, inter alia, all of the acts that each of 4 them are alleged to have committed in furtherance of the wrongful conduct as alleged herein. 5 6 TOLLING STATUTES OF LIMITATIONS DUE TO FRAUDULENT CONCEALMENT 13. Any applicable statutes of limitations have been tolled by the Defendants’ continuing,
7 knowing, and active concealment of the facts as alleged herein. Despite exercising reasonable 8 diligence, plaintiff could not have discovered, did not discover, and was prevented from 9 discovering, the wrongdoing complained of herein. Defendants should be estopped from relying 10 on any statutes of limitations as they were/have been under a continuing duty to disclose the true 11 character, nature & quality of their financial services and debt collection practices. Defendants 12 owed an affirmative duty of full & fair disclosure, but knowingly failed to discharge such duties 13 when statutorily bound to disclose by 15 USC §1641(g) and CA Homeowners’ Bill of Rights. 14 15 16 HISTORICAL ALLEGATIONS COMMON TO ALL CLAIMS AND PARTIES (verified by plaintiff and including supporting evidentiary exhibits) 14. On 7/28/2006 while still employed plaintiff bought a home at 43060 Illinois Avenue, Palm
17 Desert, California 92111. WELLS wholesaled the loan and was only a nominal lender on a note. 18 15. Exhibit A is a true copy of the 3-page $230,000 note plaintiff executed at 6.75% fixed rate 19 of interest, for a 30 year amortized term, at $1,491.78 monthly payments until August 1, 2036. 20 The note was secured by a trust deed recorded against the property at Riverside county recorder’s 21 16. Plaintiff’s loan was pre-sold in escrow and conveyed into a large pool of securitized loans. 22 On 9/13/2006 certificate holders in a Freddie Mac trust became the beneficial owners. Exhibit B 17. Plaintiff believed WELLS was lender and loan servicer because her note and trust deed 23 recited WELLS’ name as lender and included WELLS address as the place to mail her payments, 24 which implied that WELLS was the only entity involved in her loan. No one involved in the 25 escrow ever disclosed to ALLES that her loan was pre-sold during escrow to Freddie Mac, to be 26 transmuted to a Collateral Debt Obligation [CDO], sold by Wall St. brokers as investment bonds, 27 and that her Loan Servicer would be bound by terms in a Freddie Mac Seller/Servicer Agreement 28 not to modify/forbear on any loan. Alles never consented to these material loan term changes. -6FAC filed 5/9/2013
18. ALLES had committed to home loans during her past life, but each loan negotiated by the
2 bank had been held in its portfolio. ALLES had always made monthly payments to a traditional 3 lender in the past. ALLES could talk to a manager at any time about her traditional mortgage. 4 19. For example, if ALLES became unemployed or sick she could have approached a bank 5 manager to ask him to forebear for a few months, with an agreement to tack on missed payments 6 to the tail end of her loan. The bank manager could elect to forebear for a few months, rather 7 than foreclose, which would result in significant bank savings on legal fees and trustee costs. 8 9 20. ALLES assumed her 7/28/06 WELLS loan would work as loans in her past life had worked 21. If the true facts had been disclosed by anyone during escrow plaintiff would not have
10 executed the note or trust deed. Plaintiff would have continued to rent an apartment or would 11 have obtained a traditional loan from a lending institution which held loans in its own portfolio. 12 13 22. With a credit rating close to 800 points plaintiff could have obtained a traditional loan. 23. After engaging counsel plaintiff discovered WELLS had a statutory duty to notify her
14 in writing when there was a change in beneficiary. 15 USC §1641(g). Neither WELLS nor 15 Freddie Mac ever notified Alles that a new lender [a Freddie Mac Trust] owned her loan. 16 24. On 12/7/12 CWRC recorded WELLS purported assignment of the security interest [TD] 17 to Freddie Mac which was executed by Monica Gonzalez [a CWRC agent] as attorney in fact for 18 Wells Fargo Bank, NA. [Exh. C]. Neither WELLS nor Freddie Mac ever mailed a copy of the 19 purported assignment to ALLES, whose attorney discovered the assignment for the first time in a request from First American Title Company for a title report. ALLES never understood why a 20 second assignment [WELLS to Freddie Mac] would have been necessary as Freddie Mac’s 21 website confirmed a 9/13/06 acquisition of the loan [Exh.B] Wells should have assigned it then. 22 25. ALLES did not understand why neither WELLS nor Freddie Mac recorded the assignment 23 on 9/13/2006 ---the purported date Freddie Mac purchased her loan from seller/servicer WELLS. 24 WELLS never notified ALLES that Freddie Mac had been placed under a conservatorship by our 25 government on September 7, 2008 or that FHFA, as conservator for Freddie Mac, was the only 26 entity who had authority to direct Freddie Mac to approve a loan modification. Plaintiff had 27 applied for a loan modification with WELLS because she believed WELLS was the only entity 28 who had authority to approve or deny a modification as she believed WELLS was beneficiary. -7FAC filed 5/9/2013
WELLS agents never disclosed inherent conflict in having WELLS, as the loan servicer,
2 approve modifications as WELLS would gain substantially more profit [$6,000] by foreclosing 3 rather than it would realize by modifying [ a $1,000 stipend from the federal government]. 4 27. After the 2008 collapse of numerous banks the recession hit Palm Desert with a vengeance. 5 Home values dropped to half of their 2006 market value when ALLES purchased her residence. 6 The ALLES home is currently assessed at only $105,000 for tax year 2012-2013. [Exhibit D]. 7 28. ALLES paid $330,000 for the home in 2006. If ALLES’ home is foreclosed she will lose 8 her entire investment and have to return to renting an apartment. ALLES cannot qualify to buy 9 another home as her 800 credit score is ruined due to foreclosure. WELLS acted in bad faith in 10 promising to modify her loan while simultaneously foreclosing. Plaintiff’s attorney discovered 11 that engaging in dual tracking violated Exhibit A of a consent agreement WELLS had signed on 12 April 4, 2012. Plaintiff’s attorney discovered 22 additional violations of the terms of Exhibit A 13 of WELLS’ consent agreement, which vitiated any potential immunity under Civil §2924.12(g) 14 29. After home values in Palm Desert dropped in half by 2009 plaintiff started to call WELLS 15 agents to ask for a reduction in her 6.75% fixed interest rate. Plaintiff had a history of timely 16 making mortgage payments. Plaintiff always had at least two tenants sharing her home to make 17 the monthly mortgage payments. Plaintiff did not make a profit on the rental income as 100% 18 of the income was used to pay her monthly mortgage, fire insurance and county real estate taxes. 19 20 21 22 23 24 25 26 27 28 30. 31. By 2009 rents dropped significantly--forcing ALLES to reduce rents to avoid vacancies. Plaintiff had to infuse $300-$400 per month to make mortgage payments, pay taxes and
fire insurance depleting her savings account. If WELLS had modified her loan to the 2% HAMP rate, or 3% conventional rate her payment would have dropped from $1491 to $900 per month. Her payment would have dropped to $500 per month if she had received a principal reduction. ALLES could have easily afforded to pay if WELLS had modified her loan as she rarely had a vacancy on the rental rooms as the home is on the golf course fairway-- a popular rental location. ALLES enjoyed having tenants as otherwise she would be living completely alone in the home. 32. Alles called every few months to ask if she could get a loan modification while watching
interest rates drop from 6.75% down to 6%, then 5%, 4%, and finally down to the 3% range.
-8FAC filed 5/9/2013
Each time rates dropped ALLES called WELLS agents to inquire about a modification.
2 Each time the WELLS agent told ALLES she was not eligible for a modification because she was 3 “not currently in default” and WELLS only modified loans which were “currently in default.” 4 34. By 2011, which was the most recent time she called a WELLS agent to inquire about a 5 loan modification, the agent advised her to stop making payments to trigger a default rendering 6 her “eligible for a loan modification.” The WELLS agent told ALLES that so long as she kept 7 making timely payments at a high fixed rate (6.7%) WELLS would not modify her loan. 8 35. ALLES relied on advice from the WELLS agent as she had little knowledge of financing. 9 ALLES decided to stop making payments after February of 2012 to trigger eligibility to modify. 10 36. ALLES thought she would qualify for a hardship modification because she was over 70, 11 was unemployed, and was disabled with an incurable, inoperable lung disease causing coughing. 12 37. Instead of modifying her loan WELLS filed a Notice of Default on 8/2/2012, including a 13 declaration under CC §2923.5 signed by Deatrice Hemphill from Wells Fargo in Fort Hill, SC. 14 (Exhibit E) The declaration recited “the beneficiary tried with due diligence but was unable to 15 contact the borrower to discuss the borrower’s financial situation and to explore options for the 16 borrower to avoid foreclosure…and more than 30 days has past.” These statements were false. 17 38. No “beneficiary” ever called ALLES to discuss her financial situation. ALLES has had 18 the same cell phone number since she bought the home in 2006 and has always had it activated. 19 39. ALLES never received a call from anyone to discuss her financial situation or options. 20 21 22 23 24 25 26 27 28 40. 41. The last time ALLES had called WELLS was in 2011. No agent called ALLES in 2012. ALLES would have returned any call from a WELLS agent to discuss her loan situation. ALLES’ attorney filed an application for a HAMP modification through the Inland Empire
Deitrice Hemphill did not sign her declaration under oath and her statements are simply not true. 42. HUD-approved consultant. WELLS denied ALLES’ application on 11/8/12 despite an NPV report, populated by her attorney at HAMP’s website, showing she qualified for a modification. 43. In a denial letter dated 11/8/2012 Wells promised not to foreclose during a 30-day window while ALLES appealed. (Exhibit F) ALLES’ attorney immediately appealed and escalated a complaint to Freddie Mac online. Despite WELLS promise not to foreclose CWRC recorded a Notice of Sale a weekend before Thanksgiving setting a sale for 12/19/12-right before Christmas. -9FAC filed 5/9/2013
44. A CWRC server nailed the NOS on ALLES’ front door the weekend before Thanksgiving.
2 ALLES went to visit her son over Thanksgiving but could not enjoy the holidays with the threat 3 of being homeless right before Christmas despite WELLS written promise not to sell the home. 4 45. ALLES’ attorney called the escalation contact person the day after filing an appeal to see 5 if staff had received the escalation complaint by email. The assigned staff person (John) told 6 ALLES’ attorney the appeal had already been denied the next day after they received it by email. 7 46. No one ever disclosed to ALLES or her attorney that she could have applied for a new 8 Freddie Mac simplified modification for borrowers who did not qualify for HAMP or HARP. 9 10 47. 48. ALLES believes WELLS had/has only one agenda--to foreclose and steal her home. Wells postponed the trustee sale originally set for 12/19/2012 to a new date of 12/29/2012
11 ALLES paid an agent to attend the original sale to listen to the auctioneer who arrived late and 12 then postponed the sale to 12/29/12. CWRC did not send Alles written notice of postponement. 13 WELLS postponed again on 12/29/2012 to January 2013, without sending her any written notice. 14 CWRC postponed the sale a third time in January to March 2013, then postponed a fourth time to 15 April 30, 2013. WELLS postponed a fifth time to June 4, 2013 which sale is currently pending. 16 Every time the sale was postponed ALLES returned to an agitated mental state, while the sale 17 remained in pending, resulting in significant stress to her mental state. WELLS never disclosed the following facts: 18 49. 19 20 21 22 23 24 25 26 27 28 Freddie Mac and Seller/Servicers perpetrated fraud on courts, debtor and the public by conspiring to conceal and concealing its ownership [by not recording the assignments]. Plaintiff's original note, payable to Wells Fargo Bank, NA [“WELLS”] was sold within a month of origination to Freddie Mac who published a September 13, 2006 settlement date. Freddie Mac required WELLS to transfer its security interest [the intangible debt obligation created by ALLES tangible note] to Freddie Mac by executing an assignment of its security interest [the trust deed] to Freddie Mac, who directed Wells not to record the assignment, per its master contract with lenders; Seller/Servicing Guide [the Guide] §2.14 as follows:
- 10 FAC filed 5/9/2013
The FM Guide required the note to be endorsed in blank. Freddie Mac sold each loan to
2 one of its own previously created Mortgage Backed Security Trusts [MBST]. Freddie Mac took a 3 commission on each transaction while acting as “Seller” into its Trusts, as “Depositor” into its 4 Trusts and as Trustee of its REMIC Trusts. Each sale was a true sale without recourse. Pursuant 5 to a Congressional exemption for Government Sponsored Entities [GSEs] Freddie Mac was not 6 required to report these trust transactions to the Securities and Exchange Commission ["SEC"]. 7 Sponsors of private Mortgage Backed Security Trusts [MBST] were required to report to SEC. 8 51. Freddie Mac [FM] guaranteed payment to investors, opening flood gates to a worldwide 9 market of even the most conservative of investors. FM sold “Participation Certificates”[PCs] 10 to investors who acquired a fractional, beneficial interest in each intangible debt obligation 11 created by tangible notes purportedly held “in trust” by Freddie Mac as the REMIC trustee. 12 Each certificate holder received a monthly yield on its PC with payments guaranteed by FM. 13 52. Freddie Mac created these REMIC trusts under New York Trust Law, which required each 14 assignment, after a true sale into a REMIC trust, to be recorded at the County Recorder’s office, 15 but this never occurred as §22.14 of FM Guide prohibited servicers from recording assignments. 16 53. FM’s business model failed because either Seller/Servicers failed to endorse the notes in 17 blank; or they failed to record the assignments as §22.14 prohibited recording assignments; or--18 because lenders were prohibited from recording, most Seller/Servicers failed to even execute the 19 assignments to Freddie Mac of their security interests [trust deeds] after the REMIC true sales. Failure to endorse the note in blank, failure to execute an assignment of the trust deed to FM, 20 and failure to record the assignment after the true sale, violated not only New York Trust Law 21 [FM’s choice of law in its REMIC trusts] but also IRS rules. These REMIC IRS regulations 22 strictly required that all true sales into REMIC trusts had to occur within a 90-day window after 23 the REMIC trust was declared. 26 U.S.C.§§ 860A–860G. Because Freddie Mac was exempt 24 from SEC oversight FM failed to comply with SEC regulations, as required in private MBSTs. 25 FM failed to comply with recording assignments at county recorder’s offices as mandated. 26 54. During foreclosures in which Freddie Mac PC holders owned a fractional beneficial 27 interest in debt obligations, plaintiffs and courts were/are misled into believing the Seller/ 28 Servicers actually owned the loans because assignments to Freddie were never recorded. - 11 FAC filed 5/9/2013
55. In this case, Seller/Servicer WELLS actively participated with Freddie Mac, and CWRC
2 in creating a pretext that WELLS owned the loan, when they all knew this was not the case. 3 Defendants concealed that a Freddie Mac REMIC trust held legal title to the security interest, 4 and that the true beneficiaries were PC holders, who each held a fractional, beneficial interest 5 in the intangible debt obligation created by the tangible note ALLES executed on 7/28/2006. 6 56. WELLS actually processed ALLES’ application for a loan modification, even though it 7 was Freddie Mac who should have processed an application as Trustee for PC holders’ benefit 8 This charade was perpetrated because all 3 defendants (Freddie Mac, CWRC, and WELLS)
4 9 knew Freddie Mac had an internal policy to deny modifications for REMIC trust loans
10 11 12 57.
EVENTS LEADING UP TO FORECLOSURE OF PLAINTIFF’S HOME For 6 years until mid 2012 plaintiff never missed a payment to her loan servicer WELLS.
13 Plaintiff paid nearly $100,000 [mostly in interest] to WELLS during that six year period. During 14 the past few years plaintiff’s inoperable, incurable lung disease progressed to the point where she 15 became unable to work, even part-time, due to incessant coughing caused by the lung disease. 16 58. CWRC recorded Substitution of Trustee on 8/1/12 & Notice of Default 8/2/12 [Exh. E]. 17 Both were deficient for several reasons. First, the beneficiary was listed as Wells Fargo Bank, 18 NA which was not true. Freddie Mac bought the loan on 9/13/06 but the assignment was 19 never recordeded. Secondly, the attached Declaration of Compliance [required by Civil Code §2923.5(b)] was fraudulent. It listed WELLS as beneficiary which was false because Freddie 20 Mac had purchased the loan on 9/13/2012. WELLS had not been beneficiary since 9/13/2006. 21 Third, the declaration recited that “beneficiary tried with due diligence but was unable to contact 22 the borrower to discuss alternatives to avoid foreclosure”. This was false. WELLS agents had 23 told Alles in 2011 she “would not be eligible to modify her loan unless she stopped making 24 payments to trigger a default---rendering her eligible. No WELLS agent called her in 2012. 25 59. Counsel summoned NHSIE (Neighborhood Housing Services of the Inland Empire) who 26 is the HUD local agency affiliated with the Home Affordable Modification Program [HAMP]. 27 28
President Obama is in the process of appointing Mel Watts(Dem) to replace FHFA Director, Ed DeMarco who ordered no forbearance on Freddie Mac loans, and strict denial of modifications - 12 FAC filed 5/9/2013
The Treasury Department created HAMP in 2009 to stabilize the nation’s housing market.
2 WELLS executed a Servicer Participation Agreement ("SPA") on July 31, 2009 with Freddie 3 Mac [FHFA conservator] who is a government agent. WELLS agreed to apply the Treasury 4 Department's HAMP guidelines to all serviced loans. Lenders received millions in taxpayer 5 funds as incentives to modify loans for distressed borrowers to keep them in their homes. 6 61. Plaintiff’s attorney worked for several months, first with NHSIE as intermediary, then 7 directly with Carmen Saldana, WELLS Home Preservation Specialist, trying to obtain approval 8 for a loan modification under the HAMP program. Plaintiff qualified under HAMP guidelines 9 because she is disabled, has a hardship and has sufficient income to pay a reduced interest loan. 10 62. On 11/8/2008 Carman Saldana, WELLS agent, sent plaintiff written notification that she 11 “did not meet the requirements of the program” because: “Based on your documented income, 12 we are unable to create an affordable payment that meets the requirements of the program.” 13 The letter recited plaintiff could appeal WELLS’ denial and escalate a review to Freddie Mac. 14 63. It recited “Your home will not be sold in a foreclosure sale during the appeal period.” 15 A true copy of the letter from Carmen Saldana is included herein as [Exhibit F.] Despite this 16 written promise the following Saturday, on 11/17/12 an agent for CWRC posted a Notice of Sale 17 on plaintiff’s house, reciting a sale date set for 12/19/12. [Exhibit G] Plaintiff’s attorney made 18 an immediate written demand for CWRC to cancel the sale date, and made the same demand to 19 Carmen Saldana, WFHM Home Preservation Specialist. The demand was ignored by Trustee CWRC who responded they could not cancel the sale unless WELLS ordered the cancellation. 20 64. On 11/23/12 plaintiff’s attorney used the NPV calculation tool at HAMP’s online website: 21 “Make Homes Affordable” (MHA) to calculate plaintiff’s loan with actual accuracy. The NPV 22 toll populated results showing plaintiff was eligible for HAMP program relief [Exhibit H] 23 65. Notwithstanding eligibility, WELLS failed to modify its policies & procedures to ensure 24 plaintiff received equal treatment. WELLS failed to include, as Exhibit A to its denial letter, the 25 populated NPV results to support denial, as required by MHA rules. The missing Exhibit A 26 suggested that WELLS either did not populate NPV results at all, or the results showed Alles was 27 eligible so the results were omitted. ALLES realized the WELLS had no intention to approve a 28 modification, but rather intended to foreclose and steal her home on 21 days Notice of Sale. - 13 FAC filed 5/9/2013
HISTORY OF FREDDIE MAC’S SECURITIZATION WITHOUT SEC OVERSIGHT 66. Traditionally, a lender originated home loans by having homebuyers execute tangible notes
3 [promises to repay amortized principal and interest]. A lender could sue a homeowner to collect 4 unpaid balances upon default. In addition to a breach of contract remedy, lenders negotiated an 5 alternative method of repayment; i.e. lenders made owners pledge the real property as collateral. 6 The borrower was required to execute a mortgage (or deed of trust) when he/she executed the 7 tangible note, granting the lender a Power of Sale to foreclose the real property upon default and 8 use the sale proceeds to pay off the loan. The lender held the borrower’s tangible note in its own 9 loan portfolio. The lender recorded its security interest as a county lien against the real property. 10 Under the traditional lending model the potential lender had a financial incentive to ensure the 11 borrower could repay the promissory note and that the underlying property offered as collateral 12 to secure payment had sufficient equity value to repay the loan balance after a foreclosure sale. 13 67. To stimulate the economy and generate jobs, Congress passed the Tax Reform Act of 1986. 14 Congress created Real Estate Mortgage Investment Conduits [REMIC] to expand originations of 15 loans in a process called securitization. Lenders could pre-sell loans during escrows and convey 16 intangible debt obligations created by tangible notes into mortgage loan pools [REMIC trusts] 17 Hundreds of thousands of electronic copies of intangible debt obligations were split off from 18 their corresponding tangible notes and conveyed into REMIC trusts to create special tax credits 19 for investors. Investors purchased fractional beneficial interests in intangible debt obligations 20 in the REMIC trusts. Wall Street brokers marketed the fractional beneficial interests entitling 21 them as Collateralized Debt Obligation Certificates [CDO certificates] selling for $1000 each. 22 23 24 25 26 27 28 68. These Mortgage Backed Securities [MBS] were intended to give special REMIC tax credits to stimulate housing and construction markets. Billions in profits & commissions were generated for lenders, REMIC trustees and Wall St brokers as they transmuted intangible debt obligations to bond securities entitled CDO Certificates [similar to a bond]. They traded like security bonds. 69. This securitization of intangible debt obligations altered the traditional lending model by severing the direct link between the borrower and her lender, as well as the concomitant risks associated with traditional portfolio mortgages, transferring risk of default to certificate holders.
- 14 FAC filed 5/9/2013
After a loan originator issued a mortgage to a borrower, the originator sold the mortgage
2 in a secondary market to a third-party financial institution. The originator collected origination 3 fees at closing from the borrower as well as the full loan balance from the financial institution it 4 pre-sold the loan to during escrow. This process created new capital to originate even more loans 5 which is how Congress elected to stimulate the economy in 1986. The risk of borrower default 6 was transferred to investors who purchased CDO certificates [intangible debt obligations]. 7 71. As borrowers made monthly payments of principal & interest the cash-flow was distributed 8 to investors. The typical participants in the securitization lending model are (1) a Loan Servicer 9 [the Sponsor]; (2) a Depositor of loans into a Special Purpose Vehicle (SPV) for securitization; 10 (3) an Underwriter of the MBST; (4) an Issuing Trust [Issuer of Participating Certificates]; and 11 (5) the Investors in the MBST [Participation Certificate holders in the Freddie Mac model]. 12 72. Freddie Mac REMIC Trust Agreement required strict compliance with New York Trust law 13 FM sold fractional beneficial interests in loan pools entitled, “Participation Certificates” [PCs] 14 through a pre-sale prospectus entitled, “Participation Certificate Offering Circular.” [Exh. I] 15 Freddie Mac guaranteed participants monthly yields on their investments regardless of borrower 16 default events, rendering those borrower default events irrelevant to receipt of yield payments. 17 73. Freddie Mac was not required to register investments with the Securities & Exchange 18 Commission [SEC], due to a special exemption granted to GSE’s by Congress. Freddie Mac’s 19 principal endeavor was to buy mortgages, establish Mortgage Backed Securities Trusts [MBSTs] 20 21 22 23 24 25 26 27 28 and then deposit the mortgages into the MBST upon issuing securities [Participation Certificates] to investors. Freddie Mac often paid originating lenders [sellers] with Participation Certificates in lieu of cash. The most likely destination of a mortgage Freddie Mac purchased was to be conveyed into a Freddie Mac declared MBST, as most mortgages it purchased were securitized. 74. Freddie Mac MBSTs differed from private MBSTs in that Freddie Mac guaranteed monthly payments to investors regardless of borrower default events. The Freddie Mac PC Trust investor bought a security, a “Participation Certificate" [PC] much like a coupon bond for a fractional beneficial interest in intangible debt obligations created by tangible notes, with its resulting cash flow. The PC investor received a fixed monthly coupon yield from the mortgage pool monthly proceeds, which were deposited by loan servicers as debtors made their payments. - 15 FAC filed 5/9/2013
75. In worldwide market Freddie Mac’s guaranteed mortgages were seen as debts guaranteed
2 by the full faith and credit of the United States. The 2008 housing calamity and bank failures 3 obligated the federal government to treat the Freddie Mac guarantee as a federal obligation. 4 Freddie Mac must guarantee monthly coupon yields to all PC investors. Even conservative 5 investors bought Freddie Mac’s Participation Certificates simply because they were guaranteed. 6 76. Freddie Mac created MBSTs to provide Tax Benefits to investors, which would increase 7 liquidity in the secondary mortgage market. To qualify for pass-through treatment to investors 8 and Freddie Mac Corporate, Freddie Mac had to declare its MBSTs as valid REMIC Trusts by 9 following strictly applied IRS regulations on its formation and maintenance. The REMIC trusts 10 were created using New York Trust Law, which mirrored the same strict compliance requlations 11 promulgated by IRS on the creation and maintenance of REMIC trusts. 12 77. During a mortgage boom private & Freddie Mac MBSTs[$5 trillion in 15 million mortgages] 13 simplified the formation process by cutting corners. Freddie Mac could cut corners because 14 1) it did not have to register participating certificates [PCs] with the SEC; 2) it controlled every 15 step without oversight by acting as Buyer, Issuer, Depositor, Trustee, and Master Servicer; 16 3) it created, supervised, controlled & audited its own financial records; 4) it disclosed nothing to 17 sellers, servicers, investors, SEC or the public. Freddie Mac was essentially autonomous, free 18 of government oversight, flush with cash, and was backed up with the full faith and credit 19 of the federal government. Managers thought Freddie Mac was insulated from failure. 78. Freddie Mac operated a blind investment as MBS Trustee rather than owner of the securities 20 As Master Servicer, Freddie Mac took a cut of all monthly cash flows collected by sub-servicers, 21 who also charged service fees for collecting principal and interest from borrowers. Freddie Mac 22 Trust transactions, acting as Sponsor, Depositor and Issuing Trust, were not arms-length 23 transactions. Freddie Mac controlled all 3 entities, taking a cut at each step in the process. 24 79. Under the standard securitization lending model, promissory notes were supposed to be 25 sold and transferred into a trust pool [Mortgage Backed Securities Trust (MBST)] which holds 26 tangible promissory notes as collateral for Participation Certificates sold to worldwide investors. 27 80. In the ALLES loan, WELLS was Freddie Mac’s contracted sub-servicer and the SELLER. 28
- 16 FAC filed 5/9/2013
81. The "true sales" allowed originating lenders [like WELLS] to take loans [intangible debt
2 obligations created by tangible notes] off their accounting books, thereby eliminating a need to 3 maintain capital adequacy reserves against defaults. When originating lenders, who failed to 4 apply any underwriting standards because they incurred no default risks, approved thousands of 5 loans to anyone who applied, regardless of ability to pay, were hit with demands to buy-back the 6 defaulted loans, and investors discovered their dilemma, there was a “run on the banks” by cash 7 investors trying to withdraw deposits fearing loss of their cash. The “ run on the banks” caused 8 many banks to collapse in mid-2008 resulting in government seizures of big banks who were put 9 into receiverships under FDIC, or in the case of Freddie Mac and Fannie Mae, were put under a 10 conservatorship by Congress, ie. Federal Housing Finance Agency [FHFA] soley for the GSEs. 11 82. Congress created the FHFA to act as conservator to Freddie Mac & Fannie Mae, to avoid 12 bankruptcy or FDIC receivership. Those options would have resulted in a total liquidation of 13 enterprise assets, such as what occurred with the failed banks when the bubble burst in 2008. 14 Under Freddie Mac Participation Offering Circular, dated 10/14/05, appointment of a conservator 15 was not a default event which could trigger investors’ rights to demand relief, as recited on p10: 16 17 18 19 20 21 22 23 24 25 26 27 28 83. Investors’ fixed monthly coupon yields were guaranteed by Freddie Mac, regardless of borrower defaults. The following is from Freddie Mac’s Offering Circular, page 1, 10/14/05:
- 17 FAC filed 5/9/2013
In the worldwide market Freddie Mac guaranteed mortgages were viewed as equivalent to
2 a debt secured by the full faith and credit of the United States. The recent housing calamity, with 3 failures of major banks, obligated the federal government to treat the Freddie Mac guarantee as a 4 federal obligation. The Treasury has infused over $190 billion into the enterprises to date. 5 85. Freddie Mac issued securities were exempt from SEC registration statement requirements. 6 In March 2003, Freddie Mac voluntarily started to register its common stock with SEC under 7 Section 12(g) of the Exchange Act, triggering a requirement to file periodic reports with SEC, 8 including annuals on Form 10-K, quarterly on Form 10-Q, and current reports on Form 8-K. 9 86. Typically Freddie Mac purchased mortgages in a bilateral or tripartite contract consisting 10 of Freddie Mac as purchaser, seller into the trust, the trustee, master servicer and trust custodian. 11 The originating lender was usually the sub-servicer or sponsor. By controlling every aspect of 12 its securitization Freddie Mac had little regulatory oversight. Freddie Mac held all the cards and 13 could do whatever it wanted. Concurrently, Freddie Mac raised an iron curtain of inscrutability. 14 87. The mortgage notes were to be endorsed in blank by the Seller/Servicer [WELLS herein] 15 and delivered to Freddie Mac for safekeeping. The Seller/Servicer who originated the loan was 16 required to execute an assignment of its beneficial interest in the security instrument [mortgage 17 or trust deed] but was told not to record the assignment. If necessary Freddie Mac could ask the 18 sub-servicer to record an assignment at a time unilaterally selected by Freddie Mac, per §22.14: 19 20 21 22 23 24 25 26 27 28 88. Wells Fargo Bank, NA, the party who is seeking to foreclose on the subject property, is not the owner or legal holder in due course of ALLES note and thus lacks legal authority to foreclose on the intangible debt obligation created by the tangible note. WELLS is only a sub-servicer of Freddie Mac, as Trustee who is Master Servicer of all loans in each Freddie Mac REMIC Trust. The sub-servicer of the loan has neither an equitable nor legal interest--or legal title to the loan. 89. Freddie Mac is trying to use a straw party [WELLS] to foreclose a loan on its behalf. Freddie Mac, as trustee of the MBST does not own the loan either. Each of the PC Holders owns a fractional, beneficial interest in each mortgage held in the REMIC Trust.
- 18 FAC filed 5/9/2013
1 2 90.
WELLS Had Already Assigned Its Interest to Freddie Mac in 2006 The Freddie Mac Seller/Servicer Agreement required Sellers/Servicers to assign the
3 mortgage in blank to Freddie Mac but not to record the assignment. Freddie Mac is acting as 4 Trustee and not Freddie Mac Corporate. To make a deed effective in California, the grantor 5 is divested of, and the grantee is vested with, the title, and the words "convey," "transfer," and 6 similar words used in conveying property, signify the passing of title from one person to another. 7 Under the Freddie Mac Seller/Servicing Agreement whenever Freddie Mac transfers possession, 8 and the Freddie Mac sub-servicer becomes the holder of the note, the following rules apply: 9 10 11 12 13 14 15 16 17 18 19 20 21 22 91. Freddie Mac ordered sub-servicers to create a pretext that they owned the mortgage. 23 The sub-servicer forecloses under its own name. Freddie Mac and sub-servicer understand the 24 proper ownership requirements, but yet follow the marching orders of Freddie Mac Corporate, 25 who requires the seller/servicer to deliver an assignment to Freddie Mac in its corporate capacity, 26 rather than Freddie Mac as Trustee. WELLS and Freddie Mac conspire to defraud courts, and 27 other parties to enrich themselves at the detriment of those defrauded. WELLS never disclosed 28 Freddie Mac’s role in any pleadings and concealed FHFA’s conservatorship from the court. If a note is held at Freddie Mac’s DDC, Freddie Mac has possession of the note on behalf of the servicer so that the servicer has constructive possession of the note and the servicer shall be the holder of the note and is authorized and entitled to enforce the note in the name of the servicer for Freddie Mac’s benefit. This temporary transfer of possession occurs automatically and immediately upon the commencement of the servicer’s representation, in its name, of Freddie Mac’s interests in the foreclosure, bankruptcy, probate, or other legal proceeding, acting in its own name, represents the interests of Freddie Mac in foreclosure actions, bankruptcy cases, probate proceedings, or other legal proceedings. In order to ensure that a servicer is able to perform the services and duties incident to the servicing of the mortgage loan, Freddie Mac temporarily gives the servicer possession of the mortgage note. If the note is held by a document custodian on Freddie Mac’s behalf, the custodian also has possession of the note on behalf of the servicer so that the servicer has constructive possession of the note and the servicer shall be the holder of the note, is authorized and entitled to enforce the note in the name of the servicer for Freddie Mac’s benefit.
- 19 FAC filed 5/9/2013
92. Freddie Mac expressly directed WELLS, as sub-servicer, not to disclose the true facts.
2 Defendants, including their attorneys, work in concert to continue this charade and perpetrate 3 upon the courts, plaintiffs and the public through fraudulent recordings clouding titles. 4 93. WELLS counsel filed pleadings without ever disclosing to this court, or plaintiff, that the 5 note was sold to an MBS trust back in 2006 and that Freddie Mac acted as issuer, servicer, trustee 6 and custodian for the MBST. WELLS’ pleadings are a charade and obfuscation of the many roles 7 of Freddie Mac and identity of the true owner of the secured loan which is still in dispute. 8 Freddie Mac directs servicers to perpetrate fraud on the court and debtors who seek court relief. 9 Freddie Mac blackmails seller/servicers by denying them an opportunity to participate in future 10 originations unless they fully participate in the charade Freddie Mac thrusts upon the court. 11 94. A trust can be organized without a transfer of property to the trust. It can only come into 12 existence when property actually is transferred to the trust. The issuance of a certificate does not 13 constitute a transfer of property to the trust. Accordingly, there is no evidence from which a court 14 can infer such a transfer was actually made. That PC’s were sold to investors who paid for them 15 does not prove the specific mortgage being foreclosed upon was ever transferred to the MBST. 16 17 18 19 20 21 22
LACK OF DELIVERY OF MORTGAGE & NOTE FROM FREDDIE MAC CORPORATE TO FREDDIE MAC AS TRUSTEEVOIDED INSTRUMENT UNDER NEW YORK TRUST LAW
WELLS was supposed to assign Alles’ note & trust deed to Freddie Mac Corporate, who
was supposed to assign it to Freddie Mac Trustee for the REMIC trust. Freddie Mac Corporate retained the loans it was supposed to assign to Freddie Mac Trustee, and failed to record either assignment, violating New York Trust law and IRS REMIC regulations. Freddie Mac Corporate continues to hold the loans in its own name and cannot even assure Certificate Holders that in a
23 forced liquidation the loans will be inaccessible from Freddie Mac Corporate creditors because 24 the mortgages were never properly assigned into the REMIC trusts when the trusts were created. 25 This is why the government put Freddie Mac into conservatorship rather than a liquidation. 26 96. Freddie Mac Corporate does not own the loan as it was required to convey the loan 27 into the appropriate Freddie Mac trust. WELLS concealed the true beneficiary from the 28 court and plaintiff, and continues to conceal the truth from this court and plaintiff.
- 20 FAC filed 5/9/2013
Neither Freddie Mac, nor WELLS, nor CWRC will disclose the name of the MBS Trust
2 to which the ALLES loan was conveyed into on the “Freddie Mac settlement date” [9/13/06]. 3 Because WELLS had to assign the security to Freddie Mac under its Seller/Servicer Agreement 4 (see §22.14 above) on or about the September 13, 2006 Freddie Mac Settlement Date, there was 5 no beneficial interest that WELLS could have conveyed to Freddie Mac on December 7, 2012, 6 because WELLS had already assigned the note and trust deed to Freddie Mac on 9/13/2006. 7 CWRC knowingly & intentionally, fabricated & recorded a fraudulent instrument trying 8 to assign a security interest to Freddie Mac from Wells Fargo Bank, as its attorney-in-fact. 9 There was no “beneficial interest” to convey on 12/7/2012 as WELLS had already assigned its 10 beneficial interest in the security deed when it sold the loan to Freddie Mac Corporate 9/13/2006 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 98. The above recorded document contains all the indicia of a fabricated instrument intended to defraud the public and the court. WELLS had already assigned its beneficial interest on 9/13/06. - 21 FAC filed 5/9/2013
99. WELLS had no beneficial interest to assign after 9/13/06. CWRC had no “attorney in fact” 100. CWRC stepped out of its role as a purported “impartial third-party trustee” and into a role
2 agreement with Wells recorded in Riverside County as required to convey real property interests. 3
4 as exclusive agent for Wells Fargo, who was not even the beneficiary. The Freddie Mac REMIC 5 “Participating Certificate” Holders were the beneficiaries of ALLES’ intangible debt obligation. 6 Sub-servicer WELLS had no beneficial, pecuniary, or equitable interest in the note or security. 7 CWRC used a robo-signer to fabricate and record a fraudulent document to evade criminal 8 liability under Penal Code §115 for recording an instrument CWRC knew was a complete fraud 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 102. Because New York law governs a PC trust contract New York trust law must be applied. Under New York trust law the assignment must be recorded upon delivery of the security. 103. The assignment WELLS was required to execute on or before September 13, 2006 [Freddie Mac closing date on purchase of the ALLES’ loan from its Seller/Servicer WELLS] was ineffective under New York law because it was not recorded as required by New York law. - 22 FAC filed 5/9/2013 NEW YORK TRUST LAW REQUIRES ASSIGNMENTS TO BE RECORDED 101. Freddie Mac Corporate sold the mortgages to the MBST. It had no right to continue to hold the mortgages for its own account. Apparently it did not transfer the mortgages either to the MBST or to Freddie Mac as trustee. If so, there would have been no need for CWRC to fabricate WELLS’ purported assignment six years later. Freddie Mac could be holding the mortgage notes as Master Servicer. Freddie Mac was Master Custodian. Neither the Master Custodian nor Master Servicer holds any legal or equitable interest in the Trust’s mortgages. Arguably Freddie Mac Corporate holds the mortgages but a court sitting in equity would have to conclude the mortgages were held by Freddie Mac as Trustee, on behalf of Certificate Holders under an equitable trust, subject to an equitable lien or subject to the security interest created in the trust indenture. Freddie Mac elected to form the MBS trusts under New York trust law. [ see Freddie Mac’s choice of law clause] ▼ MPCA 10/14/05 page 15 of 16 ▼
104. New York adopted the Uniform Trust Act, which is silent about the procedure required to
2 transfer an interest in real estate to a custodial trust. The MBST created by the Trust Indenture is 3 a custodial trust under New York trust law. A mortgage is an interest in real estate, in judicial 4 and non-judicial jurisdictions. In a non-judicial jurisdiction the deed of trust conveys title to 5 the real property to the Trustee. California is a lien theory, non-judicial foreclosure jurisdiction 6 with race-notice statutes, mandating that assignments must be recorded to ensure lien priority. 7 Under race-notice statutes the first lien recorded has first priority, which is why one must record. 8 105. Even if the mortgage is legal and enforceable, and has been perfected against the debtor, 9 the mortgage has not attached to the trust or its beneficiaries. Freddie Mac was so accustomed 10 to making the rules without any SEC oversight that it ignored the basic legal premise “those who 11 make the rules must obey the rules.” Foreclosure and securitization must occur in accordance 12 with legal requirements under New York trust law and pursuant to strict IRS REMIC regulations. 13 106. Under these circumstances, enforcement of foreclosure on a loan claimed to be held in a 14 Freddie Mac MBS trust requires documentation to enable a court to ascertain upon whose behalf 15 the foreclosure is taking place. When the actual holder of the note is unidentified, it is impossible 16 to plead a cause of action in a federal or state court. Freddie Mac and WELLS’ failure to record 17 the assignment of its security interest, before they recorded a Notice of Default, has adverse 18 consequences in determining who holds the perfected mortgage and the non-negotiable tangible 19 promissory note. The Holder in Due Course ("HDC") status may not exist under the case at bar. 20 21 22 23 24 25 26 27 28 107. The MPCA & Master Trust Agreement provided Freddie Mac with the liberty to select the loans for inclusion in its REMIC trusts. It authorized Freddie Mac to remove loans from the mortgage pools from time to time for various reasons. Once a mortgage is reported by the public search engine as having been acquired by Freddie Mac, the actual destiny remains a mystery. It may: 1) hold the note in its own portfolio; 2) sell the note; 3) pledge or hypothecate the note; 4) securitize the note in a MBS trust; 5) securitize the note in more than one MBS trust; or 6) redeem or replace a note previously securitized. 108. Because Freddie Mac, CWRC, and WELLS have conspired and worked together to conceal who the real beneficiary is on the note and/or security interest the court must afford plaintiff a 14th amendment due process right to determine true beneficiary through discovery. - 23 FAC filed 5/9/2013
1 2 3
WELLS IS AN UNSECURED CREDITOR TRYING TO RECOVER ADVANCES 109. Wells Fargo Bank, NA---the party seeking to foreclose---is the sub-servicer who made payments on behalf of plaintiff to a Freddie Mac Trust and wrongfully withheld that information
4 from the court and plaintiff. Payments made by the sub-servicer were not credited to the account 5 of debtor ALLES under the express written rules prescribed by Freddie Mac to its loan servicers. 6 WELLS, as sub-servicer for Freddie Mac, is wrongfully attempting to recover advances it 7 made as an unsecured creditor under the pretext of being the secured mortgage creditor. 8 110. Under the Freddie Mac Seller/Servicer guide, the Servicing Agreement, and the Master 9 Trust Agreement, the loan sub-servicer is required to make monthly payments from its own funds 10 if the debtor misses a payment because Freddie Mac guarantees monthly yields to all investors. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 111. A sub-servicer of either a portfolio or a MBST mortgage loan is required to advance see servicer duties in the Master Trust Agreement
MTA p. 13 of 26
scheduled principal and interest payments until a delinquent mortgage loan is removed from Freddie Mac’s active accounting records or from a PC loan pool. If the funds on deposit in the sub-servicer’s Principal and Interest custodial account, on the day the monthly remittance is due to Freddie Mac, are less than the amount of the required monthly remittance, the servicer must
25 make a delinquency advance by depositing to the Principal and Interest custodial account enough 26 of its own funds to make the total on deposit equal to the full amount of the remittance owed to 27 Freddie Mac. The sub-servicer may reimburse itself for delinquency advances from borrower 28 collections that are subsequently deposited to the Principal and Interest custodial account.
- 24 FAC filed 5/9/2013
112. Advances are not treated as loans to Certificate Holders. Interest payments received in the
2 form of advances are taxable to the Certificate Holder as interest income. Neither the MBST nor 3 its Certificate Holders is liable for advances made by the servicer. There is no real estate statute, 4 or state or federal decision holding that only the mortgage debtor may make a required payment. 5 113. Any other person or entity can make the required payment on behalf of the debtor. 6 WELLS concealed from the court that monthly payments debtor failed to make to Certificate 7 Holders were being paid by WELLS as sub-servicer. Even if WELLS has a claim for repayment 8 against the debtor for advances made, such claim is not secured by the mortgage or real property. 9 The sub-servicer is not a secured party but rather a general creditor. It is a violation of law 10 to foreclose on real property to recoup advances made by a sub-servicer. It is no different 11 than if the note holder foreclosed on a mortgage note because the debtor failed to pay a 12 plumbing bill to the creditor’s brother-in-law. Only the owner of the note can foreclose. 13 114. The debtor is not a third party beneficiary of the Freddie Mac Seller/Servicer Agreement. 14 Debtor neither had knowledge of, nor agreed to advances paid by WELLS as a loan sub-servicer. 15 Advances paid by the sub-servicer were not for debtor’s benefit. Advances were paid because of 16 a Seller/Servicer Agreement with Freddie Mac, as the MBS Trustee. Advances are a concession 17 sub-servicers afford Freddie Mac as inducement to persuade the Trustee to use its sub-services. 18 19 20 115. The remedy of foreclosure is limited to the note holder. If, for purposes of this argument 21 only, one assumes Freddie Mac, as Trustee, holds legal title and the beneficial title is in the 22 Certificate Holders, what claim held by the Certificate Holders has gone unpaid? NONE. 23 116. If the court finds that Freddie Mac has an equitable interest as Trustee of the MBST, 24 and the right to foreclose, such foreclosure must be brought by FHFA as conservator, who is 25 charged with preserving Freddie Mac assets for the benefit of taxpayers who maintain solvency. 26 117. Freddie Mac and WELLS’ deliberate and intentional efforts to conceal and obfuscate 27 will not be corrected in the future unless the court declines to provide equitable relief because 28 Certificate Holders were paid their monthly yields and suffered no consequences of the default.
ONLY FHFA, AS FREDDIE MAC’S CONSERVATOR HAD STANDING TO FORECLOSE
- 25 FAC filed 5/9/2013
FREDDIE MAC HAS UNCLEAN HANDS 118. Freddie Mac repeatedly misstated its income, failed to keep accurate financial records,
3 operated a defective document control system, and engaged in financially imprudent transactions 4 resulting in insolvency. This is why the government seized the enterprise and placed it under a 5 conservatorship. Due to the many roles Freddie Mac played in the securitization games, and 6 institutionalization of inscrutability, a court cannot ascertain who actually owns what where 7 Freddie Mac is involved as the purported “beneficiary” or as the purported “trustee” of a trust. 8 119. Awarding any relief at this time would be premature since the correct party has not 9 sought foreclosure and due process requires the identity of the true beneficiary of ALLES’s loan. 10 PC investors [the true beneficiaries] are protected by Freddie Mac’s payment guarantee, which 11 are underwritten by the full faith and credit of the United States, having taken the enterprises 12 under conservatorship and infused $190 Billion dollars of taxpayer funds to maintain solvency. 13 14 15 120. WELLS unilaterally altered ALLES’ mortgage contract by restricting loan modification
WELLS UNILATERALLY ALTERED ALLES’ LOAN CONTRACT WITHOUT CONSENT
16 without her prior written consent, in breach of the terms and conditions of her mortgage contract. 17 A modification of a contract is a change in one or more respects, which introduces new elements 18 into the details of the contract, and/or cancels others, but leaves the general purpose and effect 19 undisturbed. It is entirely competent for contracting parties to modify or waive their rights under 20 the contract and incorporate new terms into it. Hawkins v. United States, 96 U.S. 689 (1877). 21 Any contract can be modified by mutual agreement of parties. Wheeler v. New Brunswick & Co., 22 115 U.S. 29 (1885). Two minds are required to change the terms and conditions of a contract 23 after it is executed. Whiteside v. United States, 93 U.S. 247 (1876); Riverside Rancho Corp. v. 24 Cowan, 88 CA.2d 197 (2d Dist. 1948). As executed, the mortgage is an agreement between a 25 creditor and debtor for a loan secured by real property. The terms and conditions of the loan can 26 be modified or amended only with mutual consent. One party may not amend the agreement 27 without the written consent of the other. A modification must satisfy all criteria of the 28 original contract. Carlson, et al v. Baldacci (1967) 257 CA.2d 212.
- 26 FAC filed 5/9/2013
121. Securitization imposed unilateral restrictions on loan modifications created by Freddie
2 Mac and WELLS as sub-servicer in an agreement not involving ALLES. These restrictions were 3 imposed without ALLES’ knowledge or consent and constitute a material breach of contract, 4 which if proved would render the mortgage unenforceable. 5 122. Freddie Mac tortuously interfered in a contract between debtor ALLES & creditor WELLS 6 and ALLES has a tort claim against Freddie Mac on this basis alone. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 123. The Freddie Mac MSB trust, on whose behalf foreclosure is allegedly being prosecuted, must qualify to transact business as a foreign trust in the state where the real property is located. The Freddie Mac trust in which the loan is securitized is not qualified to do business in California Under securities law, if Freddie Mac organized an MBS trust and issued Participation Certificates to investors in the United States the MBS trust must qualify to do business in the state in which it seeks to foreclose upon real property. Foreclosure law ordinarily provides that a mortgage creditor foreclosing on a loan is not transacting business and does not trigger qualification compliance requirements. However, offering securities for sale to investors is conducting business in the state going far beyond a residential lender. This requires the MBS trust to pay fees and follow state prescribed procedures to qualify to transact business in this state. A foreign trust which fails to register lacks standing to foreclose & could incur criminal liability for same. 124. A mortgage can be sold to another creditor without debtor’s consent. Alienation rights are explicit in the mortgage. However, when the mortgage is securitized, much more is taking place then a resale of the loan. As noted above, the terms and conditions of the mortgage were unilaterally altered by the creditor without the borrower’s consent. Under a traditional mortgage model, the party holding the Power of Sale is the beneficiary who suffers a loss upon a default, unless he forecloses to collect the debt from sale proceeds on property securing the obligation. 125. In securitization the mortgage is transmuted into bond securities, so the party authorized to foreclose does not bear the loss resulting from a default. By divesting the incidence of loss from the authority to foreclose, the original note has been altered---resulting in a material change to the characteristics of the mortgage without the consent of the mortgagor---ALLES. THE FM FOREIGN TRUST IS NOT QUALIFIED TO DO BUSINESS IN CALIFORNIA
- 27 FAC filed 5/9/2013
126. ALLES was neither informed nor asked to consent to securitization of her mortgage loan.
2 Alles’ consent was required under basic contract law. Control of the mortgage was conveyed to 3 a group of strangers (Freddie Mac managers] who adopted a new set of rules modifying the terms 4 and conditions, as well as the characteristics, of the mortgage loan. These managers were not a 5 party to the original transaction, nor do they represent the original mortgagee or his successor. 6 127. Under the traditional lending model foreclosure was a last resort to curing a default. 7 In securitization it has become the first resort. The sub-servicer to whom the trustee delegates 8 authority to foreclose has a financial incentive in the fees generated by the foreclosure itself, 9 and the delays incident to actual foreclosure. The losses resulting from foreclosure are passed 10 back to the Certificate Holders. In short, the party who profits from foreclosure controls the 11 decision to foreclose, while the party bearing the loss has no say whatsoever in the decision. 12 128. Freddie Mac prescribed the terms and conditions for the loans it bought from sellers. 13 Foreclosure would provide unjust enrichment to WELLS through foreclosure fees [$6-$10,000] 14 and will result in a minimal $100,000 loss to taxpayers, who involuntarily infused $190 billion 15 into Freddie Mac. Denying foreclosure will not cause injury to the Certificate Holders who 16 are innocent of fraud on the court and who are guaranteed payments by sub-servicer WELLS. 17 18 19 20 21 22 23 24 25 26 27 28 129. Alles’ note is non-negotiable as it was conveyed into the trust as a true sale, as recited: ▼ Master Trust Agreement p.8 of 26 ▼
- 28 FAC filed 5/9/2013
130. An absolute sale requires a transfer of title by a seller to a buyer without any restrictions
2 other than payment of an agreed-upon amount of money. There is evidence that such a transfer 3 never took place. ALLES mortgage was never assigned from Freddie Mac to the MBS trust, 4 and the mortgage note endorsed in blank is in the possession and control of Freddie Mac. 5 Absent delivery and possession of the bearer note or a written assignment from Freddie Mac to 6 the MBS trust, there is no way legal title has been conveyed into the trust to enable foreclosure. 7 131. Plaintiff and similarly situated borrowers did not know and could not have discovered 8 this fraud. Plaintiff's note was not properly negotiated, endorsed, and transferred to the Freddie 9 Mac REMIC Trust. WELLS is trying to enforce an intangible debt obligation in which it has no 10 pecuniary, equitable or legal interest. Plaintiff applied for a loan modification after experiencing 11 unforeseen financial hardship. Plaintiff believed her lender was willing to avoid foreclosure 12 since WELLS agents advised her to stop making payments to qualify for a loan modification. 13 132. WELLS knew it was not a beneficiary with power to modify her loan based on guidelines. 14 WELLS & Freddie Mac never told Plaintiff why her application would be automatically denied. 15 Freddie Mac, WELLS and CWRC conspired to create a pretext that WELLS was the beneficiary 16 when all three defendants knew it WELLS was not the beneficiary, and Freddie Mac was not 17 either, and that WELLS intended to deny a modification before ALLES even applied for one. 18 133. Plaintiff has now discovered that her loan is actually owned by a Freddie Mac trust, and 19 that Freddie Mac's trusts do not fully participate in the Home Affordable Modification Program [HAMP] and rarely approve modifications. Neither Freddie Mac nor WELLS are perfected, 20 secured creditors. Neither has a right to proceed with a foreclosure or deny modification. 21 22 23 DEFENDANTS’ FAILURE TO NOTIFY ALLES OF NEW BENEFICIARY IS FRAUD 134. Congress added 15 U.S.C.§1641(g) to §131 of TILA by enacting §404 of The Helping
24 Families Save Their Homes Act of 2009, which required notification of a change in beneficiary: 25 26 27 28 IN GENERAL.- In addition to other disclosures required by this title, not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including-(A) the identity, address, telephone number of the new creditor;(B) the date of transfer; (C) how to reach an agent or party having authority to act on behalf of the new creditor;(D) the location of the place where transfer of ownership of the debt is recorded; and (E) any other relevant information regarding the new creditor. - 29 FAC filed 5/9/2013
135. WELLS & Freddie Mac intentionally failed to comply with requirements of TILA §131(g)
2 triggering liability for actual damages, legal fees & statutory damages under TILA §130(a), 3 applying to Freddie Mac as new owner of Plaintiff’s loan and WELLS as its agent sub-servicer. 4 Neither Freddie Mac nor Wells Fargo ever notified ALLES of the new beneficiary, even after 5 CWRC recorded the new ownership on 12/7/12 with a fabricated assignment to Freddie Mac. 6 Freddie Mac and WEKKS violated 15 U.S.C.§1641(g) by failing to notify Alles as mandated. 7 136. WELLS purports to act as Freddie Mac’s agent without providing any evidence of agency. 8 If Freddie Mac is a legitimate new lender it was required to comply with TILA.15 USC §1640(g) 9 These violations cannot be ignored. Freddie Mac’s failure to comply was intentional omission 10 as part of the overall conspiracy to create a pretext that WELLS was the purported beneficiary 11 entitled to foreclose when in reality WELLS was/is only the sub-servicer, with no legal title or 12 beneficial interest in the intangible debt obligation created by the tangible note. WELLS is 13 nothing more than an unsecured creditor, with an unsecured equitable claim for reimbursement 14 for deposits it made on Alles’ behalf into its principal & interest master account, to be disbursed 15 to Freddie Mac, as trustee, when the guaranteed payments to PC holders come due each month. 16 17 PLAINTIFF’S DAMAGES COMMON TO ALL CLAIMS 137. Plaintiff relied on Defendants misrepresentations and was damaged in the following ways:
18 (1) Plaintiff has been paying the wrong party for an undetermined amount of time and overpaid 19 in interest which was over calculated; (2) she has suffered damage to her credit; (3) the title to 20 Plaintiff's property has been/is clouded; (4) Plaintiff has been threatened and is facing imminent 21 floss of her residence; (5) Plaintiff has expended funds to cover fees and other related costs; 22 (6) she has suffered damage to her reputation in the community; (7) she is unable to determine 23 whether she sent her monthly mortgage payments to the right party; (8) multiple parties may seek 24 to enforce the debt obligation against her on the note she executed; and (9) any potential buyer of 25 Plaintiff's home will end up in legal limbo, unable to know with any certainty whether the buyer 26 can safely purchase Plaintiff's home, get title insurance, or ever be able to obtain clear title to the 27 property, currently encumbered with a multitude of fraudulent, fabricated recorded instruments 28 creating clouds on the title. Clouds on title render a home unmarketable and blemished forever.
- 30 FAC filed 5/9/2013
1 2 3 4
A Fabricated Assignment Of Mortgage Is A Fraudulent Lien Conveying No Interest. 138. WELLS is not the owner or holder in due course of the note and lacks legal authority to foreclose upon the debt obligation because WELLS sold its interest to Freddie Mac on 9/13/06. 139. WELLS is at best, only a sub-servicer, acting for Freddie Mac as the master servicer.
5 However, WELLS has provided no evidence that it has an agency agreement with Freddie Mac. 6 Even if WELLS had an agency relationship with Freddie Mac that does not result in standing 7 because Freddie Mac is only the conservatee, with no power to act on its own behalf. Only the 8 conservator has the authority to act on behalf of a conservatee. [see Exhibit J–conservatorship]. 9 The sub-servicer of a loan has no legal or equitable title to a loan or any beneficial interest in it. 10 140. Freddie Mac attempts to use straw parties to foreclose loans on its behalf. Freddie Mac 11 as trustee of the PC trust, to which ALLES’ loan is securitized into, does not OWN THE LOAN. 12 Participating Certificate holders own fractional shares of loans held in a PC trust, as recited: 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 141. Plaintiff hereby incorporates by reference each and every one of the preceding paragraphs as if the same were fully set forth therein. 142. Plaintiff alleges that neither Federal Home Loan Mortgage Corporation [Freddie Mac] nor Wells Fargo Bank, NA [WELLS] has a secured or unsecured legal, equitable, or pecuniary interest in the lien evidenced by the Mortgage & Note, and the belated, fabricated, and invalid Assignment of Mortgage recorded on 12/07/12 conveys no security interest whatsoever. Freddie Mac Corporate does not hold legal title as only Freddie Mac, as Trustee could hold legal title, for the benefit of Participation Certificate Holders, and only litigate through its conservator, FHFA. - 31 FAC filed 5/9/2013 FIRST CLAIM FOR DECLARATORY RELIEF [Against All Defendants] ◄PC Offering Circular 10/14/05
143. Defendants allege Plaintiff's Note & Mortgage cannot be determined to be unsecured and
2 they have an enforceable, secured interest, entitling them to foreclose against plaintiff’s property. 3 Plaintiff allegations establish that a real and present controversy exists as to the respective rights 4 of the parties to this matter, including ownership of purported security interests in the Property. 5 144. Accordingly, Plaintiff requests that the court make findings and issue appropriate orders 6 stating the none of the named Defendants or Doe Defendants, have any legal title or interest in 7 Plaintiffs' Note & Mortgage which authorizes them, in fact or as a matter of law, to foreclose. 8 145. As described above, absent findings by this court, and entry of orders by this court, 9 Plaintiff will be denied any opportunity to identify the true and current owners of the beneficial 10 interest in her loan, how she can exercise her right to cure any alleged default. Plaintiff will be 11 denied the right to conduct discovery and have Defendant's claim to a secured interest in her 12 property be verified by a custodian of records who has personal knowledge of any assignments. 13 146. Plaintiff is entitled to declaratory relief to determine and resolve the disputed issues. 14 15 16 17 18 19 20 SECOND CLAIM FOR RELIEF CANCELLATION OF RECORDED INSTRUMENTS AND INJUNCTION UNDER CIVIL CODE §3420 [against all defendants] 147. Plaintiff hereby incorporates by reference each and every one of the preceding paragraphs as if the same were fully set forth therein. 148. In recording false and fabricated documents, as identified in preceding paragraphs, and as shown in Document 26, filed in this court on 3/20/13, of which this court took Judicial Notice, in
21 Document 48, filed in this court on 4/25/13, defendants (except FHFA) committed fraud on the 22 court, plaintiff and the public record. Defendants (except FHFA) through artful wording, and 23 slick insertions, created a pretext that Wells Fargo Bank, NA was beneficiary of plaintiff’s loan 24 knowing it was not true. Defendants conspired to create a pretext that WELLS was the beneficial 25 owner and had attorneys continue the charade by requesting judicial notice of false documents. 26 149. Defendants intentionally concealed the true owner to create a paper trail of a false owner. 27 Defendants’ attorneys intentionally omitted Freddie Mac and FHFA as entities they were bound 28 to disclose in Certificates of Interested Parties filed with their responsive pleadings.
- 32 FAC filed 5/9/2013
Defendants attorneys further defrauded the court and plaintiff by failing to include
2 Freddie Mac and FHFA as related entities in a Joint Rule 26 Statement filed in the court. 3 Defendant attorneys omissions were intentional as part of an overall conspiracy to defraud. 4 151. Defendants (except FHFA) knew, should have known, and/or know now the fabrications 5 with intent to deceive were unconscionable and have rendered plaintiff’s title unmarketable. 6 152. Neither Wells Fargo Bank, NA nor Freddie Mac Corporate can prove either defendant had 7 any beneficial interest in the mortgage secured by the property. For the reasons specified herein, 8 the acts taken by defendants were unauthorized, wrongful, not privileged, and were slanderous. 9 153. By virtue of the foregoing, and as a result Plaintiff is entitled to, and still own, the 10 Property, and is entitled to have her ownership of the Property reflected in the Official Records 11 of Riverside County, California. Plaintiff’s title is unmarketable resulting in damage to its value. 12 154. The fabricated documents constitute clouds on Plaintiff’s title and cause the Official 13 Records of Riverside County to reflect Defendant as the current, actual owner of a security 14 interest in the property, a fact they know is false. Plaintiff is damaged by clouds on her title. 15 155. If these recorded documents are left outstanding, Plaintiff could lose her property to a 16 purchaser for value and without notice of the invalidity of these fabricated, false documents. 17 156. “ A written instrument, in respect to which there is a reasonable apprehension that if left 18 outstanding it may cause serious injury to a person against whom it is void or voidable, may, 19 upon his application, be so adjudged, and ordered to be delivered up or canceled.” Civil §3412. 20 21 22 23 24 25 26 27 28 157. “An instrument, the invalidity of which is apparent upon its face, or upon the face of another instrument which is necessary to the use of the former in evidence, is not to be deemed capable of causing injury, within the provisions of the last section.” Civil §3413. 158. “Where an instrument is evidence of different rights or obligations, it may be canceled in part, and allowed to stand for the residue. “ Civil §3414 159. “Preventive relief is granted by injunction, provisional or final.” Civil §3420. 160. Injunction is allowed where the obligation arises from a trust. Civil §3422(4) A trust deed is an obligation arising from a trust. Plaintiff is entitled to injunctive relief prospectively to stop these defendants from continuing to record false, fabricated instruments slandering her title, and thereby diminishing the market value of her home. - 33 FAC filed 5/9/2013
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
THIRD CLAIM FOR RELIEF SLANDER OF TITLE (Against all Defendants except FHFA) 161. Plaintiff incorporates herein by reference the allegations made in preceding paragraphs as though fully set forth herein. 162. The fraudulent assignment of trust deed to Freddie Mac Corporate as assigned beneficiary from WELLS, who lacked any power to assign, and other inappropriate and wrongful recordings described herein render the Mortgage Assignment, as well as any related proceedings, a nullity. 163. As a result, the Assignment was/is invalid, and constitutes improper clouds on Alles’ title. 164. Without justification, in violation of statute, and without privilege, defendants conspired to and did cause doubt to be placed on plaintiff’s title to her property rendering it unmarketable. 165. The recording of documents in Document 26, filed in this court on 3/20/13, of which this court took Judicial Notice, in Document 48, filed in this court on 4/25/13, were wrongful at best and fraudulent at worst, resulting in material damage to the vendibility of plaintiff’s property. 166. The recording of documents in Document 26, filed in this court on 3/20/13, of which this court took Judicial Notice, in Document 48, filed in this court on 4/25/13, directly impaired the vendibility of the property on the open market in the sum of not less than $100,000.00 or such
17 other sum as may be proved at the time of trial, as part of plaintiff’s damages. 18 167. The recording of documents in Document 26, filed in this court on 3/20/13, of which this 19 court took Judicial Notice, in Document 48, filed in this court on 4/25/13 made it necessary for 20 Plaintiff to retain an attorney to bring this action to cancel the instruments clouding her title. 21 168. Therefore, Plaintiff is entitled to recover attorney’s fees and costs incurred in cancelling 22 the false and fraudulent instruments which have clouded her title. The exact amount of such 23 damages is not known to Plaintiffs at this time, and Plaintiffs will move to amend this complaint 24 to state such amount when the same becomes known, or up on proof at the time of a jury trial in 25 this matter which plaintiff demands on all issues of damages and factual findings issues. 26 169. “Preventive relief is granted by injunction, provisional or final.” Civil §3420. Plaintiff is 27 entitled to an injunction under Civil §3420 and for cancellation under Civil §3412 to remove 28 clouds on her title and to prevent any further slander against her title.
- 34 FAC filed 5/9/2013
1 2 3 4
FOURTH CLAIM FOR RELIEF QUASI CONTRACT AND UNJUST ENRICHMENT (Against defendants Wells Fargo Bank, NA and Freddie Mac) 170. Plaintiff incorporates herein by reference the allegations made in preceding paragraphs as 171. WELLS unilaterally altered ALLES’ mortgage contract by restricting loan modification
5 though fully set forth herein. 6 7 without her prior written consent, in breach of the terms and conditions of her mortgage contract. 8 A modification of a contract is a change in one or more respects, which introduces new elements 9 into the details of the contract, and/or cancels others, but leaves the general purpose and effect 10 undisturbed. It is entirely competent for contracting parties to modify or waive their rights under 11 the contract and incorporate new terms into it. Hawkins v. United States, 96 U.S. 689 (1877). 12 A contract can be modified by mutual agreement of parties. Wheeler v. New Brunswick Co., 13 115 U.S. 29 (1885). Two minds are required to change terms and conditions of a contract 14 after it is executed. Whiteside v. United States, 93 U.S. 247 (1876); Riverside Rancho Corp. v. 15 Cowan, 88 CA.2d 197 (2d Dist. 1948). As executed, the mortgage is an agreement between 16 a creditor and debtor for a loan secured by real property. The terms and conditions of the 17 loan can be modified or amended only with mutual consent. One party may not amend the 18 agreement without the written consent of the other. A modification must satisfy all criteria 19 of the original contract. Carlson, et al v. Baldacci (1967) 257 CA.2d 212. Plaintiff’s loan was 20 pre-sold in escrow and conveyed into a large pool of securitized loans. 172. On 9/13/2006 21 certificate holders in a Freddie Mac trust became the beneficial owners. Exhibit B 22 Plaintiff believed WELLS was lender and loan servicer because her note and trust deed 23 recited WELLS’ name as lender and included WELLS address as the place to mail her payments, 24 which implied that WELLS was the only entity involved in her loan. No one involved in the 25 escrow ever disclosed to ALLES that her loan was pre-sold during escrow to Freddie Mac, to be 26 transmuted to a Collateral Debt Obligation [CDO], sold by Wall St. brokers as investment bonds, 27 and that her Loan Servicer would be bound by terms in a Freddie Mac Seller/Servicer Agreement 28 not to modify/forbear on any loan. Alles never consented to these material loan term changes.
- 35 FAC filed 5/9/2013
173. ALLES had committed to home loans during her past life, but each loan negotiated by the
2 bank had been held in its portfolio. ALLES had always made monthly payments to a traditional 3 lender in the past. ALLES could talk to a manager at any time about her traditional mortgage. 4 174. For example, if ALLES became unemployed or sick she could have approached a bank 5 manager to ask him to forebear for a few months, with an agreement to tack on missed payments 6 to the tail end of her loan. The bank manager could elect to forebear for a few months, rather 7 than foreclose, which would result in significant bank savings on legal fees and trustee costs. 8 9 175. Alles assumed her 7/28/06 WELLS loan would work as loans in her past life had worked 176. If the true facts had been disclosed by anyone during escrow plaintiff would not have
10 executed the note or trust deed. Plaintiff would have continued to rent an apartment or would 11 have obtained a traditional loan from a lending institution which held loans in its own portfolio. 12 13 177. With a credit rating close to 800 points plaintiff could have obtained a traditional loan. 178. Because Alles never consented to the transmutation of what she believed was represented
14 as a traditional bank loan into some trust whereby some third party, who was a stranger to the 15 contract, would alter the terms and characteristics of the contract it was an illegal modification of 16 the original contract without her consent. WELLS breach of contract, by transmuting the loan 17 into securities bonds to be diced, sliced, and sold on Wall Street (with undisclosed commissions) 18 as soon as the ink was dry on her signature, and its intentional concealment of this material fact, 19 rendered the contract unenforceable. Carole seeks an order to cancel the contract and force Wells 20 21 22 23 WELLS CONTINUED TO PLAY PRETEND LENDER FOR OVER SIX YEARS 179. WELLS demanded monthly mortgage payments from Plaintiff since September 1, 2006 to return for original deposited funds to her in restitution for its material breach without consent.
24 and Plaintiff reasonably relied upon WELLS’ assertions that WELLS was entitled to payments, 25 never disclosing its secret sale to Freddie Mac Corporate, in violation of 15 USC §1641(g). 26 180. WELLS knowingly accepted payments and retained them for its own use knowing that
27 Wells Fargo Bank, NA [after selling to Freddie Mac] had no interest as the beneficiary under the 28 Note and Mortgage.
- 36 FAC filed 5/9/2013
181. WELLS’ purported assignment to Freddie Mac Corporate did not assign any interest
2 whatsoever in Plaintiff's Note as represented on the false, fabricated “assignment” executed by 3 CWRC’s robo-signer, such that they could accept or keep Plaintiff's payments. 4 182. Plaintiff is entitled to a full accounting from 8/1/2006 through February 2012 to discover 5 exactly what happened to the funds she paid every month to WELLS because she believe it was 6 the lender and beneficiary of her note. 7 183. It would be inequitable for WELLS to retain payments or insurance proceeds it received 8 which WELLS did not have legal authority to receive. When unjust enrichment has occurred the 9 equitable remedy of restitution is an obligation created by law without regard to the intent of the 10 parties, and is designed to restore the aggrieved party to his or her former position by return of 11 the thing relinquished or its equivalent in money. 12 184. The Mortgage recites in the "Full Performance Section" that: "If Borrower ("Purchaser") 13 pays all the indebtedness when due, and otherwise performs all the obligations imposed upon 14 Purchaser under this Mortgage, Lender shall execute and deliver a request for full reconveyance 15 and shall execute and deliver purchaser suitable statements of termination of any financing 16 statement on file evidencing Lender's Security interest in the Rents and the Personal Property. 17 The obligations to Wells Fargo Bank, NA and its assigns and Servicers [Wells Fargo] has been 18 unjustly enriched by collecting monthly payments from Plaintiff when it has no interest in her 19 Note and mortgage and did not have the proper authority to act on behalf of FHFA as conservator for Freddie Mac, the alleged “beneficiary.” 20 185. Plaintiff seeks restitution for any payments she made which were not paid directly to the 21 account of the PC holders in the REMIC trust, within which plaintiff’s loan was securitized by 22 Freddie Mac as Trustee. 23 186. Plaintiff seeks an order for disgorgement of any illegal gains received by way of: 24 commissions, kickback fees, forced insurance kickback fees, appraisal fees, late fees, penalties 25 and any other form of illegal profits WELLS received by materially breaching its contract. 26 187. WELLS also violated the implied covenant of good faith & fair dealing by its fraud. 27 WELLS fraud violated Civil Code §1572 as alleged below in fraud cause of action, and its acts 28 were unfair business practices under Business & Professions Code §17200 et seq. (see below) - 37 FAC filed 5/9/2013
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
FIFTH CLAIM FOR RELIEF VIOLATION OF 15 U.S.C. §§1640;1641(g) [TILA §§130; 131(g)] (Against Freddie Mac and/or unidentified assignees) 188. Plaintiff incorporates herein by reference the allegations made in preceding paragraphs as though fully set forth herein. 189. Plaintiff resides at 43060 Illinois Ave., Palm Desert, CA 92211 as her principal residence. 190. Subsection 131 (g) was added by §404 Helping Families Save Their Homes Act of 2009: “Notice of New Creditor: "(g) NOTICE OF NEW CREDITOR.-(1)IN GENERAL.- In addition to other disclosures required by this title, not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including-(A) the identity, address, telephone number of the new creditor;(B) the date of transfer;(C) how to reach an agent or party having authority to act on behalf of the new creditor;(D) the location of the place where transfer of ownership of the debt is recorded; and (E) any other relevant information regarding the new creditor. Failure to comply with the requirements of this new subsection 131(g) of TILA may result in civil liability for actual damages (OR) legal fees and statutory damages under Section 130(a) of TILA. 191. WELLS assigned its beneficial interest in ALLES’ loan on 9/13/2006. [Exhibit B].
18 Despite having a duty to notify ALLES of its assignment to Freddie Mac under 15 USC §1641(g) 19 Regulation Z, Truth in Lending Act, TILA Section 131(g) Freddie Mac never notified ALLES 20 that it was the purported new beneficiary of her loan after 9/13/2006. Freddie Mac will allege it 21 did not have a duty back on 9/13/2006 because the subsection (g) was not effective until 2009. 22 However, on 12/7/2012 CWRC recorded WELLS’s purported, belated “assignment” of its 23 security interest to Freddie Mac executed by CWRC well-known robo-signer Monica Gonzalez. 24 Since the change was after 2009 Freddie Mac had a duty to notify Alles of the 12/7/12 change, 25 and failed to do so. TILA §130(g) provides statutory damages, attorney fees, and actual damages. 26 Plaintiff had to engage an attorney to litigate this issue and because the true beneficiary had not 27 been disclosed she was unable to apply to the proper party for a loan modification, and did not 28 discover that Freddie Mac was under an FHFA conservatorship until after she filed a complaint.
- 38 FAC filed 5/9/2013
192. Plaintiff believes this was not an oversight by Freddie Mac. As extensively alleged above
2 Freddie Mac forced its Seller/Servicers to conceal its ownership [§22.14 of Freddie Mac Guide]. 3 Sellers were forced to foreclose in their own name and create a pretext that the sub-servicer still 4 owned the loan when both Freddie Mac and sub-servicers, including WELLS knew the truth. 5 Freddie Mac’ intentional concealment, charade on the court, plaintiff, and public record was 6 malicious and outrageous warranting punitive & exemplary damages, under Penal Code §3294. 7 193. Plaintiff alleges that Section 131(g) of TILA applies to Freddie Mac as the new owner of 8 Plaintiff s loan as the Freddie Mac website indicates that Freddie Mac owns the loan. [Exh. B] 9 10 194. Plaintiff alleges that Section 131(g) of TILA applies to Does 1-100 unknown assignees. 195. Freddie Mac never gave notice of the name, address and telephone number of the new
11 creditor ad required in TILA Section 131 (g)(1)(A). Plaintiff did not receive notice of the exact 12 date of the purported assignment of the interest in her note, as required by §131(g)(1)(B). 13 Plaintiff did not receive notice of how to reach an agent or party having authority to act on 14 Freddie Mac's or Does 1-100 behalf, as required by Section 131(g)(1)(C). Plaintiff did not 15 receive notice indicating the location of the place where transfer of ownership of the debt is 16 recorded, as required by Section 131(g)(1)(D). Plaintiff did not receive notice indicating any 17 other relevant information regarding the new creditor, purportedly Fannie Ma, Wells Fargo or 18 Does 1-100, as required by Section 131(g)(1)(E). 19 20 21 22 23 24 25 26 27 28 196. As a result of Freddie Mac's and Does 1-100 violations, Plaintiff's home is threatened to be foreclosed and she has incurred attorney fees to proactively defend against a fraudulent preforeclosure process, including fees and costs, both in amounts to be proven at trial. 197. Plaintiff did not discover that Freddie Mac or Does 1-100 had violated 15 U.S.C.§1641(g) until just a few months ago when her attorney ordered a title search from FATCO and noticed a recorded assignment in the chain of title. 198. Plaintiff could not have with reasonable diligence discovered such facts because she did not receive a copy of the recorded assignment at any time to date. 199. Thus, Freddie Mac and Does 1-100 [unknown to Plaintiff who the real creditor is if any] violated §131(g) 15 U.S.C. Section 1641 and is subject to statutory damages, civil liability, penalties, attorney fees and actual damages. TILA §§130;131(g) and 15 U.S.C.§§1640;1641(g) - 39 FAC filed 5/9/2013
200. The actual pecuniary damages include, but are not limited to, the over calculation and
2 overpayment of interest on Plaintiff's loan, the cost of repairing Plaintiff's credit, the reduction 3 and/or elimination of Plaintiff s credit limits, costs associated with removing the cloud on her 4 property title, attorneys' fees and costs, in an amount to be proven at trial, in excess of $75,000. 5 201. As a result of Freddie Mac's unknown restrictions by a separate trust agreement, including 6 failure to agree to modify, and this violation, Plaintiff's home has fallen into pre-foreclosure and 7 she has suffered actual damages in that defendants are in the process of foreclosing her home. 8 Plaintiff has incurred attorney fees, recording fees and costs, in amounts to be proven at trial. 9 Plaintiff is entitled to a private right of action to enforce TILA §131(g) at TILA §130 and under 10 U.S.C.§1640 for violations of 15 USC §1641(g). These violations provide a basis for unfair 11 business practices under Business & Professional Code §17200 et seq. as alleged below. 12 13 14 SIXTH CLAIM FOR RELIEF QUIET TITLE (All Defendants and Does 1-100) 202. Plaintiff incorporates herein by reference the allegations made in preceding paragraphs as
15 though fully set forth herein. 16 203. Plaintiff is and at all relevant times was the purchaser, and current owner of real property 204. Defendant Freddie Mac claims an interest adverse to Plaintiff’s interest in the Property, in
17 commonly known as 43060 Illinois Avenue, Palm Desert, CA 92111---a single family residence. 18
19 the form of an invalid, belated assignment of a security interest to Freddie Mac Corporate, who is 20 not the owner of plaintiff’s loan. WELLS claims an interest as a purported sub-servicer and/or 21 agent of Freddie Mac Corporate, or as Trustee of a PC REMIC trust, alleging a right to foreclose 22 on plaintiff’s loan on the purported owner’s behalf. However, Freddie Mac is not the owner, and 23 even if it is the owner of plaintiff’s loan only Freddie Mac’s conservator, FHFA has standing to 24 foreclose in Freddie Mac’s name (the conservatee). 25 26 205. FHFA may claim a security interest as the conservator for Freddie Mac, its conservatee. 206. Plaintiff is therefore seeking to quiet title against the claims of any and all Defendants,
27 including any unidentified assignee of the security interest. [as DOES] Plaintiff seeks a judicial 28 declaration quieting title in plaintiff’s name and an order expunging any invalid instruments.
- 40 FAC filed 5/9/2013
1 2 3 4 5 though fully set forth herein. 6
SEVENTH CLAIM FOR RELIEF VIOLATION OF B&P CODE §17200 ET. SEQ. (All Defendants except FHFA) 207. Plaintiff incorporates herein by reference the allegations made in preceding paragraphs as
208. Business & Professions Code §17200 et seq. protects California consumers, borrowers
7 and in some cases, businesses from fraud, unfair competition and deceptive business practices. 8 The Act covers dishonest businesses engaged in sham operations to prey upon unsuspecting 9 consumers for illicit profit. WELLS & Freddie Mac are in the mortgage loan selling, servicing, 10 and originations for the primary and secondary markets. 11 209. The Act may also cover legitimate companies that innocently misrepresent their products. 12 The Act is broad and is to be liberally construed to accomplish consumer protection. 13 210. "Unfair competition" is defined in §17200 as encompassing any one of the following five 14 types of business "wrongs": (1) an "unlawful" business act or practice; (2) an "unfair" business 15 act or practice; (3) a "fraudulent" business act or practice; (4) "unfair, deceptive, untrue or 16 misleading advertising"; and (5) any act prohibited by Sections 17500-17577.5. The definitions 17 in Section 17200 are disjunctive. Each of five "wrongs" operates independently from the others. 18 "[I]n other words, a practice is prohibited as 'unfair' or ['fraudulent'] even if not 'unlawful' and 19 vice versa.” A business act or practice is "unlawful" if it violates some other law. Explaining the 20 21 22 23 24 25 26 27 28 "unlawful" prohibition under §17200, the California Supreme Court held that §17200 "'borrows' violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under [Section] 17200.""Unlawful" claims under §17200 have been predicated on numerous laws and regulations existing at various levels of government, including: federal statutes; federal regulations state statutes; state regulations; local ordinances; prior case law; and standards of professional conduct. 211. All of the violations of law alleged in Historical Allegations and preceding claims will provide the basis for unfair business practices pursuant to Supreme Court authority. 212. Here Plaintiff has suffered damages by having to respond to multiple foreclosure actions, credit injury, attorney fees, and other damages to be proven at trial. (see damages common to all) - 41 FAC filed 5/9/2013
213. By definition, the Act covers deception, which includes a failure to disclose as well as
2 an affirmative misrepresentation. Plaintiff extensively alleged failures to disclose above. 3 214. As extensively alleged above, WELLS and Freddie Mac purposely deceived Plaintiff by 4 prosecuting a foreclosure in the sub-servicer’s name when foreclosure statutes mandate that only 5 a beneficiary of a mortgage can substitute a trustee, file a Notice of Default or Notice of Sale. 6 215. As alleged above defendants’ attorneys intentionally concealed the involvement of FHFA 7 as conservator of Freddie Mac, and Freddie Mac by failing to identify them when the attorneys 8 filed “Notice of Related Parties” and when they filed a Joint Rule 26 statement in the court. 9 These acts were all part of an overall conspiracy to defraud. 10 216. WELLS prosecuted a foreclosure, through its conspiring agent CWRC, by powers vested 11 under the mortgage loan and note, whereby the owner of the note was intentionally concealed, 12 pursuant to an overall conspiracy and plan to defraud by creating a pretext that WELLS owned 13 the loan while WELLS. Freddie Mac, and CWRC knew the true facts. 14 217. Freddie Mac, by its own trust agreement, and seller/servicer guides, requires the servicer to 15 conceal its identity in foreclosure, which requires its participation as alleged herein. Freddie Mac 16 Corporate further treats all sales as true sales as though they own the note, when it is in a trust. 17 Further Freddie Mac failed to record its assignment of the mortgage into the trust as required by 18 New York Trust Law and IRS RMIC regulations. 19 20 21 22 23 24 25 26 27 28 218. WELLS, Freddie Mac, and CWRC all conspired to defraud, and defrauded plaintiff, the court, and the public record by creating and recording Document 26 (Exhibits 2,3,4,5] filed in this court on 3/20/13, of which this court took Judicial Notice, in Document 48, filed in this court on 4/25/13 219. Plaintiff’s credit was severely damaged by the fraudulent acts of WELLS and Freddie Mac Plaintiff has suffered severe, emotional distress, and other damages that will be proven in trial. 220. Freddie Mac intentionally elects not to modify loans because the mortgage is in a Freddie Mac REMIC Trust and Freddie Mac as Trustee is prohibited from approving loan modifications. The true beneficiaries [certificate holders] by the prospectus and trust agreements are paid and have not suffered any adverse consequences of a default. Freddie Mac, WELLS and CWRC have intentionally and maliciously deceived Plaintiff, the Court, and the public record. - 42 FAC filed 5/9/2013
221. Defendants violated other laws as outlined in the FAC which are unfair business practices. 222. The test that many courts have used to determine whether a business practice is unfair
3 "involves an examination of [the practice's] impact on its alleged victim, balanced against the 4 reasons, justifications and motives of the alleged wrongdoer. In brief, the court must weigh the 5 utility of the defendant's conduct against the gravity of the harm to the alleged victim . . . ." 6 In addition to this test, California courts have adopted language from Federal Trade Commission 7 ("FTC") guidelines defining "unfair" conduct with reference to Section 5 of the FTC Act. Under 8 this standard, a business act is "unfair" when it "offends an established public policy or when the 9 practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” 10 11 12 13 14 223. Plaintiff is entitled to damages and an injunction to enjoin further illegal acts. EIGHTH CLAIM FOR RELIEF BREACH OF CONTRACT (Wells Fargo Bank, NA and Freddie Mac) 224. Plaintiff incorporates herein by reference the allegations made in preceding paragraphs as
15 though fully set forth herein. 16 225. Under California law, every contract contains an implied covenant of good faith and fair 17 dealing. It exists in virtually all contractual relationships. The implied covenant of good faith and 18 fair dealing is not an independent term within the contract, rather, it attaches to the performance 19 of a specific contractual obligation. 226. In California a breach-of-contract cause of action requires: (1) an offer and acceptance; 20 (2) consideration; (3) definite and certain terms; (4) performance by the plaintiff and Defendants 21 of all required conditions; (5) breach; and (6) damages caused by the breach. 22 227. The mortgage note [FAC, Exh. A] and mortgage trust deed [Exh. 1 of Document 26, filed 23 in this court on 3/20/13, of which this court took Judicial Notice, in Document 48, filed in this 24 court on 4/25/13 is the culmination of the offer and acceptance with definite ascertained terms. 25 A mortgage and trust deed is a contract between the borrower, lender, and trustee which binds the 26 parties to abide by the expressed terms, and to discharge their duties under the expressed terms. 27 228. Plaintiff’s loan was pre-sold in escrow and conveyed into a large pool of securitized loans. 28 On 9/13/06 certificate holders in a Freddie Mac trust became the beneficial owners. Exhibit B - 43 FAC filed 5/9/2013
Plaintiff believed WELLS was lender as well as loan servicer as her note and trust deed
2 recited WELLS’ name as lender and included WELLS address as the place to mail her payments, 3 which implied that WELLS was the only entity involved in her loan. No one involved in the 4 escrow ever disclosed to ALLES that her loan was pre-sold during escrow to Freddie Mac, to be 5 transmuted to a Collateral Debt Obligation [CDO], sold by Wall St. brokers as investment bonds, 6 and that her Loan Servicer would be bound by terms in a Freddie Mac Seller/Servicer Agreement 7 not to modify/forbear on any loan. Alles never consented to these material loan term changes. 8 Alles would not have taken the loan if she knew the true facts; i.e. that her loan would later be 9 transmuted into security bonds, severing the direct lender contact, and putting her in a position 10 where she could not negotiate any modification of the original terms if circumstances required it. 11 Material changes without Alles’ consent occurred when the intangible debt obligation created by 12 the tangible note she executed on 7/28/2006 was securitized into a trust with thousands of other 13 loans and obligations to pay investors monthly yield the loan terms materially changed. 14 230. WELLS unilaterally altered ALLES’ mortgage contract by restricting loan modification 15 without her prior written consent, in breach of the terms and conditions of her mortgage contract. 16 A modification of a contract is a change in one or more respects, which introduces new elements 17 into the details of the contract, and/or cancels others, but leaves the general purpose and effect 18 undisturbed. It is entirely competent for contracting parties to modify or waive their rights under 19 the contract and incorporate new terms into it. Hawkins v. United States, 96 U.S. 689 (1877). 20 A contract can be modified by mutual agreement of parties. Wheeler v. New Brunswick Co., 21 115 U.S. 29 (1885). Two minds are required to change terms and conditions of a contract 22 after it is executed. Whiteside v. United States, 93 U.S. 247 (1876); Riverside Rancho Corp. v. 23 Cowan, 88 CA.2d 197 (2d Dist. 1948). As executed, the mortgage is an agreement between 24 a creditor and debtor for a loan secured by real property. The terms and conditions of the 25 loan can be modified or amended only with mutual consent. One party may not amend the 26 agreement without the written consent of the other. A modification must satisfy all criteria 27 of the original contract. Carlson, et al v. Baldacci (1967) 257 CA.2d 212. Plaintiff’s loan was On 9/13/2006 28 pre-sold in escrow and conveyed into a large pool of securitized loans. certificate holders in a Freddie Mac trust became the beneficial owners. Exhibit B - 44 FAC filed 5/9/2013
231. ALLES had committed to home loans during her past life, but each loan negotiated by the
2 bank had been held in its portfolio. ALLES had always made monthly payments to a traditional 3 lender in the past. ALLES could talk to a manager at any time about her traditional mortgage. 4 232. For example, if ALLES became unemployed or sick she could have approached a bank 5 manager to ask him to forebear for a few months, with an agreement to tack on missed payments 6 to the tail end of her loan. The bank manager could elect to forebear for a few months, rather 7 than foreclose, which would result in significant bank savings on legal fees and trustee costs. 8 9 233. Alles assumed her 7/28/06 WELLS loan would work as loans in her past life had worked 234. If the true facts had been disclosed by anyone during escrow plaintiff would not have
10 executed the note or trust deed. Plaintiff would have continued to rent an apartment or would 11 have obtained a traditional loan from a lending institution which held loans in its own portfolio. 12 13 235. With a credit rating close to 800 points plaintiff could have obtained a traditional loan. 236. Because Alles never consented to the transmutation of what she believed was represented
14 as a traditional bank loan into some trust whereby some third party, who was a stranger to the 15 contract, would alter the terms and characteristics of the contract it was an illegal modification of 16 the original contract without her consent. WELLS breach of contract, by transmuting the loan 17 into securities bonds to be diced, sliced, and sold on Wall Street (with undisclosed commissions) 18 as soon as the ink was dry on her signature, and its intentional concealment of this material fact, 19 rendered the contract unenforceable. Carole seeks an order to cancel the contract and force Wells 20 21 22 23 24 25 26 27 28 to return for original deposited funds to her in restitution for its material breach without consent. 237. ALLES performed her duties under the contract at all times making timely mortgage payments each month since 8/1/2006 (nearly six years) until February 2012 when, upon the advice of WELLS agents, who told her she had to stop making payments to trigger a default, so that she would be eligible for a loan modification down to current interest rates or HAMP interest rates, and relying on the advice of WELLS agents, she stopped making payments. ALLES believed that she would then be entitled to a loan modification, and engaged an attorney to apply for a HAMP modification through WELLS, because she thought WELLS was the only entity she could apply to and that it was the entity who would approve her modification.
- 45 FAC filed 5/9/2013
238. ALLES believed that because she had excellent credit then, and had made timely
2 payments every month for six years, and that WELLS have already made nearly $100,000 in 3 interest on the invested principal, and since WELLS had approved her credit and ability to pay 4 easily in 2006, that such loan modification would be approved. Wells agents never disclosed 5 that WELLS was only a sub-servicer and that in reality Freddie Mac was the purported 6 beneficiary, and that it had a secret, internal policy of denying loan modification, and/or 7 reduction of principal, and did not fully participate in the HAMP program. 8 239. WELLS agents never disclosed that FHFA had taken Freddie Mac under conservatorship, 9 and that its Director (Ed DeMarco) had an unwritten policy of never reducing principal, and not 10 fully participating in the HAMP mortgage relief program, despite that FHFA is a federal agency 11 and was required to comply with federal HAMP guidelines in helping homeowners remain in 12 their homes, rather than foreclosing on those homes. 13 240. The implied covenant of good faith and fair dealing is an inherent part of the mortgage 14 contract. WELLS was the original contracting lender. Freddie Mac assumed WELLS contract 15 obligations by an unrecorded assignment of trust deed from WELLS about September 13, 2006. 16 241. Defendants breached the implied covenant of good faith and fair dealing by conspiring to 17 conceal Freddie Mac’s interest in Alles’ loan, and then actually concealing Freddie Mac and the 18 FHFA’s interest in Alles’ loan, and even recording false instruments to further the conspiracy. 19 Defendant s failure [or refusal] to comply with contractual responsibilities was prompted [not by an honest mistake, bad judgment, or negligence,] but instead by a conscious and deliberate plan 20 to conceal the true beneficiaries on Alles’ loan from her, the court, and the public record, as 21 alleged above. Defendants breached by not approving a HAMP modification when ALLES 22 qualified under the HAMP guidelines shown in the NPV populated by her counsel. [Exh. H] 23 242. As a direct result of the defendant's acts or failure to discharge its contractual duties, it 24 unfairly frustrated the agreed common purpose of the contract and disappointed the reasonable 25 expectations of the plaintiff, thereby depriving plaintiff of the benefits of the agreement. 26 243. As a direct result of these breaches Plaintiff was damaged by having to hire an attorney 27 to proactively try to stop the wrongful foreclosure being perpetrated by defendants. 28
- 46 FAC filed 5/9/2013
244. Plaintiff’s credit score has been damaged significantly since she has a foreclosure on her
2 record, and other damages to be proven at the time of trial. 3 245. Plaintiff was damaged in that when WELLS agents advised her to stop making monthly
4 payments, to trigger a default so she would become eligible for HAMP, while knowing the true 5 facts, that Freddie Mac was the beneficiary under conservatorship of FHFA, and that the agency 6 had a policy of not participating fully in HAMP programs, default resulted and she was unable to 7 obtain financing from any other lender while in default. Plaintiff is faced with losing all funds 8 she invested in the original purchase of the home on 8/1/2006, improvements made & payments. 9 10 11 12 13 14 NINTH CLAIM FOR RELIEF UNLAWFUL PRE-FORECLOSURE ACTS VIOLATION OF CIVIL CODE §2923.5 (all defendants except FHFA) 246. Trustees who foreclose for lenders must comply strictly with every foreclosure statute. 247. Civil Code §2923.5 was effective at the time when WELLS caused CWRC to record a
15 Notice of Default which violated Civil Code §2923.5 in that the declaration included with the 16 NOD contained a declaration which was false, fraudulent, and was executed by a robo-signer 17 in Fort Hill who had no personal knowledge of any facts related to the alleged default, and who 18 never made any contact with the borrower as required by Civil Code §2923.5 which recites: 19 20 21 22 23 24 25 26 27 28
2923.5. Notice of default, grace period; Contact to assess borrower's financial situation; Due diligence requirement; Discussion of options to avoid foreclosure; Applicability (Repealed January 1, 2013) (a) (1) A mortgagee, trustee, beneficiary, or authorized agent may not file a notice of default pursuant to Section 2924 until 30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (g). (2) A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgagee, beneficiary, or authorized agent shall schedule the meeting to occur within 14 days. The assessment of the borrower's financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. Any meeting may occur telephonically.
- 47 FAC filed 5/9/2013
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(b) A notice of default filed pursuant to Section 2924 shall include a declaration that the mortgagee, beneficiary, or authorized agent has contacted the borrower, has tried with due diligence to contact the borrower as required by this section, or that no contact was required pursuant to subdivision (h). (c) If a mortgagee, trustee, beneficiary, or authorized agent had already filed the notice of default prior to the enactment of this section and did not subsequently file a notice of rescission, then the mortgagee, trustee, beneficiary, or authorized agent shall, as part of the notice of sale filed pursuant to Section 2924f, include a declaration that either: (1) States that the borrower was contacted to assess the borrower's financial situation and to explore options for the borrower to avoid foreclosure. (2) Lists the efforts made, if any, to contact the borrower in the event no contact was made. (d) A mortgagee's, beneficiary's, or authorized agent's loss mitigation personnel may participate by telephone during any contact required by this section. (e) For purposes of this section, a borrower shall include a mortgagor or trustor. (f) A borrower may designate, with consent given in writing, a HUD-certified housing counseling agency, attorney, or other advisor to discuss with the mortgagee, beneficiary, or authorized agent, on the borrower's behalf, the borrowers financial situation and options for the borrower to avoid foreclosure. That contact made at the direction of the borrower shall satisfy the contact requirements of paragraph (2) of subdivision (a). Any loan modification or workout plan offered at the meeting by the mortgagee, beneficiary, or authorized agent is subject to approval by the borrower. (g) A notice of default may be filed pursuant to Section 2924 when a mortgagee, beneficiary, or authorized agent has not contacted a borrower as required by paragraph (2) of subdivision (a) provided that the failure to contact the borrower occurred despite the due diligence of the mortgagee, beneficiary, or authorized agent. For purposes of this section, due diligence shall require and mean all of the following: (1) A mortgagee, beneficiary, or authorized agent shall first attempt to contact a borrower by sending a first-class letter that includes the toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency. (2) (A) After the letter has been sent, the mortgagee, beneficiary, or authorized agent shall attempt to contact the borrower by telephone at least three times at different hours and on different days. Telephone calls shall be made to the primary telephone number on file. (B) A mortgagee, beneficiary, or authorized agent may attempt to contact a borrower using an automated system to dial borrowers, provided that, if the telephone call is answered, the call is connected to a live representative of the mortgagee, beneficiary, or authorized agent. (C) A mortgagee, beneficiary, or authorized agent satisfies the telephone contact requirements of this paragraph if it determines, after attempting contact pursuant to this paragraph, that the borrower's primary telephone number and secondary telephone number or numbers on file, if any, have been disconnected. (3) If the borrower does not respond within two weeks after the telephone call requirements of paragraph (2) have been satisfied, the mortgagee, beneficiary, or authorized agent shall then send a certified letter, with return receipt requested. (4) The mortgagee, beneficiary, or authorized agent shall provide a means for the borrower to contact it in a timely manner, including a toll-free telephone number that will provide access to a live representative during business hours.
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(5) The mortgagee, beneficiary, or authorized agent has posted a prominent link on the homepage of its Internet Web site, if any, to the following information: (A) Options that may be available to borrowers who are unable to afford their mortgage payments and who wish to avoid foreclosure, and instructions to borrowers advising them on steps to take to explore those options. (B) A list of financial documents borrowers should collect and be prepared to present to the mortgagee, beneficiary, or authorized agent when discussing options for avoiding foreclosure. (C) A toll-free telephone number for borrowers who wish to discuss options for avoiding foreclosure with their mortgagee, beneficiary, or authorized agent. (D) The toll-free telephone number made available by HUD to find a HUD-certified housing counseling agency. (h) Subdivisions (a), (c), and (g) shall not apply if any of the following occurs: (1) The borrower has surrendered the property as evidenced by either a letter confirming the surrender or delivery of the keys to the property to the mortgagee, trustee, beneficiary, or authorized agent. (2) The borrower has contracted with an organization, person, or entity whose primary business is advising people who have decided to leave their homes on how to extend the foreclosure process and avoid their contractual obligations to mortgagees or beneficiaries. (3) A case has been filed by the borrower under Chapter 7, 11, 12, or 13 of Title 11 of the United States Code and the bankruptcy court has not entered an order closing or dismissing the bankruptcy case, or granting relief from a stay of foreclosure. (i) This section shall apply only to mortgages or deeds of trust recorded from January 1, 2003, to December 31, 2007, inclusive, that are secured by owner-occupied residential real property containing no more than four dwelling units. For purposes of this subdivision, owner-occupied means that the residence is the principal residence of the borrower as indicated to the lender in loan documents. (j) This section shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.
248. Civil Code §2923.5 was not repealed as of January 1, 2013 but was amended, as part of the Homeowners’ Bill of Rights, which became effective on January 1, 2013 to expand protections for homeowners, and included the addition of Civil Code §2923.55. Together these two statutes require lenders to contact borrower at least 30 days in advance of recording a Notice of Default and comply with all of the provisions of those section. Legislators also expanded protection by providing injunctive relief under Civil Code §2924.12 and §2924.19 to force lenders to comply with the mandates of contacting a borrower 30-days in advance of filing a NOD to discuss foreclosure alternatives & facilitate the process of loan modification to avoid foreclosure. Legislators made in clear in enacting t he homeowners’ bill of rights they intended lenders to work with borrowers to modify loans rather than foreclose them to stabilize the housing market. - 49 FAC filed 5/9/2013
249. As alleged under historical allegations above, Alles was not contacted by telephone by
2 any agent in 2012 before the NOD was recorded, to discuss foreclosure alternatives, and she did 3 not receive any mail related to any attempt to contact her. 4 250. Under holdings of the leading case on Civil Code §2923.5 Mabry v. Superior Court (2010) 5 185 Cal.App.4th 208, and its progeny (in state & federal courts) the Notice of Default is invalid, 6 unless and until the lender proves compliance with Civil §2923.5 (Perata Mortgage Relief Act). 7 251. The Mabry holdings apply to this case and require the court to conduct a hearing to 8 resolve the issue of fact, as to whether the lender complied, where plaintiff puts forth verified 9 allegations that he/she was not contacted during the 30-days preceding recording of the NOD: 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 252. In Mabry, at page 214 the court answered the following questions as to plaintiff’s rights:
In this writ proceeding, we answer these questions about section 2923.5, also known as the Perata Mortgage Relief Act (1) (A) May section 2923.5 be enforced by a private right of action? Yes. Otherwise the statute would be a dead letter. (B) Must a borrower tender the full amount of the mortgage indebtedness due as a prerequisite to bringing an action under section 2923.5? No. To hold otherwise would defeat the purpose of the statute. (C) Is section 2923.5 preempted by federal law? No—but, we must emphasize, it is not preempted because the remedy for noncompliance is a simple postponement of the foreclosure sale, nothing more. (D) What is the extent of a private right of action under section 2923.5? To repeat: The right of action is limited to obtaining a postponement of an impending foreclosure to permit the lender to comply with section 2923.5.
253. Accordingly, plaintiff has a private right of action under Civil Code §2923.5 to force the lender to comply with section 2923.5.Mabry’s holdings were strengthened by our legislators when they enacted Civil §2924.12 and Civil §2924.19 providing for injunctive relief to compel the lender to comply before filing a Notice of Default. Plaintiff has a right to compel the lender to comply with Civil Code §2923.5 before they can move forward with any foreclosure, and to act in good faith on her application to modify her loan down to an affordable payment by way of a reduction in interest from 6.7% down to 2% or 3% pursuant to legislative intent to prevent more foreclosures. - 50 FAC filed 5/9/2013
1 2 3 4 5 as though fully set forth herein. 6
TENTH CLAIM FOR RELIEF CIVIL CONSPIRACY (All Defendants except FHFA) 254. Plaintiff incorporates herein by reference the allegations made in the preceding paragraphs
255. WELLS has an ongoing business relationship with Freddie Mac which has existed since it
7 was created in 1970. WELLS is a wholesale lender who originates loans and sells them to 8 financial institutions in the secondary mortgage market, including Freddie Mac, who buys loans. 9 256. WELLS is bound by Trust Agreements and Servicing Agreements related to the loans 10 WELLS originated and sold to Freddie Mac, or loans owned by Freddie Mac but serviced by 11 WELLS under an agreement. Freddie Mac has a “Seller/Servicer Guide” for all lenders which 12 all lenders must follow as a condition of qualification to sell loans to Freddie Mac. 13 257. As alleged in more detail under historical allegations above, Freddie Mac required sellers 14 to defraud courts, plaintiffs, and the public record by concealing the fact that the originating 15 lender actually pre-sold the loan during escrow, and that Freddie Mac is the owner of the loan. 16 258. Accordingly, Freddie Mac, WELLS, and its foreclosing trustee (CWRC) participates, and 17 continue to participate, in a conspiracy to defraud [perpetrated by Freddie Mac] by conspiring to 18 create, and creating, a pretext that WELLS was/is the beneficiary on ALLES’ loan, when all 3 19 defendants knew that WELLS was NOT the beneficiary, but was rather only the sub-servicer. In furtherance of this conspiracy to defraud, and conceal the true facts, all 3 defendants caused 20 the creation and recording of false documents shown in Document 26, filed in this court on 21 3/20/13, of which this court took Judicial Notice, in Document 48, filed in this court 4/25/13; i.e. 22 Substitution of Trustee, Notice of Default, Notice of Sale & Assignment [Doc 26: Exh. 2,3,4,5]. 23 259. All 3 Defendants knew these documents were false but recorded them with specific intent 24 to conceal the true identity of the beneficiary of the loan, and to continue the charade of falsity. 25 Defendant WELLS did so because of WELLS contract with Freddie Mac, including the Selling 26 Agreement, Trust Agreement, and Servicing Agreement. CWRC participating in the conspiracy 27 because it makes significant profits, in trustee fees generated by participating in the conspiracy. 28
- 51 FAC filed 5/9/2013
260. Defendants’ attorneys furthered the fraud by asking the court to take judicial notice of the
2 fraudulent documents, knowing they were false, and failing to identify Freddie Mac and FHFA 3 as its conservator when they filed “Notice of Related Entities and Parties.” The two names were 4 conspicuous by their absence. The attorneys for WELLS and CWRC also filed a Joint Rule 26 5 Statement, in which they AGAIN, for a second time, failed to identify Freddie Mac Corporate, 6 Freddie Mac as Trustee, or FHFA as conservator for Freddie Mac as parties related to defendants 7 261. Defendants failed to work in good faith towards approval of a loan modification, and 8 continued to file dishonest, fraudulent documents on land title records in Riverside County, 9 including a fabricated assignment, executed by a robo-signer as WELLS “attorney-in-fact.” 10 262. CWRC’s robo-signer purported to assign the security interest to Freddie Mac Corporate. 11 All 3 defendants knew the purported assignment was a nullity because WELLS had already 12 executed an assignment of its interest to Freddie Mac on or about 9/13/2006 (Freddie Mac 13 settlement date) pursuant to Section 22.14 of Freddie Mac’s Seller/Servicer Guide. 14 263. This caused direct injury to plaintiff in that she was forced to engage an attorney to 15 proactively litigate to stop the fraudulent foreclosure, and to prevent a party who has no standing 16 to foreclose from stealing her property. 17 18 19 20 21 22 23 24 25 26 27 28 as though fully set forth herein. 265. California statutes define species of fraud and recite the necessary elements, and expressly recites that whether fraud occurred is an issue of fact. Civil Code §1574. Therefore, it cannot be dispensed with through a Rule 12(b)(6) motion to dismiss. §1572. Actual fraud defined
Actual fraud, within the meaning of this chapter, consists in any of the following acts, committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: 1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
ELEVENTH CLAIM FOR RELIEF FRAUD (ACTUAL & CONSTRUCTIVE – Civil Code §1572-§1575) (All Defendants except FHFA) 264. Plaintiff incorporates herein by reference the allegations made in the preceding paragraphs
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2. The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; 3. The suppression of that which is true, by one having knowledge or belief of the fact; 4. A promise made without any intention of performing it; or, 5.
Any other act fitted to deceive.
§1573. Constructive fraud
Constructive fraud consists: 1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him; or, 2. In any such act or omission as the law specially declares to be fraudulent, without respect to actual fraud. §1574. Actual fraud a question of fact Actual fraud is always a question of fact.
§1575. Undue influence defined
Undue influence consists: 1. In the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him; 2. In taking an unfair advantage of another's weakness of mind; or, 3. In taking a grossly oppressive and unfair advantage of another's necessities or distress.
FRAUDULENT INDUCEMENT ON THE ORIGINAL CONTRACT EXECUTED 7/28/06 266. Any statute of limitations on fraud is tolled where a plaintiff did not discover the fraud because defendants’ concealed the fraud perpetrated against plaintiff. The pertinent facts are: 267. On 7/28/2006 while still employed plaintiff bought a home at 43060 Illinois Avenue, Palm Desert, California 92111. WELLS wholesaled the loan and was only a nominal lender on a note. 268. Exhibit A is a true copy of the 3-page $230,000 note plaintiff executed at 6.75% fixed rate of interest, for a 30 year amortized term, at $1,491.78 monthly payments until August 1,2036 The note was secured by a trust deed recorded in land records in Riverside county. - 53 FAC filed 5/9/2013
269. The note and trust deed formed a contract between borrower, lender, and trustee
2 which required that all parties, including any successors in interest, were bound not only by 3 its terms, but also by implied covenant good faith & fair dealing applyied to all contracts. 4 270. Plaintiff’s loan was pre-sold in escrow and conveyed into a large pool of securitized loans.
5 On 9/13/06 certificate holders in a Freddie Mac trust became the beneficial owners. Exhibit B 6 271. Plaintiff believed WELLS was lender as well as loan servicer as her note and trust deed 7 recited WELLS’ name as lender and included WELLS address as the place to mail her payments, 8 which implied that WELLS was the only entity involved in her loan. No one involved in the 9 escrow ever disclosed to ALLES that her loan was pre-sold during escrow to Freddie Mac, to be 10 transmuted to a Collateral Debt Obligation [CDO], sold by Wall St. brokers as investment bonds, 11 and that her Loan Servicer would be bound by terms in a Freddie Mac Seller/Servicer Agreement 12 not to modify/forbear on any loan. Alles never consented to these material loan term changes. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 272. The facts combined with the elements of fraud are alleged as follows: 273. Actual fraud, within the meaning of this chapter, consists in any of the following acts,
committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract:
WELLS pre-sold Alles’ loan during her escrow evidenced by the fact that all forms she filled out had “Freddie Mac” in small print either at the top, bottom or elsewhere. WELLS had already cut the deal to resell her loan to Freddie Mac, but concealed this fact from plaintiff. Wells’ sale to Freddie Mac closed on 9/13/2006 (Exh. B) WELLS was the seller, sponsor, and servicer for the Freddie Mac Remic Trust to which plaintiff’s loan was securitized into. Wells connived to conceal this fact from plaintiff, to induce her to enter into the contract. WELLS knew if it had disclosed the securitization angle Alles would not have taken the loan. Alles had a credit score near 800 and could have obtained a loan with a traditional lender who would have maintained the loan in its own portfolio. WELLS never disclosed that by its deal with Freddie Mac her tangible debt obligation (her note) would be transmuted to an intangible debt obligation converted into a “security” to be pooled and sold on Wall Street as a security.
- 54 FAC filed 5/9/2013
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
WELLS agents intended to deceive Alles by conniving the deal with Freddie Mac behind her back, with intent to deceive, and intent to conceal the true facts from her. Alles was induced into signing the contract under false pretenses without any knowledge or disclosure of the true facts or, more importantly, the true consequences of what would happen with her note & T.D.
274. 1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
WELLS agents suggested to Alles in 2011 that she stop making payments to trigger a default so that she would be “eligible for a loan modification.” WELLS agents knew Freddie Mac rarely approved loan modifications and its conservator, FHFA’s director )De Marco) forbid any forbearance on loans. ALLES was not aware that her application for a modification was pre-destined to fail because of these facts because she reasonably relied on WELLS agents whom she had a relationship with for 6 years, as she make payments to WELLS, as servicer for six years and had called to inquire about modification several times from 2008-2011.
275. 2. The positive assertion, in a manner not warranted by the information of the person making it,
of that which is not true, though he believes it to be true; WELLS agents never disclosed that WELLS was not the lender, but merely the sub-servicer of the loan. WELLS agents never told Alles that Freddie Mac was “beneficiary” since 9/13/06 or that FHFA had taken Freddie Mac under conservatorship in 2008, and that FHFA controlled the assets of Freddie Mac, its conservatee.
276. 3. The suppression of that which is true, by one having knowledge or belief of the fact;
WELLS agents suppressed the true facts as alleged in the 3-4 preceding paragraphs when they had actual knowledge that WELLS did not even own the loan and that she should be applying to FHFA for a loan modification.
277. 4. A promise made without any intention of performing it; or 278. WELLS made a written promise not to foreclose on Alles’ home while she appealed WELLS’
11/8/12 denial of her application for a HAMP modification. [Exh. F] WELLS knew it would not approved the modification because Freddie Mac had a policy of not fully participating in HAMP but did not disclose that fact to Alles. Despite the promise WELLS recorded a Notice of Sale on 11/30/12 to barrel forward with foreclosure while her appeal was still pending.
- 55 FAC filed 5/9/2013
279. WELLS continued the fraud by filing a series of false and fraudulent recordings creating a
2 pretext that WELLS was the beneficiary, through its conspiring co-defendant CWRC who knew 3 WELLS was not the beneficiary. WELLS and CWRC both knew the true facts, but endeavored 4 to continue the charade even in the federal court. Their attorneys asked the court to take judicial 5 notice of the fraudulent recorded documents shown in Document 26, filed in court on 3/20/13, 6 of which this court took Judicial Notice, in Document 48, filed in this court on 4/25/13. 7 280. Defendants attorneys continued to conceal the true facts, with intent to defraud, by failing 8 to identify Freddie Mac & FHFA on “Notice of Related Entities” and Joint Rule 26 statement. 9 281. Defendants acts caused damages to plaintiff in that she believed she would receive a loan 10 modification, when in fact, despite that she qualified for HAMP, WELLS denied modification. 11 282. WELLS concealed the fact that it would make $6,000 by foreclosing on her home, rather 12 than receiving a $1,000 stipend for approving a modification. WELLS and Freddie Mac never 13 disclosed to FHFA that it categorically denied, and rarely granted loan modifications, even where 14 plaintiffs qualified under HAMP guidelines. 15 283. Plaintiff was also damaged in that WELLS never disclosed that FHFA was investigating 16 and auditing WELLS and Freddie Mac for intentionally failing to modify loans or report their 17 denials as required by FHFA. If plaintiff knew she could have applied directly to FHFA as the 18 conservator of Freddie Mac, for a modification, and she would have been applying to an entity 19 who was likely to approve a modification-rather than continue the process with WELLS who had 20 21 22 23 24 25 26 27 28 a financial incentive NOT TO APPROVE a modification because it stood to gain far more profit by foreclosing than by modifying, and suffered no loss by foreclosing on a home with no equity. 284. The Riverside County tax assessor valued the home for the 2012-13 year at only $105,000 and the loan amount was $230,000 which would result in at least a $100,000 loss to FHFA, which loss would be borne by taxpayers who maintain its solvency. 285. Plaintiff also was damaged in that she had to engage an attorney to proactively litigate to avoid foreclosure which never should have happened because she qualified for a modification. Plaintiff is entitled to restitution, and return of all the funds she deposited in the original escrow to purchase the home in a fraudulent escrow where the true facts, including undisclosed fees and commissions WELLS and Freddie Mac made when they securitized ALLES loan. - 56 FAC filed 5/9/2013
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSTRUCTIVE FRAUD In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him; or, 286. 2. In any such act or omission as the law specially declares to be fraudulent, without
respect to actual fraud. 287. The above Actual Fraud allegations constitute constructive fraud as WELLS, who
had a duty of good faith & fair dealing, had an advantage over Alles during the escrow because of their superior knowledge in financing compared to Alles lack of knowledge. WELLS misled Alles by concealing the true facts and misrepresenting for six years that WELLS was her lender, while knowing it was not true because it had sold her note to Freddie Mac on 9/13/05 within weeks after her loan escrow closed. WELL continued to mislead plaintiff, the court, and the public by recording foreclosure documents to create a pretext that WELLS owned the loan, when in fact it knew Freddie Mac owned the loan. WELLS also misled Alles by failing to disclose that Freddie Mac was under conservatorship of FHFA and had been since 2008. CWRC CONSPIRACY AND PARTICIPATION IN FRAUD 288. CWRC conspired with WELLS and Freddie Mac to defraud, and actually defrauded Alles by composing and preparing documents for recording, knowing they were false. CWRC knew from the onset that WELLS was not the true beneficiary, and that Freddie Mac was the actual beneficiary, evidenced by the fact that CWRC executed and recorded an “assignment” of the security interest from WELLS to Freddie Mac Corporate (a fraud) and recorded it on 12/7/12. CWRC executed the document as WELLS “Attorney in Fact” when it had no such authority to do so, and could not transfer a real property asset (the security interest) to a conservatee, rather than the conservator, who controlled all of Freddie Mac’s assets. The assignment was a nullity, 289. CWRC had no power to execute an assignment to Freddie Mac Corporate as only Freddie Mac, as Trustee of the REMIC trust, to which Alles loan was securitized into, had the power to represent the TRUE BENEFICIARIES; i.e. the Participating Certificate Holders of the fractional beneficial interests in all the debt obligations in the pool of loans conveyed in the REMIC trust.
- 57 FAC filed 5/9/2013
290. Freddie Mac Corporate was a complete stranger to the ALLES loan and lacked standing
2 to foreclose. CWRC was motivated by fraud and greed because it has been on a gravy train of 3 BIG MONEY in trustee fees it rakes in by foreclosing THOUSANDS of properties for all banks 4 in a nationwide market, including WELLS. 5 291. CWRC is not an “independent trustee” but rather acted/acts as the SOLE agent for banks, 6 without conscious disregard for the rights of homeowners. CWRC was an active participant and 7 conspirator in fraud. Plaintiff is entitled to actual damages, as alleged above, and punitive 8 damages under Civil Code §3294 for malicious conduct by these defendants. 9 292. CWRC asked the court to take Judicial Notice of all of its, fabricated, fraudulent, robo10 signed instruments CWRC recorded against the ALLES property slandering her title, and in 11 violation of the very statutory scheme it purports to operate under. Civil Code §2924 et seq. 12 These fabricated, fraudulent instruments are shown in Document 26, filed in this court on 13 3/20/13, of which this court took Judicial Notice, in Document 48, filed in this court on 4/25/13. 14 Because CWRC conspired with WELLS and Freddie Mac to defraud plaintiff, the court, and the 15 public record, and slandered plaintiff’s title without privilege, they are jointly and severally liable 16 for all of the torts alleged and violations of law because their malicious acts and fraud were a 17 substantial factor in damages plaintiff suffered, as alleged in Damages Common to all Claims. 18 19 20 21 22 23 24 25 26 27 28 as though fully set forth herein. 294. FHFA is the conservator for Freddie Mac and shall remain conservator indefinitely. 295. Two federal courts have found that Freddie Mac & Fannie Mae, under conservatorship of a federal agency (FHFA) are federal actors, and because they are, homeowners are entitled to due process protections relating to foreclosure. Federal Home Loan Mortgage Corporation v Michael R. Kelley and Katin M. Kelley, Ingham County Circuit Court Docket No: 12-000885AV, decided February 12, 2013 (55th District Court Case No: 12-1734-LT). See Order No. 12-1286 LT (Hon. Thomas Boyd) - 58 FAC filed 5/9/2013 TWELFTH CLAIM FOR RELIEF VIOLATIONS OF 5TH and 14TH AMENDMENT [DUE PROCESS] (All Defendants) 293. Plaintiff incorporates herein by reference the allegations made in the preceding paragraphs
296. “Freddie Mac is a federal entity as a matter of law. Lebron v National Railroad
2 Passenger Corp., 513 US 374 (1995). Under Lebron, a company is a federal actor where the 3 government creates the corporation by special law, for furtherance of governmental objectives, 4 and retains for itself permanent authority to appoint a majority of the directors.” Id 5 297. In 2008, Congress passed the Housing and Economic Recovery Act of 2008 ("HERA") 6 which created Federal Housing Finance Agency ("FHFA"). Public Law 110-289, July 30, .2008, 7 The FHFA, a federal agency, became the conservator of both Fannie Mae and Freddie Mac 8 under the HERA. The FHFA is responsible for reorganizing, rehabilitating and winding-up their 9 affairs. See 12 USC 4617. No date is specified for the end of the conservatorship and no provision 10 exists for the automatic return of plaintiff to its original status as a private entity. The control the 11 government asserts over Freddie Mac far exceeds the control of Amtrak discussed in Lebron. 12 FHFA has authority over 100% of the stock, all officers of the company, and every director. 13 298. Government's control over Freddie Mac exceeds control over Amtrak discussed in Lebron. 14 The government has infused $190 billion of taxpayer funds into Freddie Mac and Fannie Mae. Id 15 299. “The government created plaintiff through a special law. It did this in furtherance of 16 governmental objectives — increased homeownership, among others. The government is in 17 control of plaintiff, including the authority to appoint its directors. Id 18 300. One question remains: Will this control be permanent? There is no determined end date 19 in which plaintiff will become a private entity, nor is there an automatic provision that will revert plaintiff to a private entity. Though conservatorship is described as a temporary status of a 20 company, the procedures and provisions in place in this case make the conservatorship in all 21 practicality permanent. Because plaintiff is a government entity, foreclosure by advertisement is 22 prohibited and constitutional due process must be applied.” 23 301. “The conclusion that plaintiff is a federal actor and may not foreclose by advertisement is 24 dispositive of the entire matter before the Court. There is no need to reach the other arguments 25 made by counsel. There remain no triable issues and summary disposition is appropriate. 26 Defendant's Motion for Summary Disposition is GRANTED. This case is dismissed” Id 27 from: 55th District Court Case:12-1734-LT). Order No. 12-1286 LT (Hon. Thomas Boyd) 28
- 59 FAC filed 5/9/2013
302. Accordingly, since two federal courts have found that Freddie Mac is a “government
2 entity, under the conservatorship of a government agency (FHFA) plaintiff is entitled to due 3 process. Alles’ due process rights were violated all defendants in the pending foreclosure. 4 303. Under the federal cases cited above plaintiff is entitled to due process and the right to 5 present her case to a jury, and not have her case dismissed on Judgments on the Pleadings, 6 without any opportunity for a hearing, based on taking Judicial Notice of fraudulent documents 7 recorded in a conspiracy to steal her home without due process of law. Plaintiff is entitled to 8 conduct discovery to find out which trust her loan was securitized into, and to learn the identity 9 of the true beneficiary of her loan. That WELLS was not the beneficiary on Alles’ loan when 10 CWRC recorded its first 3 fraudulent documents: (Substitution of Trustee on 8/1/2012); 11 (Notice of Default with false §2923.5 affidavit on 8/2/2012) and (Notice of Sale on 11/30/12) 12 evidenced by the fact that just a few months later CWRC tried to CURE THE DEFECTS 13 in the first 3 bogus documents by fabricating and recording a purported “assignment” of 14 the beneficial interest in trust deed from WELLS to Freddie Mac Corporate on 12/7/2012. 15 304. Plaintiff has a due process right to present evidence to a jury to show that defendants 16 violated her rights to due process (by trying to seize her property without legal authority to do so) 17 based on intentionally fraudulent recordings intended to conceal the true identity of beneficiaries 18 when the very statute being used to foreclose [Civil Code §2924 et seq.) mandates that only the 19 actual beneficiary is entitled to substitute a trustee, record NOD & NOS and foreclose the home. 20 21 22 23 THIRTEENTH CLAIM FOR RELIEF
VIOLATIONS OF ECOA DISCRIMINATION [AGE & DISABILITY] 15 USC §1691 - Unruh Act - Civil Code §51 et seq.
(All Defendants) 305. Plaintiff incorporates herein by reference the allegations made in the preceding paragraphs
24 as though fully set forth herein. 15 USC §1691 mandates that lenders may not discriminate in 25 decisions to credit approval. WELLS denied Alles’ application for a modification despite that 26 she qualified under the NPV results populated at the HAMP website. [Exh. H] WELLS denial 27 letter [ Exh. F] recited that she did not meet the “31% of income level” but failed to attach as 28 Exhibit A, the computations it used in arriving at the stated “conclusion.”
- 60 FAC filed 5/9/2013
306. That Exhibit A was missing is telling, because it shows that the denial was a pretext.
2 Secondly, HAMP has special rules for elderly and or disabled persons, which modifies the 31% 3 up to 39% of monthly income for monthly payments. These modifications to accommodate the 4 elderly and disabled persons are included in the HAMP guidelines which plaintiff attached as an 5 Exhibit to the ALLES complaint filed 11/29/2012. 6 307. WELLS concealed from ALLES the fact that Freddie Mac had initiated “Streamlined 7 Modifications” [SAI Initiative] for homeowners who did not qualify for HARP or HAMP. 8 WELLS also concealed that Freddie Mac initiated and approved a new program to approve 9 modifications, without qualifications, on a 3-month trial basis to any homeowner who applies, 10 starting July 1, 2013. WELLS could easily have qualified for the new Freddie Mac program, but 11 WELLS concealed that from her. 12 308. ALLES believes WELLS is discriminating against her because of her age (71) and the fact 13 that she can no longer work because of her disability, WELLS also refused to consider the 14 income Alles receives monthly from two tenants ($1275) in making its modification decision. 15 309. This was in violation of HAMP guidelines which allow an owner to supplement income 16 with rents, and if leases are provided, the evaluator is required to include the income as a factor. 17 310. ALLES believes that WELLS has an unpublished policy to deny and application for a 18 modification to a person over 70 and or a person who is unemployed and disabled because it of 19 some perceived notion that the homeowner is more likely to default on a modified loan. 20 21 22 23 24 25 26 27 28 311. Civil Code §51. Citation of section; Civil rights of persons in business establishments;
Definitions (a) This section shall be known, and may be cited, as the Unruh Civil Rights Act. (b) All persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, or sexual orientation are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.
- 61 FAC filed 5/9/2013
312. Alles has a right not to be discriminated, based on her age, unemployment status, or her
2 disability which impairs her ability to generate a large income. Applying for a loan modification 3 is a service and WELLS is a “business establishment of every kind whatsoever.” 4 313. WELLS allege in its answer that it is a “loan servicer” on the ALLES loan, and has the 5 “discretion” to approve or deny a loan modification. Since WELLS admits it is a business 6 establishment ( a financial institution) providing “loans services” to consumers, it is required to 7 comply with Civil Code §51. WELLS was/is required to refrain from discriminating, and 8 especially as to a decision to deny credit [under federal mandates of 15 USC §1691]. WELLS 9 denied Alles application for a HAMP modification where evidence showed she qualified for it, 10 and if not for HAMP, then for some other streamlined modification Freddie Mac offers to keep 11 homeowners in their homes, to avoid community blight, and to stabilize the housing market. 12 314. Plaintiff is entitled to all the remedies set forth in Civil Code §52 for damages, and an 13 injunction under Civil Code §52.1. Plaintiff has been damaged as alleged above under 14 “DAMAGES COMMON TO ALL CLAIMS.” 15 16 17 18 19 20 21 22 23 24 25 26 27 28 315. Plaintiff incorporates herein by reference the allegations made in the preceding paragraphs as though fully set forth herein. 316. FHFA is named as a defendant, and being served, because it is conservator of Freddie Mac, and has an interest in preserving its assets for the benefit of taxpayers. It is appropriate for FHFA to participate in this litigation. 317. FHFA is also being named because its current director, Ed DeMarco, enforces a directive not to approve any reductions in principal on any applications for loan modifications, and not to fully participate in HAMP, HARP, or other programs designed to prevent more foreclosures. Plaintiff believes the FHFA Director’s directive discriminates against elderly and/or disabled homeowners who should be accommodated and that special exceptions should be made for them. 318. Plaintiff seeks an injunctive order against enforcing a directive which fails to provide some type of exception for an elderly or disabled person, which would authorize a loan modification. - 62 FAC filed 5/9/2013 FHFA CLAIMS (Federal agency-Federal actors) [Discrimination 42 USC §1983; 15 USC §1691; Civil Code §51-52]
1 2 3 4
FOURTEENTH CLAIM FOR RELIEF [Violations of Homeowners Bill of Rights] (All Defendants except FHFA) 319. Plaintiff incorporates herein by reference the allegations made in the preceding paragraphs 320. WELLS FARGO’s CONSENT JUDGMENT USA et al v. Bank of America Corp, et al Case No. 120361 entered April 4, 2012 321. On April 4, 2012 the US District Court for the District of Columbia entered a consent Judgment to settle the case for $26 billion to be paid by consenting banks, including Wells Fargo Bank [www.justice.gov/opa/documents/wellsfargo-consent-judgement.pdf]. 322. In the consent judgment Wells Fargo Bank impliedly admitted violating the Unfair and Deceptive Practices laws, the False Claims Act, FIRREA,the Service members Civil Relief Act, the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure. The agreement recited: Wells Fargo shall comply with Servicing Standards attached as Exhibit A. The consent judgment is effective for 3 years from entry; i.e. until April 3, 2015. Servicing Standards Wells Fargo agreed to comply with are now codified in California; i.e. “The Homeowners’ Bill of Rights” [HBOR] effective 1/1/2013. 323. Although the statutes are not retroactive, and defendants argue they do not apply to this
5 as though fully set forth herein. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
case because all the documents were recorded before January 1, 2013 this argument fails. Many of defendants’ acts in furtherance of the conspiracy, and violating the statutes included in HBOR occurred after Jan. 1, 2013. Defendants continue to violate the statutes to date. 324. Some of the acts occurring after January 1, 2013 are alleged as follows: 325. WELLS’ COUNSEL and CWRC’s COUNSEL both filed Certification and Notice of Interested Parties, after January 1, 2013 without listing Freddie Mac or FHFA as entitles with an interest in the litigation. Both attorneys knew the true facts but continued the fraudulent charade on the court by trying to conceal that Freddie Mac and FHFA had an interest. 326. The following shows that Wells listed only itself as an “interested party.”
- 63 FAC filed 5/9/2013
1 2 3 4 5 6 7 8 9 10 ◄filed by Wells counsel Wells counsel omitted Freddie Mac & FHFA violating Civil §2924.17and Rule 11 (a).
11 327. Wells Counsel filed a Joint Rule 26(f) Report in which he deleted a line item in the court’s 12 13 Rule 26 order which required all parties to disclose all corporate affiliates. Wells counsel, and CWRC’s counsel failed to disclose Freddie Mac or FHFA in its Joint Rule 26(f) Report.
14 328. On April 8, 2013 Wells Counsel filed a Request for Judicial Notice in which he offered the 15 16 17 18 19 20 21 22 23 24 25 26 27 28 fraudulent recordings as Exhibits with an opposition, violating Civil §2924.17 which recites: (a) A declaration recorded pursuant to Section 2923.5 or, until January 1, 2018, pursuant to Section 2923.55, a notice of default, notice of sale, assignment of a deed of trust, or substitution of trustee recorded by or on behalf of a mortgage servicer in connection with a foreclosure subject to the requirements of Section 2924, or a declaration or affidavit filed in any court relative to a foreclosure proceeding shall be accurate and complete and supported by competent and reliable evidence. (b) Before recording or filing any of the documents described in subdivision (a), a mortgage servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower's default and the right to foreclose, including the borrower's loan status and loan information. (c) Until January 1, 2018, any mortgage servicer that engages in multiple and repeated uncorrected violations of subdivision (b) in recording documents or filing documents in any court relative to a foreclosure proceeding shall be liable for a civil penalty of up to seven thousand five hundred dollars ($7,500) per mortgage or deed of trust in an action brought by a government entity identified in Section 17204 of the Business and Professions Code, or in an administrative proceeding brought by the Department of Corporations, the Department of Real Estate, or the Department of Financial Institutions against a respective licensee, in addition to any other remedies available to these entities. This subdivision shall be inoperative on January 1, 2018.
- 64 FAC filed 5/9/2013
1 329. Civil §2924.17(a) mandates that any declaration or affidavit file in any court relative to a 2 3 4 5 6 7 8 foreclosure proceeding shall be accurate and complete and supported by competent evidence. WELLS counsel knew the declaration he filed, and the documents he asked the court to take Judicial Notice of were not “accurate and complete and supported by competent and reliable evidence.” WELLS counsel is fully aware of the true facts in this case. He knew that WELLS was not the beneficiary; that Freddie Mac was the purported beneficiary and that neither the SOT, NOD, NOS, or purported “assignment” recorded on 12/7/12 complied with §2924.17. Yet, he filed them with the court and asked for Judicial Notice. This was a clear violation.
9 330. CWRC’s counsel also filed a Request for Judicial Notice of the same fabricated, recorded 10 11 12 instruments which are fraudulent, and continue to create a pretext that WELLS is beneficiary. These fabricated, fraudulent instruments are shown in Document 26, filed in this court 3/20/13, of which this court took Judicial Notice, in Document 48, filed in this court on 4/25/13.
13 331. Despite an affirmative duty to be transparent in foreclosure proceedings and with the court, 14 which duty is now statutory [as of 1/1/13], Wells and CWRC continue a pattern of violations. 15 332. Legislators expressed a clear intent to force lenders to modify loans rather than foreclose: 16 333. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: 17 334. SECTION 1. The Legislature finds and declares all of the following: (a) California is still reeling from the economic impacts of a 18 wave of residential property foreclosures that began in 2007. 19 From 2007 to 2011 alone, there were over 900,000 completed foreclosure sales. In 2011, 38 of the top 100 hardest hit ZIP Codes in the nation were 20 in California, and the current wave of foreclosures continues apace. 21 All of this foreclosure activity has adversely affected property values and resulted in less money for schools, public safety, and other public services. 22 In addition, according to the Urban Institute, every foreclosure imposes significant costs on local governments, including an estimated nineteen 23 thousand two hundred twenty-nine dollars ($19,229) in local government 24 costs. And the foreclosure crisis is not over; there remain more than two million "underwater" mortgages in California. 25 (b) It is essential to the economic health of this state to mitigate the negative 26 effects on the state and local economies and the housing market that are the result of continued foreclosures by modifying the foreclosure process to 27 ensure that borrowers who may qualify for a foreclosure alternative are 28
- 65 FAC filed 5/9/2013
1 2 3 4 5 6 7 8 9
considered for, and have a meaningful opportunity to obtain, available loss mitigation options. These changes to the state's foreclosure process are essential to ensure that the current crisis is not worsened by unnecessarily adding foreclosed properties to the market when an alternative to foreclosure may be available. Avoiding foreclosure, where possible, will help stabilize the state's housing market and avoid the substantial, corresponding negative effects of foreclosures on families, communities, and the state and local economy. (c) This act is necessary to provide stability to California's statewide and regional economies and housing market by facilitating opportunities for borrowers to pursue loss mitigation options.
10 335. To this end legislators provided a unilateral attorney fee provision to award fees only to homeowners to encourage attorneys to file motions to enjoin servicer violations. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 336. Legislators expressly granted standing to homeowners to enforce the consent agreement in subsection (g) by providing a defense only to servicers who comply with the consent agreement. Wells’ argument that plaintiff cannot enforce the agreement is wrong. Subsection (g) grants that enforcement remedy indirectly. Injunctions grant prospective relief. Whether Wells complied with the consent judgment is an issue of fact in this case. Plaintiff intends to seek an injunction for these violations of HBOR and for prospective injunctive relief. - 66 FAC filed 5/9/2013 Legislators provided a defense for servicers complying with the consent judgment: (g) A signatory to a consent judgment entered in the case entitled United States of America et al. v. Bank of America Corporation et al., filed in the United States District Court for the District of Columbia, case number 1:12-cv-00361 RMC, that is in compliance with the relevant terms of the Settlement Term Sheet of that consent judgment with respect to the borrower who brought an action pursuant to this section while the consent judgment is in effect shall have no liability for a violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17. (i) A court may award a prevailing borrower reasonable attorney's fees and costs in an action brought pursuant to this section. A borrower shall be deemed to have prevailed for purposes of this subdivision if the borrower obtained injunctive relief or was awarded damages pursuant to this section.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
337. The HBR requires lenders to provide proper documentation before they can exercise rights over homeowners’ properties and provides remedies to enforce their rights. 338. Because injunctive relief operates “in futuro,” courts must apply the law in effect at the time of the court’s decision. Koebke v. Bernardo Country Club (2005) 36 Cal.4th 824, 837; Hunt v. Superior Court (1999) 21 Cal.4th 984, 999; In Broadmoor San Clemente Homeowners Ass’n v. Nelson (1994) 25 Cal.App.4th 1, 4. In Estate of Hoffman, (2002) 97 Cal.App.4th 1436, held it would be “inappropriate” to review the trial court order based on the law in existence at the time of the ruling where affirmance based on the prior law would be an “idle act” because a law enacted. The same rule applies to declaratory judgment, which operates prospectively and, significantly, whether or not the Legislature intended the new law to be retroactive. City of Watsonville v. State Dept. of Health Services (2005) 133 Cal.App.4th 875, 884-885. 339. The foreclosure standing statute Civil §2924(a)(6), as amended, provides that: “No entity shall record or cause a notice of default to be recorded or otherwise initiate the foreclosure process unless it is the holder of the beneficial interest under the mortgage or deed of trust, the original trustee or the substituted trustee under the deed of trust, or the designated agent of the holder of the beneficial interest.” Thus, the Legislature’s purpose is clear on its face, no entity may initiate the foreclosure process until it factually proves that it is: (a) the holder of the beneficial interest under the mortgage or deed of trust; (b) the original trustee or the substituted trustee under the deed of trust; or (c) the designated agent of the holder of the beneficial interest. If the above factual predicates to the right to foreclose are challenged, due process precludes resolving Quiet Title, Cancellation of Instruments, Declaratory Relief, Slander of Title, Fraud and Ca. Bus. & Prof. Code 17200 issues at the pleading stage. 340. Since injunctive relief and declaratory relief apply prospectively plaintiff is entitled to an injunction for all violations under the Homeowner’s Bill of Rights, and specifically for those which occurred after January 1, 2013 as alleged above. /// /// ///
- 67 FAC filed 5/9/2013
1 2 3 4 5 6 7 WHEREFORE,
PRAYER FOR RELIEF
Plaintiff prays judgment against Defendants, and each of them, as follows: 1. For general and special damages according to proof; 2. For actual monetary damages in the amount greater than $75,000.00 and for compensatory
8 and statutory damages, attorneys fees and costs according to proof at trial; and for exemplary and 9 punitive damages; 10 11 12 3. For Plaintiff's reasonable attorneys fees and costs necessary to obtain this relief; 4. For an order voiding any Assignment in connection with the Mortgage Loan; 5. For an order of restitution requiring this Defendant to disgorge all revenues acquired from
13 Plaintiffs by means of unlawful, unfair, fraudulent and/or deceptive acts or practices as more 14 fully described above and according to proof; 15 16 17 6. For prejudgment interest as allowed by law; 7. For all claims prayed in violations of statutes; 8. For declaration and order that this Defendant release and re-convey any Mortgage [deed of
18 trust] or other document signed or entered into and subsequently recorded in connection with the 19 Mortgage Loan which contained any information which was not accurate; 20 21 22 23 24 25 26 27 28 9. For an order voiding any Mortgage [deed of trust], Note and any other document signed or entered into by the Plaintiff in connection with the mortgage loan; 10. For an order requiring this Defendant to return all monies, proceeds, payments, funds, revenues, fees and the like acquired from either Plaintiff as a result of or arising from the Mortgage Loan which for which they were not entitled to accept; 11. For an order Forfeiture of return of any loan proceeds; 12. For Quiet Title to the property in Plaintiff s name. 13. For an order rescinding Alles’ original loan contract with a refund of all amounts deposited. 14. For orders enjoining any future violations of any statutes cited herein.
- 68 FAC filed 5/9/2013
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: 5/9/2013 DEMAND FOR JURY TRIAL Pursuant to Federal Rules of Civil Procedure 38(b) plaintiff demands a jury trial on issues for which she is entitled under federal and state law. 15. For an order enjoining the Director of FHFA from enforcing a blanket directive which precludes any type of forbearance or principal reduction on Freddie Mac & Fannie Mae’s loans, without some exception policy for special considerations to be given to elderly and/or disabled persons so they may remain in their homes through loan modifications. 16. For statutory damages according to proof; 17. For costs of suit herein incurred; and 18. For such other and further relief as this Court may deem just and proper.
- 69 FAC filed 5/9/2013
I, CMLOLE S. ALLES, a m plaintiff in t l ~proceeding. i~ I have read the foregoing
FIRST ,4MENDED COMPLAINT and know the contents thereof. Althougl~ I do not
understand all of the ~ t a t u t e and s legal arguments that my attorney included in the pleading, I understand any factual allegations that have been made and know
whether those arc true, as they relate to hstorical aU.egatioils about what has
and e during these foreclosure proceedings, which are the subject of transpired b e f i ~ ~ thi~ Litigation. As to the factual allegations thcy are based on my own personal knuwlcdgo, except a R to thoae matters which are prefaced by plaintiff bslisvss, and as
to those allegations, I believe them to be true. I declare under penalty of perjury,
under California and Federal law, that the foregoing is true and correct and that this
declaration was executed in Palm Desert, California on May 9, 2013.
CAROLE S. ALLES
EXHIBIT LIST (First Amended Complaint) A. Promissory Note to Wells Fargo Bank, NA $230,000 30-yr; 6.75% interest @ $1471.78 B. Freddie Mac Bought Plaintiff’s Loan from Wells Fargo Bank, NA on 9/13/2006 C. Purported assignment of trust deed [Wells to Freddie Mac] CWRC recorded on 12/7/12 D. Riverside County Tax Assessor’s assessed value for tax year 2012-2013 [$105,000] E. NOD recorded 8/2/12, with false Civil §2923.5 affidavit signed by Deatrice Hemphill F. Wells 11/8/12 Denial Letter with false promise not to foreclose pending appeal G. Notice of Sale recorded 11/30/2012 with sale set for 12/19/2012 H. NPV results populated by plaintiff’s attorney showing Alles qualified for HAMP I. PC Offering Circular dated 10/14/2005 used to sell PC shares in Freddie Mac Trusts J. Conservatorship Confirmation [FHFA appointed conservator of Freddie Mac] 9/18/08
FIXED RATE NOTE
JULY 28, 2006
43060 ILLINOIS AVENUE, PALM DESERT, CA 92211
1. BORROWER'S PROMISE TO PAY
(this amount is In return for a loan that I have received, I promise to pay U.S. $ 230,000.00 called "Principal"), plus interest, to the order of the Lender. The Lender is N.A. I will make all payments under this Note in the form of cash, check or money order.
I understand that the Lender may transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the "Note Holder."
2. INTEREST Interest will be charged on unpaid principal until the full amount of Principal has been pa-id. I will pay interest at a yearly rate of 6.750 %. The interest rate required by this Section 2 is the rate I will pay both before and after any default described in Section 6(B) of this Note.
PAYMENTS (A) Time and Place of Payments
I will pay principal and interest by making a payment every month.
I will make my monthly payment on the first day of each month beginning on SEPTEMBER 1, 2006 I will make these payments every month until I have paid all of the principal and interest and any other charges described below that I may owe under this Note. Each monthly payment will be applied as of its scheduled due date and will be applied to interest before Principal.
If, on AUGUST 1, 2036 , I still owe amounts under this Note, I will pay those amounts in full on that date, which is called the "Maturity Date.".
I will make my monthly payments at VVELLS FARGO BANK, N.A. P.O. BOX 17339, BALTIMORE, MD 21297-1339 o r at a different place if required by the Note Holder.
(6) Amount of Monthly Payments
My monthly payment will be in the amount of U.S. $ 4. 1,491.78
BORROWER'S RIGHT TO PREPAY
I have the right to make payments of Principal at any time before they are due. A payment of Principal only is known as a "Prepayment." When I make a Prepayment, I will tell the Note Holder in writing that I am doing so. I may not designate a payment as a Prepayment if I have not made all the monthly payments due under the Note. I may make a full Prepayment or partial Prepayments without paying a Prepayment charge. The Note Holder will use all of my Prepayments to reduce the amount of Principal that I owe under this Note. However, the Note Holder may apply my Prepayment to the accrued and unpaid interest on the Prepayment amount, before applying my Prepayment to reduce the Principal amount of the Note. If I make a partial Prepayment, there will be no changes in the due date or in the amount of my monthly payment unless the Note Holder agrees in writing to those changes.
MULTISTATE FIXED NOTE - Single Family FNMAIFHLMC UNIFORM INSTRUMENT 1 of3
FORM 3200 1/01 ECOllL
If a law, which applies t o this loan and which sets maximum loan charges, is finally interpreted so that the interest o r other loan charges collected o r to be collected in connection with this loan exceed the permitted limits, then: (a) any such loan charge shall be reduced by the amount necessary t o reduce the charge t o the permitted limit; and (b) any sums already collected from me which exceeded permitted limits will be refunded to me. The Note Holder may choose to make this refund by reducing the Principal I owe under this Note or by making a direct payment to me. If a refund reduces Principal, the reduction will be treated as a partial Prepayment.
6. BORROWER'S FAILURE TO PAY AS REQUIRED
(A) Late Charge for Overdue Payments
If the Note Holder has not received the full amount of any monthly pa ment by the end of 15 calendar days after the date if is due, 1 will pay a late charge to the dote Holder. The amount of the.charge will be the <eater of $ 5.00 o r 5.000% of my overdue pa ment of p r ~ n c ~ pand a l interest. I will pay 1 % . late charge promptly but only once on each ate payment. (6) Default If I do not pay the full amount of each monthly payment on the date it is due, I will be in default.
( C ) Notice of Default If 1 am in default, the Note Holder may send me a written notice telling me that if I do not pay the
overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is mailed to me o r delivered by other means.
(D) No Waiver By Note Holder
Even if, at a time when I am in default, the Note Holder does not require me t o pay immediately in full as described above, the Note Holder will still have the right to do so if I am in default at a later time.
(E) Payment of Note Holder's Costs and Expenses
If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right t o be aid back by me for all of its costs and expenses in enforcing this Note t o the extent not prohi ited by applicable law. Those expenses include, for example, reasonable attorney's fees.
7. GIVING OF NOTICES
Unless applicable law requires a different method, any notice that must be given t o me under this Note will be given by delivering it o r by mailing it by first class mail to me at the Property Address above or at a different address if I give the Note Holder a notice of my different address. Any notice that must be given t o the Note Holder under this Note will be given by delivering it or by mailing it by first ctass mail to the Note Holder at the address stated in Section 3(A) above or at a different address i f I am given a notice of that different address.
8. OBLIGATIONS OF PERSONS UNDER THIS NOTE If more than one person signs this Note, each person is fully and personally obligated t o keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety o r endorser of this Note is also obligated t o do these things. Any person who takes over these obligations, including the obligations of a guarantor, surety o r endorser o f this Note, is also obligated t o keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually o r against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note.
I and any other person who has obligations under this Note waive the rights of Presentment and Notice of Dishonor. "Presentment" means the right t o re uire the Note Holder t o demand payment of amounts due. "Notice o f Dishorior" means the rig t t o require the Note Holder to give notice to other persons that amounts due have not been paid.
NOTE Slngle Family - FNMAlFHLMC UNIFORM INSTRUMENT
FORM 3200 1101 ECOl l L REV. 04119102
10. UNIFORM SECURED NOTE
This Note is a uniform instrument with limited variations in some jurisdictions. In addition to the protections given t o the Note Holder under this Note, a Mortgage, Deed of Trust or Security Deed (the "Security Instrument"), dated the same date as this Note, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required t o make immediate payment in full of all amounts that I owe under this Note. Some of those conditions are described as follows:
If all or any part of the Pro erty o r any Interest in the Property is sold o r transferred (or if Borrower is not a naturaPperson and a beneficial interest in Borroiyerjs sold.or ayment in transferred) without Lenderls.prtor written consent, Lender ma [equire ~ m m e d ~ a t e Instrument. However, !his option shall not full of all sums secured by thls Secur~ty exercised by Lender if such exercise is prohibited by Applicable Law. If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall rovide a period of not less than 30 days from the date the notice is iven in accordance with Jection 1 . 5 within which Borrower must ay all.sums secured by this Becurity Ins~rurnant. If Borrower fails to a thes su s rlor t o tRe ex lration o f t h ~ er~od,Lender may invoke any remedies perm?t8d by t t i s !&ec~r~fy lnrtrumerl without fur&& not~ce o r demand on Borrower.
WITNESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED.
(Sign Original Only)
- Single Famlly - FNMAIFHLMC UNIFORM INSTRUMENT
FORM 3200 1101
ECOl1L REV. 04124102
Real property in the City of Palm Desert, County.of Riverside, State of California, described as follows: LOT 338 OF TRACT NO. 2283, I N THE COLINTY OF RIVERSIDE, =ATE OF CAUFORNIA, AS SHOWN BY MAP ON FILE I N BOOK 42 PAGES 82,83, 84, 85,86, 87,88 AND 8 9 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CAUFORNIA.
Yes! Our records show that Freddie Mac is the owner of your mortgage. - Freddie Mac
Go straieht to content. Home 1 Terms and Conditions Privacy Policv
Freddie Mac How to Get Help with Your Mortgage
Yes. Our records show that Freddie Mac is the owner of your mortgage and it was acquired on September 13,2006. This date is also referred to as the Freddie Mac settlement date.
What to Do Next
1. For help with your mortgage, contact your lender and let them know you would like to pursue assistance through the federal Making Home Affordable (NIHA) program.
a. Your lender, the company to which you make your mortgage payments (also referred to as a mortgage sewicer), can help you determine ifyou are e@le for the options under MHA. If you are current on your mortgage payments, but have been unable to refinance because you have little or no equity m the home, the Home Affordable Refinance Program may help you obtain a lower mterest rate or more stable mortgage. If you are behmd m making your mortgage payments or believe you may soon hll behind, a Home Affordable Modification may help you obtain more affordable mortgage payments. Alternatives to Foreclosure Working vvlth Your Lender Who to Contact for Help Avoidm~ Fraud
"-t&j:*. "(B i r f
r l ; l ~ $ i ~ a6i1h r i'"8hl
1. See ifFreddie Mac Owns Your Loan 2. Learn More About HARP 3. Check Your EEgilhty for
4. Get Prepared and Call Your Lender 5. Consider Another HARPParticipatincr Lender
Yes! 0 ur records show that Freddie Mac is the owner of your mortgage. Freddie Mac
If it is not realistic for you to keep your home, a short sale or "deed-in-lieu of foreclosure " may help you transition to more affordable housing.
Freddie Mac is working with its lenders to offer these solutions to ehgible borrowers vvlth Freddie Macowned mortgages. Because Freddie Mac does not work directly with consumers, you will need to work with your lender to determine your best foreclosure prevention option. b. If you are not eligible for MHA, don't give up! Ask your lender about other o~tions to make your payments more affordable or to avoid foreclosure. There are other options available for homeowners vvlth Freddie Mac-owned mortgages that are available through your lender.
2. If you are unable to reach your lender, call a U.S. Department of Housing & Urban Development @IUD)-ce ytif~ed housing counselor at 1-800-569-4287 or visit the web site to find a housing counselor in your are a.
Housing counselors can help you contact and work with your lender to get help with your mortgage - fi-ee of charge
Be informed. Visit our Avoiding Foreclosure Resource Center for information and guidance on alternatives to foreclosure, working with your lender, avoiding eaud and more. Be patient and diligent. Lenders are working hard to get to every call and sometimes it takes longer than you expect. Get prepared. Before you call your lender, here's what you'll need for your conversation
Learn more about the options available to you under MHA.
Thank you for contacting Freddie Mac. One of ow top priorities is rnakmg sure homeowners wrth Freddie Mac-owned mortgages are able to get proper help and understand all options available to them during this d8icult time.
Case 5:12-cv-02095-MWF-DTB Document 26 Filed 03/20/13 Page 37 of 39 Page ID #:677
LARRY W. WARD
COUNTY OF RIVERSIDE ASSESSOR-COUNTYCLERK-RECORDER
P.O.Box 12004 Riverside ,CA 92502-2204
PROPERTY VALUE NOTICE
July 23, 2012
Assessment Number: 637217004-0 Property Address: 43060 ILLINOIS AVE, PALM DESERT 92211 s residential properties Because of current market conditions we haw independently reLiewed market ~ l u e of purchased between January 1, 1999 and December 31, 207 1 throughout Rierside County ,as well as all other properties that receiwd a decline in mlue reassessment last year. We are required to enroll the lower of either the e based on the market property's market wlue or the Proposition 13 factored base year value. (The Prop. 13 ~ l u is mlue of your property when it was acquired, plus any new construction, plus an inflation factor of no more than 2% per year.) For the 201212013 assessment year the Assessed Value on this property is listed below. Prop. 13 Value Full Value Homeowner's Exemption Total Net 351,992 113,000
Homeownerls Exem~tion: If you own and occupy this property as your grimarv residence, you may be eligible far a homeowner's exemption. You are allowed only one homeowner's exemption in the state of California . If you are eligible and do not see an or by calling (951) 955exemption amount listed aboe you may obtain an application online at m.riwrsideacr.c~m 6200. Informal Review of Assessment: Should you ha* reason to beliew that the market Value of your property as of January 1, 2012 is less than the assessed mlue amount shown abow and you haw factual evidence to support a lower assessment, you may file a Decline in Value Request with the Assessor by Se~tember 4. 2012. Our staff will redew your request and proide written notification regarding their findings for all applications receiwd atter July 1, 2012. This posting will be considered your notice for applications receiwd prior to July 1, 2012. You may file online at www.riwrsideacr.com or call (951) 955-6200 to request a form. Assessment Apueals Should you disagree with the assessed value, you may also formally appeal your assessment. Assessment appeal application forms must be filed between Julv 2 and Nowmber 30, 2012. The Application for Changed Assessment and instructions may be obtained from the Clerk of the Board at www.rlwocob.com, or by calling (951) 955-1060. After redewing the application, if the Assessor and the property owner can stipulate to a mutually agreed upon value, the process allows the change in wlue without a formal hearing. l h e Board may accept the stipulation or reject it and set the matter for a hearing
Case 5:12-cv-02095-MWF-DTB Document 26 Filed 03/20/13 Page 30 of 39 Page ID #:670
Case 5:12-cv-02095-MWF-DTB Document 26 Filed 03/20/13 Page 31 of 39 Page ID #:671
Case 5:12-cv-02095-MWF-DTB Document 26 Filed 03/20/13 Page 32 of 39 Page ID #:672
WELLS FARGO HOME MORTGAGE RETURN MAIL OPERATIONS PO BOX 10368 DES MOINES IA 50306-0368
Online: Fax: Telephone: Correspondence: Hours of Operation:
CAROLE ALLES 43060 ILLINOIS AVENUE PALM DESERT, CA 92211-7551
weIlsfargo.com (866) 278-1 179 (800) 416-1472 PO Box 10335 Des Moines, IA 50306 Mon - Fri, 8 AM - 11 PM Sat, 9 AM - 3 PM CT 0154270391 43060 Illinois Avenue Palm Desert CA 92211
Loan Number: Property Address:
Subject: Your request for mortgage payment assistance Note: We service your mortgage on behalf of your investor, Federal Home Loan Mortgage Corp Freddie Mac. Dear Carole Alles: We're responding to your request for mortgage assistance and the options that may be available to help you. We realize that the process can take some time, and we appreciate your patience while we review your options.
Here's what we found We carefully reviewed the information you sent us and explored a number of mortgage assistance options. At this time, you do not meet the requirements of the program because:
Based on your documented monthly income, we are unable to create an affordable payment that meets the requirements of the program. Please note: the information above is the primary reason that you are not eligible for mortgage assistance, however there may be other reasons related to the decision. If you have any questions about our decision, please call your Home Preservation Specialist at the number listed at the bottom of
What you need to do if you want to appeal this decision You have the right to request an appeal of the above-noted decision. If you want to appeal the decision, please follow these important steps: 1. Carefully review this letter and the reason you do not meet the requirement of the program. 2. If you have a reason to believe our determination was incorrect and want to appeal the decision, call your home preservation specialist right away at the number listed at the bottom of this letter. We will discuss what documents you are required to submit to support your appeal. You must ensure that we receive all the information requested before 30 calendar days from the date of this letter. If we do not receive all required documentation from you by the deadline, we cannot move forward with your appeal. Mail all required documents (and include your loan number) to:
Property Address: 43060 Illinois Avenue Palm Desert CA 92211
1000 Blue Gentian Road Suite 304 MAC X9999-01 N Eagan, MN 55121 Or fax all required documents to your home preservation specialist at the fax number listed at the bottom of this letter (and include your loan number). 3. After we receive your documentation, you will receive an acknowledgement letter outlining next steps in the appeals process. 4. Your home will not be sold in a foreclosure sale during the appeal period.
Your important next steps There may be other mortgage assistance options available to help you avoid a foreclosure sale. Please contact us to learn about the options listed below: If you're interested in staying in your home, you may be eligible for help through a different mortgage assistance program. If you cannot or prefer not to stay in your home: o If the present value of your home is higher than your mortgage balance, you can try to sell your home before the foreclosure sale takes place. o If your mortgage balance is higher than the present value of your home, you may want to consider what is known as a "short sale". This allows you to sell your home privately for an agreed-upon amount that is less than what you owe on your mortgage. To start the short sale process, it's important for you to work with us in advance to set the selling price. o The remaining option is a deed in lieu of foreclosure. You can voluntarily deed your property to Wells Fargo, transferring ownership of your home to us. What you need to know about foreclosure We will continue to work with you to help you avoid a foreclosure sale. Please note the following: If your mortgage has been or will be referred to foreclosure, that process moves forward at the same time. e During the appeal period (within 30 days of the date of this letter), a foreclosure sale of your heme wl!! naf be heid. As part of the foreclosure process, you may see steps being taken in proceedings or receive notices from a third-party attorney delivered by mail. Call us now W e must hear from you. In order for us to help you, it's critical that you contact us immediately to discuss your options. Please call the phone number listed below.
GAWM. S A ~ ~ A W I
Carmen Saldana Home Preservation Specialist Wells Fargo Home Mortgage
--. ran n o i 7 n AT.PSTUSZ-ET-M~-COO~
1 1lilI1 l1 1 1 1 1 Ill 1 1 1l1lllll11111 111I 11I11
Page 3 of 3
0154270391 Loan Number:
Property Address: 43060 Illinois Avenue Palm Desert CA 92211
Ph: 1-877-242-5052 ext. 29489 Fax: 1-866-590-8910
[~tru~gjli with n ~ other expenses? Help is available.
Sometimes customers have trouble keeping up with their monthly expenses, other than their mortgage payments. If this is happening to you, help is available at no cost from a HUD-approved, non-profit credit counseling agency. Simply call a counselor who will work closely with you to rower your other monthly payments, take your frnancral circumstances into consideration, and create a budget plan to work for you. To find an agency in your neighborhood, call 1-800-569-4287 or call the HOPE Hotline at 1-888-995-HOPE.
Be sure you avoid anyone who asks for a fee for counseling or a loan modification, or asks you to sign over the deed to your home, or to make your mortgage payments to anyone other
This communication is an attempt to collect a debt and any information obtained will be used for that purpose. However, if you have received a discharge of this debt in bankruptcy or are currently in a bankruptcy case, this notice is not intended as an attempt to collect a debt, and we have a security interest in the property and will only exercise our rights as against the property. With respect to those loans located in the State of California, the state Rosenthal Fair Debt Collection Practices Act and the federal Fair Debt Collection Practices Act require that, except under unusual circumstances, collectors may not contact you before 8 a.m. or after 9 p.m. They may not harass you by using threats of violence or arrest or by using obscene language. Collectors may not use false or misleading statements or call you at work if they know or have reason to know that you may not receive personal calls at work. For the most part, collectors may not tell another person, other than your attorney or spouse, about your debt. Collectors may contact another person to confirm your location or enforce a judgment. For more information about debt collection activities, you may contact the Federal Trade Commission at 1-877-FTC-HELP or wvvw.ftc.gov. The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with th~s law concerning this creditor is Office of the Comptroller of the Currency, Customer Assistance Group, 1301 McKinney Street, Suite 3450, Houston, TX 77010-9050. Wells Fargo Home Mortgage is a division of Wells Fargo Bank. N. A. O 2012 Wells Fargo Bank, N. A. All rights resewed. Equal Housing Lender. NMLSR ID 399801
Case 5:12-cv-02095-MWF-DTB Document 26 Filed 03/20/13 Page 34 of 39 Page ID #:674
Case 5:12-cv-02095-MWF-DTB Document 26 Filed 03/20/13 Page 35 of 39 Page ID #:675
NPV Evaluation Results
Based on the information you provided your mortgage may pass a HAMP NPV evaluation and you may be eligible for a HAMP modification. Be sure to save a copy of the information below and share it with your mortgage servicer to discuss options available to you. Please note, CheckMyNPV.com provides only an estimate of a servicer's NPV evaluation. While the NPV formula used is required to be the same as your mortgage servicer's, differences in input data and other industry-related data may result in different outputs. Your session has ended and you will not be able to run an NPV evaluation without completing this process again.
lnformation Calculated For You
For more information about the proposed modification, visit the Fre_qgntIy Asked .Qu.estjons NPV Date Unpaid Principal Balance of the Proposed Modification Principal Forbearance Proposed Modification
Interest Rate of the Proposed Modification Principal and Interest Payment of the Proposed Modification Amortization Term of the Proposed Modification 480 months
lnformation That You Provided
Which Best Describes You? Homeowner
Servicer & Investor Information
Your Inv eddie Mac
Homeowner & Property lnformation
Data Collection Date Borrower Credit Score 11-23-2012
Co-Borrower Credit Score Monthly Gross Income Property State Property ZIP Code Property Value Property Valuation Type Mortgage lnformation Original Loan Amount First Payment Date
Total First Mortgage Debt
Months Remaining) on Your Mortgage
Modification Fees Paid by Investor Monthly Payment lnformation Principal and Interest
$1,491.78 $139.00 $55.00 $27.00
Months Past Due Imminent Default
Important information regarding NPV Evaluation results obtained from this site.
The net present value ("NPV") of your mortgage is one of many factors that need to be considered in determining whether you are eligible for participation in the Home Affordable Modification Program ("HAMP"). For this reason: The NPV evaluation results generated through use of this Site ("NPV Results") are not evidence of, nor are they determinative of, your or any other person's or entity's eligibility for
participation in any federal, state, local, Fannie Mae, Freddie Mac or other mortgage foreclosure prevention or assistance type plan. This calculator uses the same underlying formula for calculating NPV as that used by each participating mortgage servicer, these results may vary from that of this calculator due to differences in data inputs. The NPV Results for a mortgage that are the same as or similar to NPV evaluation results obtained or reported by any other person or entity ("Other hlPV Evaluation Results") in connection with that mortgage do not constitute in any way any endorsement, statement, confirmation, verification or certification of accuracy or reasonableness by Treasury, its financial agents or any person or entity of such Other NPV Evaluation Results. The NPV Results for a mortgage that differ from Other NPV Evaluation Results in connection with that mortgage do not constitute in any way any suggestion, inference, statement, confirmation, verification or certification by Treasury, its financial agents or any person or entity of any error, omission or illegal activity by any person or entity.
Mortgage Participation CertiÑcates
Mortgage Participation CertiÑcates Freddie Mac issues and guarantees Mortgage Participation CertiÑcates, or ""PCs.'' PCs are securities that represent undivided beneÑcial ownership interests in, and receive payments from, pools of one- to four-family residential mortgages.
Freddie Mac's Guarantee We guarantee the payment of interest and principal on the PCs as described in this OÅering Circular. Principal and interest payments on the PCs are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. We alone are responsible for making payments on our guarantee.
Tax Status and Securities Law Exemptions The PCs are not tax-exempt. Because of applicable securities law exemptions, we have not registered the PCs with any federal or state securities commission. No securities commission has reviewed this OÅering Circular.
The PCs may not be suitable investments for you. You should not purchase PCs unless you have carefully considered and are able to bear the associated prepayment, interest rate, yield and market risks of investing in them. The Risk Factors section beginning on page 7 highlights some of these risks.
OÅering Circular dated October 14, 2005
If you intend to purchase PCs, you should rely only on the information in this OÅering Circular, in the disclosure documents that we incorporate by reference in this OÅering Circular as stated under Additional Information and in the related pool supplement (each, a ""Pool Supplement'') that we will make available on our internet website as to each PC Pool upon its formation. We may not have independently veriÑed information furnished to us by sellers regarding the loans backing PC Pools and make no representations or warranties concerning the accuracy or completeness of that information. In addition, sellers sometimes provide information about certain mortgages that they sell to us in separate additional supplements (""Additional Supplements''). Each Pool Supplement and Additional Supplement contains information as of the date of the issuance of the related PCs. For the convenience of investors, we may post Additional Supplements on our website and furnish them upon request. We have not veriÑed the information in Additional Supplements and make no representations or warranties concerning the accuracy or completeness of that information. You can Ñnd additional and updated information about our PCs on our internet website at www.freddiemac.com/mbs/. We have not authorized anyone to provide you with diÅerent information. Any information that may be furnished to you by a third party may not be reliable. This OÅering Circular, any related Pool Supplement and any incorporated documents may not be correct after their dates. We are not oÅering the PCs in any jurisdiction that prohibits their oÅer. Appendix I shows the page numbers where deÑnitions of capitalized terms appear. TABLE OF CONTENTS
Description Page Description Page
Freddie Mac ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Additional InformationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Summary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Risk Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Application of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Description of the Mortgages ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Fixed-Rate Mortgages ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Adjustable Rate Mortgages (ARMs)ÏÏÏÏÏÏ ARM Indices ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Special Mortgage Characteristics ÏÏÏÏÏÏÏÏÏ Mortgage Purchase and Servicing Standards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Description of the PCs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PC Pool FormationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ General Pooling Criteria ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Pooling Criteria for Mortgages with Special CharacteristicsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Pool Factors and Monthly Reporting Periods ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Payment Dates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Payments of PrincipalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Payments of InterestÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Record DatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Final Payment Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GuaranteesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PC Pool ExpensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Compensation of Servicers and Freddie Mac ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Pool Supplements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Monthly Reporting of Pool Data ÏÏÏÏÏÏÏÏÏ Form of PCs, Holders and Payment Procedures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
3 3 4 7 12 12 12 12 13 15 16 19 23 23 24 24 25 26 27 27 28 29 30 30 30 30 31 31 31
Prepayment, Yield and Suitability Considerations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32 Prepayments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32 Yields ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35 Suitability ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 The Agreement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 Transfer of Mortgages to PC Pool ÏÏÏÏÏÏÏÏ 38 Repurchase and Substitution of MortgagesÏÏ 39 Events of Default ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40 Rights Upon Event of Default ÏÏÏÏÏÏÏÏÏÏÏ 40 Control by Holders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41 AmendmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41 Tax Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41 Termination ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41 Various Matters Regarding Freddie MacÏÏÏ 42 Governing Law ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42 Certain Federal Income Tax Consequences ÏÏ 42 General ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42 Tax Status ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 Buydown or Extended Buydown Mortgages ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 Discount and Premium ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 Application of the Stripped Bond Rules ÏÏÏ 46 Backup Withholding, Foreign Withholding and Information Reporting ÏÏÏÏÏÏÏÏÏÏÏÏ 47 ERISA ConsiderationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48 Legal Investment Considerations ÏÏÏÏÏÏÏÏÏÏÏ 48 Distribution ArrangementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49 Secondary Markets, Mortgage Security Performance and Market Support Activities ÏÏ 49 Certain Relationships and Transactions ÏÏÏÏÏÏ 50 Appendix I Ì Index of Terms ÏÏÏÏÏÏÏÏÏÏÏÏÏ I-1 Appendix II Ì Example Pool Supplement ÏÏÏ II-1 Appendix III Ì Terms Used in Pool Supplements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏIII-1
FREDDIE MAC Freddie Mac is one of the largest participants in the U.S. mortgage market. We are a stockholder-owned government-sponsored enterprise chartered by Congress on July 24, 1970 under the Federal Home Loan Mortgage Corporation Act, as amended (the ""Freddie Mac Act''). Our statutory purposes are: ‚ To provide stability in the secondary market for residential mortgages; ‚ To respond appropriately to the private capital markets; ‚ To provide ongoing assistance to the secondary market for residential mortgages (including mortgages on housing for low- and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage Ñnancing; and ‚ To promote access to mortgage credit throughout the United States (including central cities, rural areas and other underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage Ñnancing. We fulÑll the requirements of our charter by purchasing residential mortgages and mortgagerelated securities from mortgage lenders and securities dealers and by providing our credit guarantees of payment of principal and interest on the mortgage-related securities we issue. Our principal oÇces are located in McLean, Virginia. We have additional oÇces in Washington, D.C.; Reston, Virginia; Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; New York, New York; and Woodland Hills, California. ADDITIONAL INFORMATION We prepare annual Information Statements that describe our business and operations, and contain our audited Ñnancial statements. We also prepare Information Statement Supplements from time to time. As of any given date, this OÅering Circular incorporates by reference the most recent Information Statement and any subsequent Information Statement Supplements. You should rely only on the most recent information provided or incorporated by reference in this OÅering Circular and any applicable Pool Supplement. You can obtain copies of this OÅering Circular, any Pool Supplement, any Additional Supplement, our most recent Information Statement, any subsequent Information Statement Supplements and the Mortgage Participation CertiÑcates Agreement (as amended from time to time, the ""Agreement'') under which PCs are issued from:
Freddie Mac Ì Investor Inquiry 1551 Park Run Drive, Mailstop D5B McLean, Virginia 22102-3110 Telephone: 1-800-336-3672 (571-382-4000 within the Washington, D.C. area) E-mail: Investor Inquiry@freddiemac.com
We also make these documents available on our internet website at this address: Internet Website: www.freddiemac.com*
* We are providing this internet address solely for the information of prospective investors. We do not intend this internet address to be an active link and we are not using reference to this address to incorporate additional information into this OÅering Circular or any Pool Supplement, except as speciÑcally stated in this OÅering Circular.
SUMMARY This summary highlights selected information about the PCs. Before buying PCs, you should read this OÅering Circular and the other disclosure documents referred to in Additional Information. You should rely on the information in an applicable Pool Supplement as to the PC Pool it describes if it is diÅerent from the information in this OÅering Circular. Information in any applicable Additional Supplement is provided by the sellers of the related Mortgages and not by us. Appendix I shows the page numbers where deÑnitions of capitalized terms appear.
Issuer and GuarantorÏÏÏÏÏÏÏÏÏ Federal Home Loan Mortgage Corporation, or ""Freddie Mac,'' a shareholder-owned government-sponsored enterprise. PC PoolsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PCs represent undivided beneÑcial ownership interests in pools of mortgages that we form (""PC Pools''). Investors in PCs own beneÑcially their pro rata shares of the mortgages in the PC Pool for their PCs. PC Pools generally have a minimum size at formation of $1,000,000 for Gold PCs and $500,000 for ARM PCs, but there is no minimum pool size for ARM PCs backed by Initial Interest Mortgages delivered under our Guarantor Program or Gold PCs backed by Initial Interest Mortgages delivered under our MultiLender Swap Program. Types of Mortgages ÏÏÏÏÏÏÏÏÏÏ The assets in each PC Pool include mortgages or participation interests in mortgages that we have acquired (""Mortgages''). The Mortgages are secured primarily by Ñrst liens on one- to four-family residential properties and may be either Ñxed-rate Mortgages or adjustable rate Mortgages (""ARMs''). Some Ñxed-rate Mortgages and ARMs are Initial Interest Mortgages. We describe the characteristics of diÅerent types of Mortgages in Description of the Mortgages. Types of PCs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Each ""Gold PC'' represents an interest in a PC Pool consisting of Ñxed-rate, level payment, fully amortizing Mortgages, Ñxed-rate Initial Interest Mortgages or Ñxed-rate Balloon/Reset Mortgages. Each ""ARM PC'' represents an interest in a PC Pool consisting of ARMs. Pool CharacteristicsÏÏÏÏÏÏÏÏÏÏ Each Mortgage in a PC Pool must meet the eligibility standards we have established. We may amend or waive our eligibility standards from time to time. The Pool Supplement for each PC Pool will describe the types and various characteristics of the Mortgages in the PC Pool. Mortgages may be repurchased from PC Pools or substituted for in certain limited situations described in this OÅering Circular. PaymentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We pay principal and interest monthly on each Payment Date beginning in (1) the month after issuance for Gold PCs or (2) the second month after issuance for ARM PCs. Payment Dates fall on or about the 15th day of each month. However, we do not pay principal on PCs backed by Initial Interest Mortgages that are in their interest only period unless unscheduled principal payments have been made on those Mortgages during that period. Our payments on PCs do not include the amounts of any fees, charges or interest in excess of the applicable PC Coupon that may be paid on the underlying Mortgages. These amounts are retained by servicers as servicing compensation or retained by us as management and guarantee fees.
‚ Interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We pay interest on each PC at its applicable per annum interest rate (""PC Coupon''). Interest payable on a Payment Date accrues during (1) the preceding calendar month for Gold PCs or (2) the second preceding calendar month for ARM PCs. ‚ Principal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We pass through all principal payments made on the Mortgages in a PC Pool. We base the amount of these payments on servicers' reports of principal received on the Mortgages and, for Gold PCs, our calculation of scheduled monthly principal payments. Principal payments include full and partial prepayments of principal of Mortgages by borrowers and the principal amount of any Mortgages that are repurchased from PC Pools. The Holders of PCs issued from the same PC Pool receive any principal payments on a pro rata basis. Pool Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ In any month, you can determine the amount of the principal payment on a PC by reference to the Pool Factor for the related PC Pool. A Pool Factor is an exact decimal truncated to eight places which, when multiplied by the original principal balance of the related PC, equals the remaining principal balance of the PC after giving eÅect to the principal payment to be made in the same month for Gold PCs or in the following month for ARM PCs. We publish Pool Factors on or about the Ñfth Business Day of each month. Payment Capped ARM PCs may also have Negative Amortization Factors, which indicate any amounts of deferred interest added to the principal balances of such PCs during periods of negative amortization. Guarantee ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ For Gold PCs, we guarantee timely payment of interest at the applicable PC Coupon and the timely payment of scheduled principal, whether or not we receive these payments from the servicers of the underlying Mortgages. For ARM PCs, we guarantee timely payment of interest at the applicable PC Coupon, whether or not we receive these payments from the servicers of the underlying Mortgages, and the full and Ñnal payment of any principal no later than the month following the Final Payment Date. We do not guarantee the timely payment of scheduled principal on ARM PCs. Principal and interest payments on the PCs are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. Servicing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We are responsible for supervising the servicing of the Mortgages. We contract with mortgage servicers that perform most servicing functions on Freddie Mac's behalf and in accordance with standards we have established and may waive or change from time to time. PC Agreement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We issue and administer PCs according to the Agreement, which we summarize in this OÅering Circular. You should refer to the Agreement for a complete description of your rights and obligations and those of Freddie Mac. Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Most PCs are issued in exchange for Mortgages, in which case we do not receive cash proceeds. We use the proceeds from the sale of PCs for cash to provide funds for general corporate purposes, including the purchase of additional Mortgages. Form of PCsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PCs are issued, held and transferable only on the book-entry system of the Federal Reserve Banks. The Holder of a PC is the entity that
appears as such on the records of a Federal Reserve Bank. Only institutions that are members of the Federal Reserve System may be Holders of PCs. PC DenominationsÏÏÏÏÏÏÏÏÏÏÏ The PCs are issued in minimum denominations of $1,000 and in $1 increments above that minimum. Method of PaymentÏÏÏÏÏÏÏÏÏÏ A Federal Reserve Bank credits payments on each Payment Date to the accounts of Holders on the Federal Reserve Banks' book-entry system. Each Holder, and each Ñnancial intermediary in the chain to the beneÑcial owners of the PCs, will be responsible for remitting payments to their customers. Tax Status ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We will classify each PC Pool as a grantor trust. As an investor in PCs, you will be treated as the owner of a pro rata undivided interest in the ordinary income and the principal of the related grantor trust, and will be considered the owner of a pro rata undivided interest in each of the underlying Mortgages.
RISK FACTORS Although we guarantee the payments on PCs and so bear the associated credit risk of the underlying Mortgages, as an investor you will bear the other risks of owning mortgage securities. This section highlights some of these risks. Investors should carefully consider the risks described below and elsewhere in this OÅering Circular, the applicable Pool Supplement and the other documents referred to in Additional Information before deciding to purchase PCs. However, neither this OÅering Circular nor those other documents describe all the possible risks of an investment in PCs that may result from your particular circumstances, nor do they project how PCs will perform under all possible interest rate and economic scenarios. PCs may not be suitable investments for you. PCs are complex securities. You, alone or together with your Ñnancial advisor, need to understand the risks of your investment, and you need to be able to analyze the information in this OÅering Circular, the applicable Pool Supplement and the documents referred to in Additional Information, as well as the economic and other factors that may aÅect your investment. If you require a deÑnite payment stream, or a single payment on a speciÑc date, PCs are not suitable investments for you. If you purchase PCs, you need to have enough Ñnancial resources to bear all of the risks related to your investment. PC principal payment rates are uncertain. Principal payment rates on PCs will depend on the rates of principal payments on the underlying Mortgages. Mortgage principal payments include scheduled payments and full and partial prepayments, including prepayments that result from reÑnancings and other voluntary payments by borrowers and from the repurchase of Mortgages from PC Pools due to defaults or delinquencies, inaccurate representations or warranties or other factors. Mortgage prepayment rates Öuctuate continuously and in some market conditions substantially. Therefore, we cannot predict the rate of prepayments on the Mortgages or the rate of principal payments on the related PCs. Mortgage prepayments are aÅected by many factors and are unpredictable. The rates of prepayments of Mortgages, and therefore the rates of principal payments on the related PCs, are inÖuenced by a variety of economic, social and other factors, including local and regional economic conditions, homeowner mobility and the availability of, and costs associated with, alternate Ñnancing. Such factors include but are not limited to: ‚ Prevailing mortgage interest rates. In general, as mortgage interest rates decline, borrowers tend to reÑnance their current, higher rate Mortgages, which results in faster prepayment rates on the related PC Pool. On the other hand, as mortgage interest rates increase, borrowers tend not to reÑnance their Mortgages, which results in slower prepayment rates on the related PC Pool. ‚ Mortgage characteristics, such as the geographic location of the mortgaged properties, loan size, borrower credit scores or loan-to-value ratios. These characteristics may be concentrated in a PC Pool, either initially or as a result of changes over time. To the extent Mortgages with similar characteristics tend to have similar prepayment patterns, the related PCs may prepay more quickly or more slowly than other PCs. ‚ Procedures implemented by mortgage originators and servicers to ease the burden on themselves and borrowers of processing reÑnance loans. These changes may include reducing the amount of documentation and costs required to reÑnance and easing 7
underwriting standards, which could encourage borrowers to reÑnance their Mortgages. Some of our Mortgage purchase programs may facilitate these practices. ‚ Characteristics of the borrowers (such as credit rating) and their equity positions in their houses (whether the LTV ratio is high or low). In particular, borrowers with substantial equity in their houses may be prone to engaging in cash-out reÑnancings in which the reÑnancing mortgage has a higher principal balance than the reÑnanced mortgage. This technique enables the borrower to convert all or a portion of the equity into cash. ‚ The rate of defaults and resulting repurchases of the Mortgages in a PC Pool. Defaults may increase during periods of economic recession, natural disasters, declining property values or increased use of secondary Ñnancing or as a result of other factors that decrease borrowers' equity. ‚ Active solicitation by originators and servicers. Many mortgage servicers, including sellers of Mortgages to Freddie Mac, solicit borrowers to reÑnance their Mortgages. In particular, servicers may solicit borrowers to reÑnance in an eÅort to preserve servicing income. To mitigate this risk, we place restrictions on solicitation of borrowers which are intended to prevent servicers from targeting borrowers under Mortgages they service for us more actively than they target other borrowers. ‚ Servicing fee rates. PC Pools containing Mortgages that are subject to servicing fee rates that are relatively low may experience diÅerent prepayment rates than PC Pools in which relatively high servicing fee rates predominate. We make no representation concerning the particular eÅect that any factor may have on Mortgage prepayment behavior. Various types of Mortgages may have special prepayment characteristics. For example: ‚ ARMs tend to have higher default rates than Ñxed-rate Mortgages. ‚ Convertible ARMs may be converted to Ñxed-rate Mortgages, which will be repurchased from the PC Pool shortly before their conversion. ‚ Payment Capped ARMs have weighted average lives that can lengthen if negative amortization occurs and shorten if accelerated amortization occurs. ‚ Biweekly Mortgages have weighted average lives that are shorter than those of otherwise similar monthly payment Mortgages. ‚ Hybrid ARMs may be prone to reÑnancing toward the end of their Ñxed-rate periods. ‚ Prepayment Protection Mortgages may tend to prepay diÅerently than Mortgages without prepayment premiums. ‚ Initial Interest Mortgages, which permit borrowers to pay only accrued interest for extended periods without requiring principal amortization, may aÅect borrower decisions regarding the sale of property or reÑnancing because the borrower may not have reduced the principal balance of the Mortgage by making unscheduled principal payments. 8
‚ Extended Buydown Mortgages may experience higher default rates than other Buydown Mortgages because they provide for larger increases in the eÅective interest rates to borrowers. ‚ Relocation Mortgages could be less sensitive than other types of Mortgages to prepayments resulting from decreasing interest rates and more sensitive than other types of Mortgages to prepayments resulting from home sales. The prepayment behavior of Relocation Mortgages also generally depends on the circumstances of individual employees and employers and the characteristics of the speciÑc relocation programs involved. ‚ Assumable Mortgages could be less sensitive than other types of Mortgages to prepayments due to home sales because they may not have to be prepaid when the mortgaged property is sold to a qualiÑed borrower. ‚ FHA/VA Mortgages may exhibit diÅerent prepayment behavior than Conventional Mortgages because they are underwritten using diÅerent criteria and they are usually Assumable Mortgages. We make no representation concerning the particular prepayment rates for any type of Mortgage as compared to other kinds of Mortgages. Principal payment behavior varies over time and between PC Pools. The rate of principal payments on a PC Pool may vary signiÑcantly from month to month as a result of Öuctuations in the principal payment rates of its underlying Mortgages. A PC Pool may experience payment behavior that is similar to or diÅerent from that experienced by other PC Pools consisting of similar Mortgages. Any PC Pool could experience payment behavior that is signiÑcantly diÅerent from other PC Pools, particularly if it contains a relatively small number of Mortgages, contains Mortgages from only one seller or has been formed speciÑcally to emphasize one or more loan characteristics, such as property location, credit score or loan size. Changes in prepayment behavior could also result from changes in or waivers of our Mortgage purchasing or servicing requirements or standards. Prepayments can reduce your yield. Your yield on a PC will depend on its price, the interest rate payable on the PC, the payment delay on the PC, the rate of prepayments on its underlying Mortgages, and the other characteristics of those Mortgages. You should carefully consider the yield risks associated with PCs, including these: ‚ If you purchase a PC at a discount to its principal amount and the rate of principal payments on the underlying Mortgages is slower than you expect, you will receive payments over a longer period than you expect, so the yield on your investment will be lower than you expect. ‚ If you purchase a PC at a premium over its principal amount and the rate of principal payments on the underlying Mortgages is faster than you expect, you will receive payments over a shorter period than you expect, so the yield on your investment will be lower than you expect. ‚ In general, the rate of Mortgage prepayments early in your investment has the greatest eÅect on your yield to maturity. A negative eÅect on your yield produced by principal prepayments at a higher (or lower) rate than you expect in the period immediately 9
following your purchase of a PC is not likely to be fully oÅset by an equivalent reduction (or increase) in that rate in later periods. The yield on your PCs may be less than the PC Coupon. The eÅective yield on any PC will be less than the yield that its PC Coupon and purchase price would otherwise produce, because: ‚ On its Ñrst Payment Date, 30 days' interest will be payable on the PC even though interest began to accrue approximately 45 days earlier, in the case of Gold PCs, or 75 days earlier, in the case of ARM PCs. ‚ On each Payment Date after the Ñrst Payment Date, the interest payable on the PC will accrue during its Accrual Period, which will end approximately 15 or 45 days before that Payment Date (for Gold PCs and ARM PCs, respectively). Index values and Mortgage characteristics will aÅect yields of ARM PCs. If you invest in ARM PCs, you should consider the following additional risks: ‚ PC Coupons for ARM PCs generally adjust monthly based on a weighted average of the interest rates on the underlying Mortgages. Several factors will aÅect these PC Coupons: ‚ Disproportionate principal payments, including prepayments, on the underlying Mortgages that have relatively low, or high, interest rates compared to the other Mortgages in the same PC Pool will aÅect the level of the PC Coupon for the related ARM PCs, even if the interest rates on the remaining Mortgages do not change. ‚ The PC Coupon of your ARM PCs may not fully reÖect current interest rates or Index values because the underlying Mortgage interest rates may adjust on various dates and at various intervals and typically adjust less frequently than monthly. In addition, the interest rates of the underlying Mortgages typically adjust based on an Index value published some time before such adjustment (the lookback period), and there may be a gap of up to several months from the publication of the applicable Index value until the PC Coupon reÖects the adjusted value. As a result, the PC Coupon of your ARM PCs may not fully reÖect current interest rates or Index values. ‚ Although there are generally no limits on monthly PC Coupon adjustments for ARM PCs, interest rates on the underlying ARMs are subject to lifetime ceilings and may be subject to adjustment caps and lifetime Öoors. As a result of these limitations, the PC Coupon on an ARM PC at any time may not reÖect the applicable Index value or changes in that value from period to period. ‚ When mortgage interest rates are generally low, which usually results in faster prepayments, the applicable Index value may be relatively high. On the other hand, when mortgage interest rates are generally high, which usually results in slower prepayments, the applicable Index value could be relatively low. Either of these scenarios could result in a lower than expected yield on the ARM PCs. In addition, depending on how frequently the underlying ARMs adjust and the existence of any adjustment caps, in an increasing interest rate environment, the rate of default could increase, which could reduce your yield on the ARM PCs. 10
‚ The value of an Index will generally change from time to time. Even if the average value of an Index is consistent with your expectations, the timing of any changes in that value may aÅect your actual yield. In general, the earlier a change in the value of the applicable Index, the greater the eÅect on your yield. As a result, a negative eÅect on your yield produced by an Index value that is higher (or lower) than you expect early in your investment is not likely to be fully oÅset by an equivalent reduction (or increase) in that value in later periods. ‚ If the Index values used to adjust the interest rates of underlying ARMs are lower than you expect, the yield on your investment could be lower than you expect, especially if prepayments are slow. Even if the Index value is higher than you expect, but prepayments are fast, your yield could be lower than you expect. ‚ The CMT Index and LIBOR tend to reÖect current market rates, and their values may be more volatile than the value of Eleventh District COFI or other Indices which reÖect averages of rates in eÅect over longer periods of time. ‚ If you invest in Payment Capped ARM PCs, the application of payment caps may result in negative amortization or accelerated amortization, which may aÅect your yield. Reinvestment of principal payments may produce lower yields; expected principal payments may not be available for reinvestment. Mortgages tend to prepay fastest when current interest rates are low. When you receive principal payments in a low interest rate environment, you may not be able to reinvest them in comparable securities with as high a yield as your PC. When current interest rates are high, Mortgages tend to prepay more slowly and your ability to reinvest principal payments could be delayed. If the yield on comparable investments is higher than the yield of your PCs at that time, you could be disadvantaged by not receiving principal for reinvestment as quickly as you expected. PCs are subject to liquidity risk. PCs are not traded on any exchange and the market price of a particular issuance of PCs or a benchmark price may not be readily available. A secondary market for some types of PCs may not develop. Even if a market develops, it may not continue. As a result, you may not be able to sell your PCs easily or at prices that will allow you to realize your desired yield. The secondary markets for some PCs have experienced periods of illiquidity in the past, and can be expected to do so again in the future. Illiquidity can have a severely negative impact on the prices of PCs, especially those that are particularly sensitive to prepayment or interest rate risk. PCs are subject to market risk. The market values of your PCs will vary over time in response to, among other factors: the level of, and changes in, prevailing interest rates; the age and other characteristics of Mortgages backing a PC; the number of and outstanding principal balance of other PCs with similar characteristics; and the availability of comparable securities. In addition, Ñnancial, regulatory and legislative developments concerning Freddie Mac generally could aÅect prices for your PCs. Also, any adverse change in the market perception of our credit standing could reduce the market price of PCs. If you sell your PCs when their market values are low, you may experience signiÑcant losses. You may not be allowed to buy PCs. If you are subject to investment laws and regulations or to review by regulatory authorities, you may not be allowed to invest in some types of PCs or in PCs generally. 11
APPLICATION OF PROCEEDS Most PCs are issued in exchange for Mortgages, in which case we do not receive cash proceeds. We use the net proceeds received from the sale of PCs for cash to provide funds for general corporate purposes, including the purchase and Ñnancing of additional Mortgages. DESCRIPTION OF THE MORTGAGES General Mortgages typically are evidenced by mortgage notes secured by mortgages or deeds of trust or other similar security instruments creating liens on one-to four-family residential properties. Mortgages include both whole loans and participation interests in loans. They may have been originated for the purpose of purchasing, reÑnancing or rehabilitating the mortgaged properties. The mortgaged properties may be owner-occupied properties or non-owner occupied properties, such as second homes or investment properties. Mortgages may vary in form based largely on state law. They may take the form of other Ñnancial and security arrangements to Ñnance residential properties over a Ñxed term. These other arrangements are designed to provide a holder with the same rights and remedies as the holder of a mortgage. Accordingly, we treat these sorts of arrangements as Mortgages. Examples include Cooperative Share Mortgages and arrangements designed to comply with Islamic law. All of the Mortgages are either: ‚ ""Conventional Mortgages,'' which neither the United States nor any agency or instrumentality of the United States guarantees or insures. ‚ ""FHA/VA Mortgages,'' which the Federal Housing Administration, the Department of Veterans AÅairs or the Rural Housing Service guarantees or insures. Mortgages bear interest at either a Ñxed or an adjustable interest rate. Most of the Mortgages we purchase are Ñxed-rate, fully amortizing, Conventional Mortgages with level monthly payments. Initial Interest Mortgages require only monthly interest payments for a Ñxed initial period, after which they fully amortize the unpaid principal balance over the remaining term of the Mortgage. Mortgages have payments that are due monthly or, in some cases, biweekly. We acquire Mortgages with various original or modiÑed terms to maturity. The actual period from origination to maturity of a Mortgage may be slightly longer than the stated term because the Ñrst payment on a Mortgage frequently is not due until the second month after origination. The following is a description of the types of Mortgages we most frequently acquire and pool. Fixed-Rate Mortgages Fixed-rate Mortgages have interest rates that are Ñxed when the Mortgage is originated and do not change. The main types of Ñxed-rate Mortgages that we acquire and pool are Level Payment Mortgages, Balloon/Reset Mortgages and Initial Interest Mortgages. They are described below. ‚ Level Payment Mortgages generally have original or modiÑed terms to maturity of 10, 15, 20 or 30 years and provide for equal scheduled monthly payments of principal and interest that will fully amortize the principal balance of the Mortgage over its term and 12
pay interest as due. These Mortgages may include Mortgages that have been converted from an adjustable to a Ñxed interest rate. ‚ Balloon/Reset Mortgages have original terms to maturity of generally Ñve or seven years, and require level monthly payments of principal and interest based on an amortization schedule of up to 30 years. The amount of the monthly payment remains constant until the end of the Ñve- or seven-year term. At that time, the borrower may either pay the outstanding principal balance of the Mortgage (as a balloon payment) or, subject to certain conditions, extend and reset the loan at a then-current market rate for a 30-year, Ñxed-rate mortgage. We repurchase Balloon/Reset Mortgages from PC Pools shortly before their maturity or reset dates. ‚ Initial Interest Mortgages require monthly payments of accrued interest only on the principal balance of the Mortgage for a speciÑed initial period, followed by fully amortizing monthly payments of principal and interest for the remaining term of the Mortgage. On Ñxed-rate Initial Interest Mortgages that we acquire, the initial interest only period generally will be for 15 years followed by a 15-year fully amortizing period, or for 10 years followed by a 20-year fully amortizing period, but other combinations are also possible. Full or partial prepayments can be made at any time. In the case of a partial prepayment during the interest only period, the borrower's monthly payment is reduced to reÖect the reduced principal balance of the Mortgage. Adjustable Rate Mortgages (ARMs) ARMs have original or modiÑed terms to maturity of generally up to 30 years with interest rates that adjust periodically at speciÑed intervals over the term of the Mortgage. An ARM has an initial Ñxed-rate period followed by an adjustable rate period. The adjusted interest rate on an ARM is equal to a Ñxed margin (the ""Margin'') plus the value of a speciÑed index (""Index''). The adjustment value of the Index is the most recent value available a speciÑed number of days before the adjustment date. This interval is the ""lookback'' period. Many ARMs are convertible to a Ñxed interest rate during a speciÑed time period. The originator of a convertible ARM determines the speciÑc procedures regarding the exercise of the conversion option, including its timing and the beginning of the Ñxed rate. If the borrowers exercise their conversion option, we will repurchase convertible ARMs from PC Pools shortly before their conversion dates. The main types of ARMs that we acquire and pool are Rate Capped ARMs and Payment Capped ARMs. Rate Capped ARMs ""Rate Capped ARMs'' have maximum interest rates (lifetime ceilings) and may also have some combination of (a) limits on the amount the interest rate can adjust up or down on each adjustment date (adjustment caps) and (b) minimum interest rates (lifetime Öoors). Rate Capped ARMs are not subject to negative amortization Ì any excess over, or any deÑcit under, the interest rate that would be in eÅect if no adjustment caps or lifetime ceilings or Öoors were applied will not be added to, or subtracted from, amounts due to be paid by the borrower in subsequent periods. After the initial Ñxed-rate period, the monthly payment is adjusted to a fully amortizing level each time the interest rate is adjusted, except in the case of Initial Interest ARMs in their interest only periods. There is no limit to the amount of the adjusted monthly payment on a Rate Capped ARM. 13
The most common types of Rate Capped ARMs we purchase and pool are Annual ARMs, Hybrid ARMs and Initial Interest ARMs. ‚ Annual ARMs have initial Ñxed-rate periods of one year with interest rates that adjust every year, and they are generally subject to periodic adjustment caps. ‚ Hybrid ARMs have relatively long initial Ñxed-rate periods, typically of two, three, Ñve, seven or 10 years, as speciÑed. (The diÅerent types of Hybrid ARMs having these Ñxedrate periods, with annual adjustments thereafter, are sometimes referred to as ""2/1,'' ""3/1,'' ""5/1,'' ""7/1'' and ""10/1'' ARMs.) After the Ñxed-rate period expires, the Ñxed rate converts to an adjustable rate for the remaining term of the Mortgage. The initial adjustment, as well as subsequent periodic adjustments, are subject to adjustment caps. The initial adjustment cap on this type of ARM may be greater than subsequent adjustment caps. ‚ Initial Interest ARMs require monthly payments of accrued interest only on the principal balance of the Mortgage for a speciÑed initial period, followed by fully amortizing monthly payments of principal and interest for the remaining term of the Mortgage. The Initial Interest ARMs that we acquire are non-convertible and generally have initial 3-, 5-, 7- or 10-year interest only periods followed by a fully amortizing period which, when combined with the initial interest only period, totals 30 years. Like other ARMs, the interest rate on an Initial Interest ARM adjusts periodically. The initial Ñxed-rate period of an Initial Interest ARM may or may not be equal in duration to its interest only period. Full or partial prepayments can be made at any time. In the case of a partial prepayment during the interest only period, the borrower's monthly payment is reduced to reÖect the reduced principal balance of the Mortgage. Payment Capped ARMs ""Payment Capped ARMs'' bear interest at a rate that adjusts periodically based on a speciÑed Index. The amount of any interest rate adjustment is limited by a lifetime ceiling and may be limited by an adjustment cap and/or a lifetime Öoor. The interest rate on the Payment Capped ARM usually adjusts monthly, while the borrower's scheduled monthly payment usually adjusts annually. Typically, a ""payment cap'' equal to 7.5% of the previous scheduled monthly payment limits the amount of any single increase or decrease in the scheduled monthly payment. This payment cap typically applies to each payment adjustment, other than the adjustment in the Ñfth year after origination and every Ñfth year thereafter and, in some cases, the Ñnal payment adjustment, which are fully-amortizing adjustments. The timing of the payment adjustments, combined with the payment cap, can give rise to either negative amortization or accelerated amortization: ‚ Negative amortization occurs in any month when the borrower's monthly payment amount is insuÇcient to pay all of the monthly interest due on the Mortgage. This unpaid interest is then deferred and added to the principal amount of the Mortgage. A Payment Capped ARM may be subject to a ""deferred interest limit,'' which may be set by the terms of the Mortgage or by state law. A deferred interest limit prevents a mortgage balance from increasing above a speciÑed level, typically 110% or 125% of the original principal balance of the Mortgage, as a result of the amount added to the principal balance of a Mortgage due to negative amortization. The 14
borrower's required monthly payment is increased to avoid exceeding this limit, without regard to the 7.5% payment cap, on the next scheduled payment adjustment dates. Deferred interest may result from (a) increases in the Mortgage interest rate due to an increase in the applicable Index value during a period when the scheduled monthly payment remains Ñxed or (b) payment caps that limit the amount of increase in the scheduled monthly payment, which results in the monthly payment amount being less than the amount of interest accruing each month. ‚ Accelerated amortization occurs in any month when the scheduled monthly payment exceeds the amount needed to pay the principal and interest on the Mortgage on a level-payment, fully amortizing basis. Accelerated amortization may result from (a) limitations on decreases in the amount of the scheduled monthly payment or (b) decreases in the interest rate of the Payment Capped ARM during a period when the scheduled monthly payment remains Ñxed. Accelerated amortization may shorten the term of a Payment Capped ARM and result in the Ñnal payment of its outstanding principal amount prior to its stated maturity date. ARM Indices The following are the Indices most often used in the ARMs we acquire and pool. The CMT Index, LIBOR and Eleventh District COFI are the Indices used most frequently. We make no representation as to the continuing availability of any Index or source of Index values. If an Index becomes unavailable, we will designate a new one based upon comparable information and methodology. ‚ CD Index: The weekly average of secondary market interest rates on nationally traded six-month negotiable certiÑcates of deposit, as published by the Federal Reserve Board in the Federal Reserve Statistical Release entitled ""H.15 Selected Interest Rates (Daily)''(the ""H.15 Release''), which is published on the Federal Reserve's website at www.federalreserve.gov/releases/H15/update. ‚ CMT Index: The weekly average yield on U.S. Treasury securities adjusted to a constant maturity of one, three, Ñve, seven or 10 years or to some other constant maturity, as published in the H.15 Release. Yields on Treasury securities at constant maturity are determined by the U.S. Treasury from the daily yield curve, based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market. ‚ Contract Rate Index: The ""National Average Contract Interest Rate for the Purchase of Previously Occupied Homes by Combined Lenders,'' as released by the Federal Housing Finance Board. ‚ Eleventh District COFI: The monthly weighted average cost of savings, borrowings and advances for member savings institutions of the Eleventh District of the Federal Home Loan Bank, as released by the Federal Home Loan Bank of San Francisco. ‚ Federal COF Index: The average of the interest rates for marketable U.S. Treasury bills and notes, as calculated and released by Freddie Mac. 15
‚ LIBOR: The arithmetic mean of the London interbank oÅered quotations for U.S. dollar denominated deposits with a maturity of one month, three months, six months, one year or some other maturity, as reported in The Wall Street Journal. ‚ National COF Index: The ""Monthly Median Annualized Cost of Funds for Savings Association Insurance Fund (""SAIF'')-Insured Institutions,'' as released by the OÇce of Thrift Supervision. ‚ Prime Rate: The prime lending rate of major banks as published in the H.15 Release.
‚ Semi-annual Secondary Market Treasury Index: The weekly average discount prevailing in weekly secondary market trading of six-month U.S. Treasury bills as published in the H.15 Release, as calculated from composites of quotations reported by Ñve leading U.S. government securities dealers to the Federal Reserve Bank of New York. ‚ Twelve-Month Average CMT Index: The 12-month average of the monthly yields on United States Treasury securities, adjusted to a constant maturity of one year, as published in the H.15 Release. Yields on Treasury securities at 1-year constant maturity are determined by the U.S. Treasury from the daily yield curve, based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market. Special Mortgage Characteristics We may acquire and pool a variety of Ñxed-rate Mortgages and ARMs with special characteristics. Pool Supplements for PC Pools consisting of Mortgages with these characteristics will identify them. These Mortgages may prepay diÅerently than standard Ñxed-rate Mortgages and ARMs. The following are the more common types of Mortgages with special characteristics that we acquire and pool, but we may from time to time also acquire and pool other kinds of Mortgages with special characteristics: ‚ An Assumable Mortgage is one that can be assumed by a creditworthy purchaser of the related mortgaged property at the applicable interest rate for the remaining term of the Mortgage, or one that does not contain an enforceable due-on-transfer clause permitting automatic acceleration upon the transfer of the property regardless of the creditworthiness of the transferee. Typically, ARMs and FHA/VA Mortgages are Assumable Mortgages. Most Ñxed-rate Conventional Mortgages are not Assumable Mortgages. Some ARMs have initial Ñxed-rate periods during which they cannot be assumed. ‚ A Biweekly Mortgage requires the borrower to make payments every 14 days rather than monthly. The borrower's biweekly payment is equal to one-half of the monthly payment that would be required on the basis of a monthly amortization schedule. The borrower makes 26 (or sometimes 27) payments each year, which is the equivalent of 13 (or sometimes 13¥) monthly payments. A Biweekly Mortgage will remain outstanding for a shorter term than an otherwise identical monthly payment Mortgage. For example, a 30-year, Ñxed-rate, level payment Mortgage with an interest rate of 7.5% would be paid in full in approximately 23 years under a biweekly payment arrangement. Some Biweekly Mortgages are convertible, permitting the borrower and/or the servicer to terminate the biweekly payment arrangement under certain circumstances. If a 16
Biweekly Mortgage is converted, subsequent payments are required to be made monthly, which results in a slower rate of amortization after the conversion. ‚ A Buydown Mortgage is originated with special payment arrangements by which the borrower, lender and/or third party deposits funds in a separate account and uses those funds to pay a portion of the scheduled monthly payment on the Mortgage for a ""buydown period,'' usually 18 to 36 months. Using a buydown account eÅectively reduces the interest rate paid by the borrower during the buydown period. Throughout that period, the borrower's monthly payment increases at periodic intervals until it reaches its fully amortizing level. Frequently, the interest rate on a Buydown Mortgage exceeds the rate the same borrower would have paid on a similar Mortgage without a buydown. An Extended Buydown Mortgage is a Buydown Mortgage for which (a) the buydown period is longer than two years or (b) the eÅective interest rate during the buydown period is more than two percentage points below the interest rate of the Mortgage, regardless of the length of the buydown period. ‚ A Cooperative Share Mortgage is secured by a Ñrst mortgage, lien or other security interest on (a) the stock or membership certiÑcate (or similar arrangement) issued to the borrower as a tenant-stockholder or resident-member by a cooperative housing corporation (a ""Cooperative'') and (b) the proprietary lease, occupancy agreement or right of tenancy granting the tenant-stockholder or resident-member rights to occupy a speciÑc dwelling unit in the building owned by the Cooperative. Ownership interests and occupancy rights in a Cooperative generally are subject to restrictions on transfer, and also are subject to claims by the Cooperative for unpaid maintenance charges. The Cooperative, as owner of the building, is responsible for its management and typically pays certain costs. If there is a blanket mortgage on the building, the Cooperative is responsible for payments on that mortgage. Generally, tenant-stockholders or residentmembers of the Cooperative make monthly payments to the Cooperative for their pro rata share of maintenance charges, including payments on the blanket mortgage, real property taxes, insurance, maintenance costs and other capital and ordinary expenses. The lien of a Cooperative Share Mortgage on the ownership interest and right of tenancy of a tenant-stockholder or resident-member is subject to the prior lien of the Cooperative for unpaid maintenance and to the prior lien of the blanket mortgage on the building. ‚ A Home Equity Line of Credit (HELOC) is a Mortgage on which interest is calculated and payable monthly on its average daily outstanding principal balance. Before the applicable draw period expires, the borrower may borrow additional principal amounts on the HELOC, up to an agreed upon maximum amount. During the applicable draw period, the borrower is obligated to pay only the amount of interest which accrues on the HELOC during the billing cycle, but may choose to pay all or a portion of the principal. After the draw period ends, the borrower must make regularly scheduled monthly principal and interest payments. Most HELOCs are Second Mortgages. ‚ Prepayment Protection Mortgages require fees, or prepayment premiums, to be paid whenever prepayments made within a speciÑed period exceed a speciÑed percentage of the original principal balance of the Mortgage. In order to be treated as a Prepayment Protection Mortgage, the prepayment premium must last for at least one year and must 17
equal at least 1% of the amount prepaid. (We do not treat Mortgages having a shorter premium period or smaller premium as Prepayment Protection Mortgages.) Generally, we do not purchase Prepayment Protection Mortgages whose prepayment protection periods last longer than Ñve years. Various combinations of prepayment rates and protection periods are possible within those limitations. For example, two of the more common combinations are prepayment premiums that lapse after three years and have an assessment of 2% on prepaid amounts exceeding 20% of the Mortgage's original principal balance, and prepayment premiums that lapse after Ñve years and have an assessment of six months' advance interest at the then-current interest rate on the Mortgage on prepaid amounts exceeding 20% of the original principal balance. Currently, the servicer retains all prepayment premiums. Prepayment premiums are not passed through to Holders. We prohibit our servicers from collecting prepayment premiums in cases where the payoÅ of the Mortgage is received in connection with the workout of a delinquent Mortgage or due to a default. Applicable laws may also aÅect whether a prepayment premium can be collected or limit the amount that can be collected. ‚ Reinstated FHA/VA Mortgages are insured by the Federal Housing Administration or guaranteed by the Department of Veterans AÅairs and have been repurchased by the seller from pools backing mortgage-backed securities guaranteed by the Government National Mortgage Association due to delinquencies and in accordance with its policies. However, we do not acquire such Mortgages unless the delinquency has been cured and no other default exists, all payments under such a Mortgage have been made for a minimum of 30 days preceding its delivery to us or since its assumption by a qualiÑed borrower, there has been no modiÑcation of any of the terms of the Mortgage, and the Mortgage is sold to us with recourse to the seller. These Mortgages do not include any mortgages guaranteed by the Rural Housing Service. ‚ A Relocation Mortgage is a mortgage loan made to a transferred or newly-hired employee to Ñnance a home purchase at a new job location. The Relocation Mortgage usually requires an employer contribution to mortgage funding, which may be signiÑcant. These Mortgages usually are originated by agreement between the employer and the lender under a relocation program administered by the employer or its agent, although sometimes they are made on a ""spot'' basis rather than under an established relocation program. ‚ A Second Mortgage is a Mortgage that is subordinate only to a Ñrst lien on the mortgaged property, which, in the case of Second Mortgages we acquire, generally must be occupied by the borrower as the borrower's principal residence. ‚ A Simple Interest Mortgage is a Mortgage in which interest is computed on the basis of a year of 365 or 366 days and actual days elapsed. For other Mortgages, interest is typically computed on the basis of a year of 360 days consisting of twelve 30-day months. Each monthly payment of a Simple Interest Mortgage is applied Ñrst to the interest that has accrued as of the date of payment, with the remainder being applied to principal. The total amount of interest that accrues on a Simple Interest Mortgage over its life may exceed or be less than the amount that accrues on other Mortgages having the same interest rate and maturity, depending on the timing of the borrower's 18
payments. Moreover, there is no grace period on a Simple Interest Mortgage if the borrower makes a monthly payment after the due date, while most other Mortgages provide a grace period, typically of 15 days, during which additional interest does not accrue on a late payment. The borrower under a Simple Interest Mortgage pays additional interest if a payment is not timely made and less interest if a payment is made early. Mortgage Purchase and Servicing Standards General Any Mortgages that we purchase must satisfy the mortgage purchase standards that are contained in the Freddie Mac Act. These standards require us to purchase Mortgages of a quality, type and class that meet generally the purchase standards imposed by private institutional mortgage investors. This means the Mortgages must be readily marketable to institutional mortgage investors. The Guide In addition to the standards in the Freddie Mac Act, which we cannot change, we have established our own mortgage purchase standards, credit, appraisal and underwriting guidelines, and servicing policies. These standards are stated in our Single-Family Seller/Servicer Guide (the ""Guide''). The Guide also contains forms of our mortgage purchase documents. You may obtain online access to the Guide through an independent provider for a fee. You may contact Investor Inquiry as shown on page 3 for information on obtaining online access to the Guide. We may waive or modify any of the Guide's purchase standards, guidelines or servicing policies when we purchase any particular Mortgages or group of Mortgages. We also reserve the right to waive or modify generally the provisions of the Guide at any time. This means that the Mortgages in a given PC Pool may not conform at any particular time to all of the provisions of the Guide, our mortgage purchase documents or this OÅering Circular. We summarize below certain of our purchase standards, guidelines and servicing policies. This summary, however, is qualiÑed in its entirety by the Guide and by any applicable mortgage purchase documents, servicing agreements and supplemental disclosures. Mortgage Purchase Standards The Freddie Mac Act imposes limits, which are subject to an annual adjustment, on the maximum original principal amount of any one- to four-family mortgage that we may purchase. These limits are commonly referred to as ""conforming loan limits.'' For 2005, the conforming loan limits for Ñrst-lien Conventional Mortgages are: $359,650 (single-family); $460,400 (two-family); $556,500 (three-family) and $691,600 (four-family). The applicable conforming loan limits are 50% higher for all Mortgages secured by properties located in Alaska, Guam, Hawaii and the U.S. Virgin Islands. Conforming loan limits for second-lien Mortgages are 50% of those for single-family Ñrst-lien Mortgages. When we purchase both the Ñrst-lien Mortgage and the second-lien Mortgage on the same property, the total amount we purchase may not exceed the applicable conforming Ñrstlien loan limit. In general, a loan-to-value (""LTV'') ratio is a ratio of (a) the total principal balance of a Mortgage or the total mortgage indebtedness to (b) the value of the property securing the 19
Mortgage. Under the Freddie Mac Act, we may not purchase a Conventional Mortgage if, at the time of purchase, the outstanding principal balance (if a Ñrst lien) or the total outstanding mortgage indebtedness (if a Second Mortgage) exceeds 80% of the value of the related mortgaged property unless we have one or more of the following credit protections, which are designed to oÅset any additional credit losses that may be associated with higher LTV ratios: mortgage insurance from an approved mortgage insurer; a seller's agreement to repurchase or replace (for periods and under conditions as we may determine) any Mortgage that has defaulted; or retention by the seller of at least a 10% participation interest in the Mortgages. In general, the Mortgages we purchase under the Guide may not have LTV ratios exceeding 95%. However, we may reduce or increase the required LTV ratios based on a number of factors, such as the borrower's intended use of Mortgage proceeds, the type of property securing the Mortgage, the existence of special Ñnancing arrangements and the market in which the mortgaged property is located. We may from time to time purchase and pool Mortgages having LTV ratios in excess of 95% in order to enable borrowers to purchase homes or reÑnance existing mortgages and pay certain related expenses. However, we currently do not expect to purchase and pool Mortgages with LTV ratios exceeding 105%. We use mortgage information available to us to determine which Mortgages we will purchase, the prices we will pay for Mortgages, how to pool the Mortgages we purchase and which Mortgages we will retain in our own portfolio. The information we use varies over time, and may include, among other things, LTV ratio, loan size and age, geographic distribution, weighted average interest rate, purpose or source of origination and credit scoring. We have discretion to determine whether the Mortgages we purchase will be securitized or held in our portfolio. FHA/VA Mortgages are underwritten using the criteria speciÑed by the Federal Housing Administration, the Veterans Administration or the Rural Housing Service, the federal government agencies which insure or guarantee them, rather than the underwriting standards in our Guide. Eligible Sellers, Servicers and Warranties We acquire Mortgages only from sellers we approve. We are responsible for supervising the servicing of the Mortgages and we contract with mortgage servicers we have approved to perform most servicing functions on our behalf and in accordance with standards we have established and may change from time to time. We approve sellers and servicers of Mortgages based on a number of factors, including their Ñnancial condition, operational capability and mortgage origination and servicing experience. The seller or servicer of a Mortgage need not be the originator of that Mortgage. When we purchase a Mortgage, we rely on representations and warranties of the seller with respect to certain matters, as is customary in the secondary mortgage market. These representations and warranties cover such matters as: ‚ The accuracy of the information provided by the borrower. ‚ The accuracy and completeness of any third party reports prepared by qualiÑed professionals, such as property appraisals and credit reports. ‚ The validity of each Mortgage as a Ñrst or second lien, as applicable. ‚ The fact that payments on each Mortgage are current at the time of delivery to us. 20
‚ The physical condition of the mortgaged property. ‚ The originator's compliance with applicable state and federal laws, including state antipredatory lending statutes and other laws that protect borrowers. Our Mortgage custodians check the stated terms of the Mortgage documents, but we generally do not independently verify the accuracy of the seller's representations and warranties. Servicing Responsibilities and Compensation We generally supervise servicing of the Mortgages according to the policies in the Guide. Each servicer is required to perform all services and duties customary to the servicing of mortgages, either directly or through approved subservicers. Those responsibilities include all activities concerning the calculation, collection and processing of Mortgage payments and related borrower inquiries, as well as all Mortgage administrative responsibilities, including claims collection, workouts, foreclosures and reports. We monitor a servicer's performance through periodic and special reports and inspections to ensure it complies with its obligations. Servicers remit payments to us under various arrangements, but these do not aÅect the timing of payments to Holders of PCs. We invest payments remitted to us at our own risk and for our own beneÑt until we pass them through to Holders of PCs. Servicers receive fees for their services. Our Guide generally requires that servicers retain a servicing fee of at least 0.25% of the principal balance of the Mortgages they service. However, we may permit lower servicing fee rates for certain servicers or PC Pools. Prepayments A borrower may make a full or partial prepayment on a Mortgage at any time without paying a premium, except for Prepayment Premium Mortgages. A borrower may partially prepay a Mortgage in order to reduce the number or size of future monthly payments, provided that the Mortgage is current and the prepayment will not result in an interest rate change or an extension of the term. A borrower may fully prepay a Mortgage for several reasons, including an early payoÅ, a sale of the related mortgaged property or a reÑnancing of the Mortgage. We pass through all prepayments to the Holders of the related PCs. Mortgage Repurchases We may repurchase Mortgages from PC Pools in certain limited situations. In determining whether a Mortgage should be repurchased, we consider various factors, including whether the repurchase will reduce our administrative costs or our possible exposure under our guarantees and our statutory and other legal obligations. We always repurchase a Mortgage from its PC Pool shortly before: ‚ A Balloon/Reset Mortgage reaches its scheduled maturity or reset date, regardless of whether the borrower decides to pay the Mortgage in full or extend it at a reset interest rate. ‚ A convertible ARM converts to a Ñxed-rate Mortgage upon the borrower's exercise of the conversion option. 21
‚ The eÅective date of the modiÑcation of a ModiÑable Mortgage, which is a Mortgage whose interest rate can be modiÑed pursuant to an agreement between the borrower and the servicer after it is included in a PC Pool (""ModiÑable Mortgage''). In addition, we may require or permit the seller or servicer of a Mortgage to repurchase any Mortgage or (within six months of the settlement of the related PCs) substitute for any Mortgage a Mortgage of comparable type, unpaid principal balance, remaining term and yield, if there is a material breach of warranty by a seller or servicer as to that Mortgage. Substitutions of Mortgages are far less common than cash repurchases. Mortgage repurchases may also occur due to defaults and delinquencies. See Description of the Mortgages Ì Mortgage Purchase and Servicing Standards Ì Defaults and Delinquencies and The Agreement Ì Repurchase and Substitution of Mortgages. A Mortgage repurchase will be treated as a prepayment in full of the Mortgage being repurchased and the entire principal amount of that Mortgage will be passed through to PC Holders on the appropriate Payment Date. Defaults and Delinquencies In attempting to resolve an existing or impending delinquency or other mortgage default, we may take any of the following measures: ‚ Approve an assumption of a Mortgage by a new borrower. ‚ Allow a repayment plan or a forbearance period during which regular Mortgage payments may be reduced or suspended. ‚ Approve a modiÑcation of certain terms of the Mortgage if we determine that the borrower would be able to make all payments under the modiÑed Mortgage terms. ‚ Pursue a reÑnancing of the Mortgage or a preforeclosure contract for sale of the underlying property. ‚ Charge oÅ all or part of the unpaid principal balance of the Mortgage. ‚ Initiate a foreclosure proceeding. When considering our options under the particular circumstances, we determine, in accordance with the terms of the Agreement, whether to repurchase a Mortgage from a PC Pool. Repurchasing a Mortgage from its PC Pool has the same eÅect on Holders as a prepayment. If we determine not to repurchase the Mortgage from its PC Pool, the measures we take may aÅect the timing of payments of principal to Holders. We generally demand accelerated payment of principal and initiate foreclosure proceedings when a Mortgage has become 90 days delinquent. However, we also continue to pursue alternate measures to resolve the delinquency before the conclusion of the foreclosure proceedings, if such measures appear likely to mitigate our potential losses. If, after demand for acceleration, a borrower pays all delinquent amounts or agrees with us to accept an arrangement for reinstatement of the Mortgage, we may terminate the foreclosure proceedings and withdraw our demand. If the borrower again becomes delinquent, we generally will make a new demand for acceleration and commence new foreclosure proceedings. 22
Generally, we repurchase, or require or permit a seller or servicer of a Mortgage to repurchase, any Mortgage if: ‚ such Mortgage is 120 days or more delinquent, ‚ based on our current delinquency and loss model, we have determined that it is more likely than not that a delinquency on such Mortgage will not be cured within 120 days of the due date of its last paid installment, or ‚ we determine, on the basis of information from the related borrower or servicer, that loss of ownership of the mortgaged property is likely or default is imminent due to borrower incapacity, death or hardship or other extraordinary circumstances that make future payments on such Mortgage unlikely or impossible. Sometimes the unpaid principal balance of a Mortgage exceeds the current value of the underlying property. Bankruptcy courts are permitted, under limited circumstances, to approve a borrower's plan reducing the borrower's obligation under such a Mortgage to the current value of the property and to treat the remaining amount of the Mortgage indebtedness as an unsecured obligation. We may treat the unsecured portion of the Mortgage as a partial prepayment and pass through that amount as a guarantee payment as early as the date of the court action. Our Information Statement and certain Information Statement Supplements provide information regarding our overall Mortgage delinquency, default and foreclosure experience. Transfer and Assumption Policies Most of the Ñxed-rate Conventional Mortgages that we acquire are not assumable because they contain ""due-on-transfer'' clauses permitting automatic acceleration of the Mortgage debt when the mortgaged property is transferred. We generally require servicers to enforce these due-on-transfer clauses and to demand full payment of the remaining principal balance of a Mortgage to the extent permitted under the mortgage documents and applicable state and federal law. We allow assumptions in other limited circumstances, such as transfers between certain related persons. DESCRIPTION OF THE PCs General We issue two types of PCs Ì Gold PCs and ARM PCs. Gold PCs have a payment delay (the delay between the time interest begins to accrue and the time the investor receives an interest payment) of approximately 45 days. ARM PCs have a payment delay of approximately 75 days. Gold PCs are backed by Ñxed-rate, level payment, fully amortizing Mortgages, Ñxed-rate Initial Interest Mortgages or Balloon/ Reset Mortgages. ARM PCs are backed by ARMs, including adjustable rate Initial Interest Mortgages. Each PC represents an undivided beneÑcial ownership interest in the Mortgages contained in its related PC Pool. Once we have identiÑed a Mortgage to a PC Pool, the Mortgage remains in that PC Pool unless it is paid in full, foreclosed upon, repurchased or replaced by a substitute Mortgage. The minimum original principal balance for a PC Pool is generally $1,000,000 for Gold PCs and $500,000 for ARM PCs. ARM PCs backed by Initial Interest Mortgages delivered under our Guarantor Program or Gold PCs backed by Initial Interest Mortgages delivered under our 23
MultiLender Swap Program are not subject to a minimum original principal balance. We may change these minimum PC Pool sizes at any time. PC Pool Formation We may purchase Mortgages from eligible sellers under various purchase programs. We purchase most Mortgages under our ""Guarantor Program,'' in which we purchase Mortgages from a single seller and, in exchange, deliver to that seller PCs representing undivided interests in those same Mortgages. We also purchase Mortgages for cash under our ""Cash Program.'' Mortgages purchased under our Cash Program are typically (i) retained by us in our retained portfolio, (ii) pooled and sold to third parties as PCs for cash through an auction or (iii) pooled together with other Mortgages that we purchase under our ""MultiLender Swap Program.'' Under our Multilender Swap Program, we purchase Mortgages from various sellers and issue to those sellers PCs representing undivided interests in the purchased Mortgages. To the extent Mortgages purchased under our Cash Program are pooled with Mortgages purchased under our Multilender Swap Program, we may sell part of the resulting PCs to third parties for cash through an auction. We acquire Mortgages under these programs on a daily basis in accordance with the terms contained in our Guide and applicable agreements with sellers. Our issuance of PCs in exchange for Mortgages is conditioned on the seller's compliance with the applicable terms and conditions of our Guide and other applicable mortgage purchase documents, including the seller's obligations to timely deliver acceptable Mortgages in the agreed upon amount, and to make available to investors all required oÅering documents. Freddie Mac currently assigns a six-character, unique numeric or alphanumeric designation, or ""PC Pool Number,'' to each PC Pool. The Ñrst two (or three, in some instances) characters of a PC Pool Number are known as its ""PreÑx.'' The PreÑx indicates some basic information about the PC Pool, such as its term and the general type of Mortgages within the PC Pool. PreÑxes are subject to change (including modiÑcation, discontinuance or the addition of new ones) at any time. Our internet website provides a current list of frequently used PreÑxes. General Pooling Criteria Some of our general pooling practices for Gold PC Pools and ARM PC Pools are summarized below. Our pooling practices are subject to change. We may also grant exceptions to these practices in our sole discretion. Gold and ARM PC Pools ‚ Conventional Mortgages are pooled separately from FHA/VA Mortgages. ‚ ModiÑable Mortgages are pooled separately from other Mortgages. ‚ Initial Interest Mortgages are pooled separately from other Mortgages. An ARM PC may be backed by Initial Interest ARMs with diÅerent initial Ñxed-rate periods and interest only periods. ‚ Prepayment Protection Mortgages are generally pooled separately from other Mortgages. A PC may be backed by Prepayment Protection Mortgages with diÅerent prepayment premium features. Under certain circumstances, Mortgages with waived 24
prepayment premiums may be pooled with Mortgages that can be prepaid at any time without premium. Gold PC Pools ‚ The interest rates of the Mortgages in a Gold PC Pool are within a range from (a) the PC Coupon plus any minimum required servicing fee through (b) 250 basis points above the PC Coupon. ‚ Twenty-year Mortgages may be pooled with 30-year Mortgages and each type may be pooled separately. ‚ Ten-year Mortgages may be pooled with 15-year Mortgages and each type may be pooled separately. ‚ Balloon/Reset Mortgages are pooled separately based on the original term to the maturity or reset date (Ñve or seven years). ‚ In general, Cooperative Share Mortgages, Extended Buydown Mortgages or Relocation Mortgages may constitute up to 10% of the original principal balance of a Gold PC Pool without any special designation or disclosure to reÖect that fact, so long as these types of Mortgages, in combination, do not constitute more than 15% of the original principal balance of the PC Pool. ARM PC Pools ‚ Usually, the Mortgages in an ARM PC Pool adjust based on the same Index and have the same initial and periodic adjustment caps, adjustment frequency and lookback period. ‚ We usually pool Hybrid ARMs in their initial Ñxed-rate periods separately from other ARMs. ‚ Convertible ARMs still in their convertible periods may be pooled only with other Convertible ARMs that convert during the same time period and in accordance with the same conversion formula. Pooling Criteria for Mortgages with Special Characteristics Some of our Mortgages have special characteristics, as described in Description of the Mortgages Ì Special Mortgage Characteristics. Typically, we pool these Mortgages only with Mortgages having the same characteristics, and they are identiÑed in the applicable Pool Supplement. Some of these Mortgages, such as Cooperative Share Mortgages, have special characteristics that do not change and that result in their being pooled separately on a permanent basis. Others, when their special characteristics no longer apply, may be pooled with the types of Mortgages that they then resemble. For example, Convertible ARMs, which are typically convertible to a Ñxed interest rate during a speciÑed conversion window, must be pooled with non-convertible ARMs if they are pooled after their conversion window has expired. 25
Pool Factors and Monthly Reporting Periods Pool Factors Each month we calculate and make available, including on our internet website and through approved vendors, the Pool Factor for each PC Pool. A ""Pool Factor'' is an exact decimal truncated to eight places which, when multiplied by the original principal amount of a PC, will equal the remaining principal amount of the PC. The Pool Factor for any month reÖects the remaining principal amount after the payment to be made on the Payment Date: ‚ In the same month, for Gold PCs. ‚ In the following month, for ARM PCs. Currently, we make Pool Factors available on or about the Ñfth Business Day of each month, except that the Pool Factor for a PC Pool for the month of its formation is always 1.00000000 and is not published. We have the right to change when the Pool Factors will be available and how we calculate them. We make payments on all PCs based on their applicable Pool Factors. ""Payment Capped ARM PCs,'' which are backed by Payment Capped ARMs, may experience negative amortization, as described in Description of the Mortgages Ì Adjustable Rate Mortgages (ARMs). When negative amortization occurs, we will indicate this in the following month: ‚ By publishing a Negative Amortization Factor for the PC Pool. ‚ By including a corresponding amount in the related Pool Factor. A ""Negative Amortization Factor'' is an exact decimal truncated to eight places that reÖects the amount of deferred interest added to the principal balances of the Mortgages in a PC Pool in the preceding month. When negative amortization has occurred, we will make interest payments to you at the applicable PC Coupon, less the aggregate deferred interest indicated by the Negative Amortization Factor published in the previous month. We make Negative Amortization Factors available at the same time and in the same manner as the related Pool Factors. Use of Factors For any Payment Date, you can calculate the principal payment on a PC by multiplying its original principal amount by: ‚ The diÅerence between its Pool Factors for the preceding and current months, in the case of a Gold PC. ‚ The diÅerence between its Pool Factors for the two preceding months, in the case of an ARM PC without a Negative Amortization Factor. ‚ The diÅerence between its Pool Factors for the two preceding months, plus its Negative Amortization Factor, if any, for the preceding month, in the case of a Payment Capped ARM PC. For any Payment Date, you can calculate interest payments on a Gold PC by multiplying its Ñxed PC Coupon by 1/12th, and then multiplying that amount by the principal balance of the PC immediately before that Payment Date (reÖected by its Pool Factor published in the immediately preceding month), and you can calculate interest payments on an ARM PC (assuming no deferred interest) by multiplying its PC Coupon published for the applicable Accrual Period by 1/12th, and 26
then multiplying that amount by the principal balance of the PC immediately preceding that Payment Date (reÖected by its Pool Factor published in the second preceding month). For a Payment Capped ARM PC, the amount of interest paid will be reduced by the amount of any deferred interest. Monthly Reporting Periods Each month, servicers report payments to us, including all prepayments, on the Mortgages in a PC Pool for the applicable one-month reporting period (a ""Monthly Reporting Period''). For any Payment Date, the applicable Monthly Reporting Period generally is: ‚ The calendar month preceding that Payment Date, for Gold PCs. ‚ The second calendar month preceding that Payment Date, for ARM PCs. We have the right to change the Monthly Reporting Period for any PCs as provided in the Agreement. Payment Dates We make payments to the Holders of PCs on each Payment Date beginning in: ‚ The month after issuance, for a Gold PC. ‚ The second month after issuance, for an ARM PC. The ""Payment Date'' is the 15th day of each month or, if the 15th day is not a Business Day, the next Business Day. For this purpose, ""Business Day'' means a day other than: ‚ A Saturday or Sunday. ‚ A day when the Federal Reserve Bank of New York (or other agent acting as our Ñscal agent) is closed or, as to any Holder, a day when the Federal Reserve Bank that maintains the Holder's account is closed. Payments of Principal General We pay principal, if any, to the Holders of PCs on each applicable Payment Date. The principal balance of a PC Pool sometimes varies from the aggregate principal balance of the underlying Mortgages due to delays or errors in processing mortgage information, such as a servicer's failure to Ñle an accurate or timely report of its collections of principal or its having Ñled a report that cannot be processed. We will account for any diÅerences as soon as practicable by adjusting subsequent Pool Factors. We have the right to modify our procedures for passing through full or partial prepayments of principal to Holders. Calculation of Principal Payments for Gold PCs The aggregate principal payment in any month on any Gold PC reÖects: ‚ The scheduled principal payments due on the Mortgages in the related PC Pool for the current calendar month. 27
‚ Prepayments on those Mortgages as reported by servicers for the preceding Monthly Reporting Period and the principal amount of any Mortgage repurchased during the preceding Monthly Reporting Period, as well as any such prepayments and principal reported on the Ñrst Business Day of the calendar month following such Monthly Reporting Period. ‚ Any adjustments necessary to reconcile the principal balance of the PC Pool with the aggregate balance of the related Mortgages reported to us by servicers. We calculate the scheduled principal due on the related Mortgages based upon the actual principal balance, interest rate and remaining term to maturity of each Mortgage in the Gold PC Pool. Our calculation of scheduled principal may not reÖect actual payments on the Mortgages. For example, we calculate scheduled principal payments on Gold PCs backed by Biweekly Mortgages without regard to their special payment characteristics, which periodically result in partial prepayments. A Holder of such a PC receives payments once a month, regardless of how many payments the borrower makes in a month, in accordance with the payment calculations for Gold PCs. We calculate the scheduled principal payment due on Gold PCs backed by Balloon/Reset Mortgages assuming the same (usually 30-year) term used to amortize the related Mortgages rather than the term to the balloon/reset date. The monthly payments made on these PCs reÖect this amortization schedule, except for the Ñnal payment, which includes the remaining balloon payment. Calculation of Principal Payments for ARM PCs The principal payment in any month on an ARM PC reÖects any principal payments on the related Mortgages reported by servicers for the applicable Monthly Reporting Period, including any prepayments, and the principal amount of any Mortgage repurchased during the applicable Monthly Reporting Period, as well as any such prepayments and principal reported on the Ñrst Business Day of the calendar month following that Monthly Reporting Period. In the absence of reports from servicers, we do not adjust the related Pool Factor. Rather, we reconcile any diÅerences between actual payments on the Mortgages and principal payments on the PCs as soon as practicable by adjusting subsequent Pool Factors. Payments of Interest General Interest will accrue on each PC during each Accrual Period at the applicable PC Coupon. We compute interest on the basis of a 360-day year of twelve 30-day months. In the case of a Ñxed-rate PC, the PC Coupon is set at the time of issuance and does not change. In the case of an ARM PC, the PC Coupon adjusts periodically, as described below. We generally publish the applicable PC Coupon for ARM PCs for an Accrual Period on or about the Ñfth Business Day in the relevant month. You can obtain the PC Coupons for ARM PCs for the current Accrual Period on our internet website or from Investor Inquiry as shown on page 3. Absent clear error, our determination of the applicable Index values and our calculation of the PC Coupon for each Accrual Period will be Ñnal and binding. 28
Interest accrues on the principal amount of a PC as determined by its Pool Factor for: ‚ The month preceding the month of the Payment Date, for Gold PCs. ‚ The second month preceding the month of the Payment Date, for ARM PCs. The ""Accrual Period'' relating to any Payment Date is: ‚ The calendar month preceding the month of the Payment Date, for Gold PCs. ‚ The second calendar month preceding the month of the Payment Date, for ARM PCs. ARM PCs ARM PCs have PC Coupons that are based on the weighted average interest rate of the Mortgages in the related PC Pool, minus applicable servicing fees and our management and guarantee fee. The PC Coupon of an ARM PC is an exact decimal truncated to three places. Description of the MortgagesÌIndices describes the Indices most often used to adjust ARMs and ARM PCs. We calculate the PC Coupon of an ARM PC monthly and adjust it to reÖect changes in the unpaid principal balances and interest rates of the related Mortgages. This monthly adjustment has no prescribed limit, although the related Mortgages will be subject to any applicable initial and periodic adjustment caps, lifetime ceilings and, in some instances, lifetime Öoors. The PC Coupon used to calculate the interest payment in a given month reÖects the interest rates on the ARMs in the related PC Pool in eÅect for the preceding month. The interest rates of the Mortgages underlying an ARM PC may adjust in diÅerent months and some, all or none of the Mortgages may adjust on a given date. As a result, the PC Coupon of an ARM PC may not fully reÖect recent changes in the value of the applicable Index. In addition, disproportionate principal payments on the underlying Mortgages with diÅerent interest rates will aÅect the PC Coupon of an ARM PC. For example, if Mortgages with interest rates above the weighted average of the PC Pool are prepaid more frequently than Mortgages with interest rates at or below the weighted average, the weighted average of the interest rates in the PC Pool will decrease, and therefore the PC Coupon payable to Holders will be reduced. ARM PCs backed by Hybrid ARMs that have the same initial Ñxed rate period receive interest at a Ñxed PC Coupon until the ARMs begin to adjust. After that occurs, the PC Coupon on these PCs adjusts in the same manner as other ARM PCs. The PC Coupon on a Payment Capped ARM PC is calculated in the same way as on other ARM PCs. When negative amortization occurs, however, a Holder receives interest at the PC Coupon, less accrued deferred interest, which is added to the principal balances of the related Payment Capped ARM PCs. Interest accrues afterwards on the outstanding principal balance, including the added deferred interest, at the applicable PC Coupon. Record Dates We pass through payments on each Payment Date to Holders as of the related Record Date. The ""Record Date'' for any Payment Date is the close of business on the last day of (a) the preceding month for Gold PCs or (b) the second preceding month for ARM PCs. 29
Final Payment Date The ""Final Payment Date'' of a PC is the Ñrst day of the latest month in which we will reduce the related Pool Factor to zero. The actual Ñnal payment on any PC will be made on a regular Payment Date, not on the Ñrst day of a month. The Ñnal payment on any PC could occur signiÑcantly earlier than the month of its Final Payment Date. Guarantees We guarantee to each Holder of a PC: ‚ The timely payment of interest at the applicable PC Coupon. ‚ In the case of Gold PCs only, the timely payment of scheduled principal on the underlying Mortgages. ‚ The full and Ñnal payment of principal on the underlying Mortgages by the Payment Date that falls (a) in the month of its Final Payment Date, for a Gold PC or (b) in the month after its Final Payment Date, for an ARM PC. For Payment Capped ARM PCs, which are subject to negative amortization, our guarantee of principal includes, and our guarantee of interest excludes, any deferred interest added to the principal balances of the related Mortgages. In addition, our guarantee covers any interest shortfalls on the PCs arising from reductions in Mortgage interest rates pursuant to application of the Servicemembers Civil Relief Act and similar state laws. Principal and interest payments on the PCs are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. PC Pool Expenses Generally, we do not seek reimbursement from a PC Pool for any expenses we may incur in connection with that PC Pool. However, certain amounts expended by Freddie Mac or a servicer for the protection or maintenance of Mortgages or related property may be borne on a pro rata basis by Freddie Mac and the Holders of the related PCs. Freddie Mac may pay such expenses from amounts otherwise due to the Holders, which may aÅect the timing of receipt of payments by the Holders. However, these expenses will not aÅect Freddie Mac's guarantee or the Holders' right to receive all principal and interest due on their PCs. Compensation of Servicers and Freddie Mac We or our servicers generally retain payments of interest on Mortgages in a PC Pool that exceed the PC Coupon for that PC Pool, as well as any fees and charges paid by borrowers, such as late payment fees, prepayment premiums, fees payable upon exercise of an ARM conversion option and review and transfer charges on assumptions. These amounts are not passed through to Holders. The amounts we retain are treated as management and guarantee fees and the amounts retained by servicers are treated as servicing fees. 30
Pool Supplements We make available on our internet website a Pool Supplement for each PC Pool when it is formed. The Pool Supplement identiÑes the features of the Mortgages in the related PC Pool and sets forth data concerning the PC Pool. We have attached as Appendix II to this OÅering Circular an example of a Pool Supplement, and deÑnitions of terms we use in Pool Supplements are attached as Appendix III. In some cases, a Pool Supplement may not include all of the information speciÑed in Appendix II, and in other cases, additional information or legends may be included. Pool Supplements for PC Pools containing Ñxed-rate Mortgages contain diÅerent information than Pool Supplements for ARM PCs, and generally will exclude the data Ñelds shown in Appendix II which are applicable only to ARM PCs and include the data Ñelds which apply only to Gold PCs. If information in a Pool Supplement is inconsistent with information in this OÅering Circular, you should rely on the information in the Pool Supplement as to the PC Pool it describes. We may change our practices relating to Pool Supplements at any time. Monthly Reporting of Pool Data Each month, in addition to Pool Factors, we make available on our internet website certain updated information as to each PC Pool. Generally, this information corresponds to the information provided in the Pool Supplement for the relevant PC Pool to the extent such original information changes over time. In some cases, our monthly updates may not include all of that information, and in other cases, additional information or legends may be included. If information on the internet website as to a PC Pool is inconsistent with information in the related Pool Supplement, you should rely on the updated information on the website as to the PC Pool it describes. We may change our practices relating to our monthly updating of PC Pool data at any time. Form of PCs, Holders and Payment Procedures Form PCs are issued, held and transferable only on the book-entry system of the Federal Reserve Banks. This means that PCs are not represented by certiÑcates. The Department of Housing and Urban Development's regulations governing our book-entry securities (24 C.F.R. Part 81, Subpart H) and any procedures that we and a Federal Reserve Bank may adopt apply to the issuance and recordation of, and transfers of interests (including security interests) in, the PCs. Holders' individual accounts are governed by operating circulars and letters of the Federal Reserve Banks. Each issue of PCs is identiÑed by a unique nine-character alphanumeric designation assigned by the CUSIP Service Bureau, known as a ""CUSIP Number.'' The CUSIP Number is used to identify each issue of PCs on the books and records of the Federal Reserve Banks' book-entry system. Holders The term ""Holder'' means any entity that appears on the records of a Federal Reserve Bank as a holder of particular PCs. Only banks and other entities eligible to maintain book-entry accounts with a Federal Reserve Bank may be Holders of PCs. Investors who beneÑcially own PCs typically are not the Holders of those PCs. Investors ordinarily will hold PCs through one or more Ñnancial intermediaries, such as banks, brokerage Ñrms and securities clearing organizations. For example, as 31
an investor, you may hold a PC through a brokerage Ñrm, which, in turn, holds through an entity eligible to maintain accounts with a Federal Reserve Bank. In that case, you would be the beneÑcial owner and that eligible entity would be the Holder. A Holder that is not also the beneÑcial owner of a PC, and each other Ñnancial intermediary in the chain between the Holder and the beneÑcial owner, will be responsible for establishing and maintaining accounts for their customers. Neither we nor any Federal Reserve Bank will have a direct obligation to a beneÑcial owner of a PC that is not also the Holder. The Federal Reserve Banks and we may treat the Holder as the absolute owner of a PC for the purpose of receiving payments and for all other purposes, regardless of any notice to the contrary. If you are not a Holder yourself, you may exercise your rights only through the Holder of your PCs. Denominations Holders must hold and transfer their PCs in minimum original principal amounts of $1,000 and additional increments of $1. A Holder may not transfer a PC if, as a result of the transfer, the Holder would have remaining in its account PCs of the same issue having an original principal amount of less than $1,000. A Holder of PCs will also have to comply with any Federal Reserve Bank minimum wire transfer requirements. Payment Procedures Federal Reserve Banks credit payments on PCs to the appropriate Holders' accounts. Each Holder and each other Ñnancial intermediary will be responsible for remitting payments to the beneÑcial owners of the PCs that it represents. The Agreement provides that if a principal or interest payment error occurs, we may correct it by adjusting payments to be made on future Payment Dates or in any other manner we consider appropriate. PREPAYMENT, YIELD AND SUITABILITY CONSIDERATIONS Prepayments The rates of principal payments on the PCs will depend on the rates of principal payments on the underlying Mortgages. Mortgage principal payments may be in the form of scheduled amortization or partial or full prepayments. Prepayments include: ‚ Prepayments by the borrower. ‚ Liquidations resulting from default, casualty or condemnation. ‚ Payments we make under our guarantee of principal, other than payments of scheduled principal. ‚ Prepayments resulting from the repurchase of Mortgages from a PC Pool due to default, delinquency, inaccurate representations and warranties made by sellers or other factors. Mortgages may be voluntarily prepaid in full or in part at any time, in most cases without payment of a premium. 32
Mortgage prepayment rates are likely to Öuctuate signiÑcantly over time. Prepayment rates are inÖuenced by many factors, which may exist in multiple combinations, including: ‚ Levels of current mortgage interest rates and borrower reÑnancing activity. ‚ The age, principal amount, geographic distribution and payment terms of Mortgages. ‚ Procedures implemented by Mortgage originators and servicers to ease the burden on themselves and borrowers of processing reÑnance loans. These changes may include reducing the amount of documentation and costs required to reÑnance and easing underwriting standards, which could encourage borrowers to reÑnance their Mortgages. Some of our Mortgage purchase programs may facilitate these practices. ‚ Characteristics of the borrowers (such as credit rating) and their equity positions in their houses (whether the LTV ratio is high or low). In particular, borrowers with substantial equity in their houses may be prone to engaging in cash-out reÑnancings in which the reÑnancing mortgage has a higher principal balance than the reÑnanced mortgage. This technique enables the borrower to convert all or a portion of the equity into cash. ‚ Changes in local industry and population migration and relocation as they aÅect housing turnover. ‚ Active solicitation by originators and servicers. Many mortgage servicers, including sellers of Mortgages to Freddie Mac, solicit borrowers to reÑnance their Mortgages. In particular, servicers may solicit borrowers to reÑnance in an eÅort to preserve servicing income. To mitigate this risk, our Guide places restrictions on solicitation of borrowers which are intended to prevent servicers from targeting borrowers under Mortgages they service for us more actively than they target other borrowers. ‚ Servicing fee rates. PC Pools containing Mortgages that are subject to servicing fee rates that are relatively high may experience diÅerent prepayment rates than PC Pools in which relatively low servicing fee rates predominate. ‚ The use of special Ñnancing arrangements, including buydown plans or other provisions that cause the amount of the borrower's payment to change during the term of the Mortgage. ‚ In the case of ARMs, Öuctuations in the reference Index values, the extent of periodic adjustments on the underlying Mortgage interest rates, the extent to which the initial Mortgage interest rates are discounted from their fully indexed rates and the extent to which borrowers exercise conversion options on convertible ARMs. ‚ The desire of borrowers to reduce the LTV ratio to 80% or below to eliminate the requirement for mortgage insurance on a Mortgage. Prevailing mortgage interest rates especially inÖuence prepayment rates. In general, as mortgage interest rates decline, borrowers tend to reÑnance their current, higher rate Mortgages, which results in faster prepayment rates on the related PC Pools. On the other hand, as mortgage interest rates increase, borrowers tend not to reÑnance their Mortgages, which results in slower prepayment rates on the related PC Pools. 33
Various types of Mortgages may have special prepayment characteristics. For example: ‚ ARMs tend to have higher default rates than Ñxed-rate Mortgages. ‚ Convertible ARMs may be converted to Ñxed-rate mortgages, which will be repurchased from the PC Pool shortly before their conversion. ‚ Payment Capped ARMs have weighted average lives that can lengthen if negative amortization occurs and shorten if accelerated amortization occurs. ‚ Biweekly Mortgages have weighted average lives that are shorter than those of otherwise similar monthly payment Mortgages. ‚ Hybrid ARMs may be prone to reÑnancing toward the end of the Ñxed-rate period. ‚ Prepayment Protection Mortgages may tend to prepay diÅerently than Mortgages without prepayment premiums. Depending on a variety of factors, including possible waivers of the premium, the timing of any notiÑcation to the borrower of applicable waivers and the interest rate environment, the prepayment behavior of Prepayment Protection Mortgages may be diÇcult to predict. ‚ Initial Interest Mortgages, which permit borrowers to pay only accrued interest for extended periods without requiring principal amortization, may aÅect borrower decisions regarding the sale of property or reÑnancing because the borrower may not have reduced the principal balance of the Mortgage by making unscheduled principal payments. ‚ FHA/VA Mortgages may exhibit diÅerent prepayment behavior than Conventional Mortgages because they are underwritten using diÅerent criteria and are usually Assumable Mortgages. DiÅerent types of Mortgages may be aÅected diÅerently by the same factor, and some factors may aÅect prepayment behavior on only some types of Mortgages. For example: ‚ Extended Buydown Mortgages may experience higher default rates than other Buydown Mortgages because they provide for larger increases in the eÅective interest rates to borrowers. ‚ Second Mortgages may be more likely to be prepaid than Ñrst lien mortgages because they tend to have higher interest rates, shorter maturities and lower principal amounts than Ñrst lien mortgages. ‚ Relocation Mortgages could be less sensitive than other types of Mortgages to prepayments resulting from decreasing interest rates and more sensitive than other types of Mortgages to prepayments resulting from home sales. The prepayment behavior of Relocation Mortgages also generally depends on the circumstances of individual employees and employers and the characteristics of the speciÑc relocation programs involved. ‚ Assumable Mortgages could be less sensitive than other types of Mortgages to prepayments due to home sales because they may not have to be prepaid when the mortgaged property is sold to a qualiÑed borrower. In addition, Assumable Mortgages with diÅerent assumability features may exhibit diÅerent prepayment behavior. 34
The rate of defaults and resulting repurchases of the Mortgages in a PC Pool will also aÅect the prepayment behavior of that PC Pool. Defaults may increase during periods of economic recession, natural disasters, declining property values or increased use of secondary Ñnancing or as a result of other factors that decrease borrowers' equity. In addition, mortgage servicing decisions, including seeking alternatives to foreclosure, may impact the prepayment behavior of particular PC Pools. In approving alternatives to foreclosure and in determining whether or when Mortgages will be repurchased from a PC Pool, we consider several factors. See Description of the Mortgages Ì Mortgage Purchase and Servicing Standards Ì Defaults and Delinquencies. The rate of principal payments on a PC Pool may vary signiÑcantly from month to month as a result of Öuctuations in the principal payment rates of its underlying Mortgages. A PC Pool may experience payment behavior that is similar to or diÅerent from that experienced by other PC Pools consisting of similar Mortgages. In addition, any PC Pool could experience payment behavior that is signiÑcantly diÅerent from other PC Pools, particularly if it contains a relatively small number of Mortgages, contains Mortgages from only one seller or has been formed speciÑcally to emphasize one or more speciÑc loan characteristics, such as borrower credit rating or loan size. We can make no representation concerning the particular eÅect that any factor may have on Mortgage prepayment behavior, or the prepayment rates for any type of Mortgage as compared to other kinds of Mortgages. Yields General In general, your yield on PCs will depend on several variables, including: ‚ The price you paid for your PCs. ‚ The PC Coupon for your PCs. ‚ The rate of principal prepayments on the underlying Mortgages. ‚ The payment delay of your PCs. ‚ In the case of ARM PCs, the values of the applicable Index. ‚ In the case of ARM PCs, the eÅect of any periodic interest rate and payment adjustments (and any associated adjustment caps, lifetime ceilings and lifetime Öoors) on the underlying ARMs. ‚ In the case of Payment Capped ARM PCs, whether your PC experiences negative or accelerated amortization. ‚ The weighted average life of an Initial Interest Mortgage will diÅer from the weighted average life of a fully-amortizing Mortgage having the same principal amount, interest rate and maturity and, as a result, its yield may be more or less than the yield of the fully-amortizing Mortgage, depending on its purchase price. PC Pools backed by Initial Interest Mortgages may therefore have diÅerent yields than PC Pools backed by fullyamortizing Mortgages having otherwise similar terms. Moreover, prepayments of Initial Interest Mortgages during the interest only period may aÅect yields on the PC Pools 35
that contain them more than similar prepayments would aÅect the yields on PC Pools containing fully-amortizing Mortgages. You should carefully consider the yield risks associated with PCs, including these: ‚ If you purchase a PC at a discount to its principal amount and the rate of principal payments on the underlying Mortgages is slower than you expect, you will receive payments over a longer period than you expect, so the yield on your investment will be lower than you expect. ‚ If you purchase a PC at a premium over its principal amount and the rate of principal payments on the underlying Mortgages is faster than you expect, you will receive payments over a shorter period than you expect, so the yield on your investment will be lower than you expect. ‚ In general, the rate of Mortgage prepayments early in your investment has the greatest eÅect on your yield to maturity. A negative eÅect on your yield produced by principal prepayments at a higher (or lower) rate than you expect in the period immediately following your purchase of a PC is not likely to be oÅset by an equivalent reduction (or increase) in that rate in later periods. ‚ Mortgages tend to prepay fastest when prevailing interest rates are low. When this happens, you may not be able to reinvest your principal payments in comparable securities at as high a yield. ‚ In a high interest rate environment, Mortgages tend to prepay more slowly. When this happens, you may not receive principal payments, which could otherwise be reinvested in comparable securities at a higher yield, as quickly as you expect. Yields of ARM PCs If you invest in ARM PCs, you should consider the following additional risks: ‚ PC Coupons for ARM PCs generally adjust monthly based on a weighted average of the interest rates on the underlying Mortgages. Several factors will aÅect these PC Coupons: ‚‚ Disproportionate principal payments, including prepayments, on the underlying Mortgages that have relatively low, or high, interest rates compared to the other Mortgages in the same PC Pool will aÅect the level of the PC Coupon for the related ARM PCs, even if the interest rates on the remaining Mortgages do not change. ‚‚ The PC Coupon of your ARM PCs may not fully reÖect current interest rates or Index values because the underlying Mortgage interest rates may adjust on various dates and at various intervals and typically adjust less frequently than monthly. In addition, the interest rates of the underlying Mortgages typically adjust based on an Index value published some time before such adjustment (the lookback period) and there may be a gap of up to several months from the publication of the applicable Index value until the PC Coupon reÖects the adjusted value. 36
‚‚ Although there are generally no limits on monthly PC Coupon adjustments for ARM PCs, interest rates on the underlying ARMs may be subject to adjustment caps, lifetime ceilings and, in some cases, lifetime Öoors. As a result of these limitations, the PC Coupon on an ARM PC at any time may not reÖect the applicable Index value or changes in that value from period to period. ‚ When mortgage interest rates are generally low, which usually results in faster prepayments, the applicable Index value may be relatively high. On the other hand, when mortgage interest rates are generally high, which usually results in slower prepayments, the applicable Index value could be relatively low. Either of these scenarios could result in a lower than expected yield on the ARM PCs. In addition, depending on how frequently the underlying ARMs adjust and the existence of any adjustment caps, in an increasing interest rate environment, the rate of default could increase, which could reduce your yield on the ARM PCs. ‚ The value of an Index will generally change from time to time. Even if the average value of an Index is consistent with your expectations, the timing of any changes in that value may aÅect your actual yield. In general, the earlier a change in the value of the applicable Index, the greater the eÅect on your yield. As a result, a negative eÅect on your yield produced by an Index value that is higher (or lower) than you expect early in your investment is not likely to be oÅset by an equivalent reduction (or increase) in that value in later periods. ‚ If the Index values used to adjust the interest rates of underlying ARMs are lower than you expect, the yield on your investment could be lower than you expect, especially if prepayments are slow. Even if the index value is higher than you expect but prepayments are fast, your yield could be lower than you expect. ‚ The CMT Index and LIBOR tend to reÖect current market rates, and their values may be more volatile than the value of Eleventh District COFI or other Indices which reÖect averages of rates in eÅect over longer periods of time. ‚ If you invest in Payment Capped ARM PCs, the application of payment caps may result in negative amortization or accelerated amortization, which may aÅect your yield. Payment Delay The eÅective yield on any PC will be less than the yield that its PC Coupon and purchase price would otherwise produce, because: ‚ On its Ñrst Payment Date, 30 days' interest will be payable on the PC even though interest began to accrue approximately 45 days earlier, in the case of Gold PCs, or 75 days earlier, in the case of ARM PCs. ‚ On each Payment Date after the Ñrst Payment Date, the interest payable on the PC will accrue during its Accrual Period, which will end approximately 15 or 45 days before that Payment Date (for Gold PCs and ARM PCs, respectively). 37
Suitability PCs may not be suitable investments for you. You should consider the following before you invest in PCs: ‚ PCs are not appropriate investments if you require a single lump sum payment on a date certain, or if you require an otherwise deÑnite payment stream. ‚ A market may not develop for the sale of some types of PCs after their initial issuance. Even if a market develops, it may not continue. As a result, you may not be able to sell your PCs easily or at prices that will allow you to realize your desired yield. ‚ The market values of your PCs are likely to Öuctuate, primarily in response to changes in prevailing interest rates. Such Öuctuations may result in signiÑcant losses to you. ‚ The secondary markets for some PCs have experienced periods of illiquidity in the past, and can be expected to do so again in the future. Illiquidity can have a severely negative impact on the prices of PCs, especially those that are particularly sensitive to prepayment or interest rate risk. ‚ PCs are complex securities. Before investing in a PC, you should be able, either alone or with a Ñnancial advisor, to evaluate the information contained and incorporated in this OÅering Circular and in any related Pool Supplement. You should evaluate the information in the context of your personal Ñnancial situation and your views on possible and likely interest rate and economic scenarios. This OÅering Circular does not describe all the possible risks of an investment in PCs that may result from your particular circumstances, nor does it project how PCs will perform under all possible interest rate and economic scenarios. You should purchase PCs only if you, alone or together with your Ñnancial advisor, understand the prepayment, yield, liquidity and market risks associated with your investment under a variety of interest rate and economic scenarios and you have suÇcient Ñnancial resources to bear all the risks related to your PCs. THE AGREEMENT We form PC Pools and create and sell PCs under the Agreement dated as of October 14, 2005, as amended from time to time. The following summary describes various provisions of the Agreement. This summary is not complete. You should refer to the Agreement if you would like further information about its provisions. You can obtain copies of the Agreement from our internet website or by contacting Investor Inquiry as shown on page 3. Your receipt and acceptance of a PC, without any signature or other indication of assent, constitutes your unconditional acceptance of all the terms of the Agreement. Transfer of Mortgages to PC Pool The Mortgages in each PC Pool will be identiÑed to that PC Pool. We will hold the Mortgage documents, directly or through a custodian acting as our agent or through the seller or servicer of the Mortgages, for the beneÑt of the Holders of each related PC Pool, subject to policies and procedures that we may adopt, modify and waive from time to time. 38
Repurchase and Substitution of Mortgages Once we have identiÑed Mortgages to a PC Pool, Mortgages will not be removed from or added to that PC Pool unless there is a repurchase or substitution in one of the situations described below. We will make any repurchase or substitution in accordance with applicable laws in eÅect at the time of repurchase or substitution. Each repurchase will be treated as a prepayment in full of the Mortgage being repurchased and the entire principal amount of that Mortgage will be passed through to PC Holders on the appropriate Payment Date. Substitutions of Mortgages are far less common than cash repurchases. Repurchases or substitutions may occur in the following situations: ‚ We may repurchase a Mortgage in connection with a payment on our guarantee of that Mortgage. ‚ We may repurchase, or require or permit a seller or servicer to repurchase, a Mortgage if a repurchase is necessary or desirable: ‚ to maintain proper servicing of the Mortgage, or ‚ to maintain the status of the PC Pool as a Ñxed investment trust for federal income tax purposes. ‚ We may repurchase, or require or permit a seller or servicer of a Mortgage to repurchase, any Mortgage if: ‚ such Mortgage is 120 days or more delinquent, ‚ based on Freddie Mac's delinquency and loss model, Freddie Mac has determined that it is more likely than not that a delinquency on such Mortgage will not be cured within 120 days of the due date of its last paid installment, or ‚ Freddie Mac determines, on the basis of information from the related borrower or servicer, that loss of ownership of the mortgaged property is likely or default is imminent due to borrower incapacity, death or hardship or other extraordinary circumstances that make future payments on such Mortgage unlikely or impossible. ‚ We may repurchase a Mortgage if a bankruptcy court approves a plan that materially aÅects the terms of the Mortgage or authorizes a transfer or substitution of the underlying property. ‚ We may require or permit the seller or servicer of a Mortgage to repurchase the Mortgage or (within six months of the settlement of the related PCs) substitute for the Mortgage a Mortgage of comparable type, unpaid principal balance, remaining term and yield, if there is: ‚ a material breach of warranty by a seller or servicer of the Mortgage, ‚ a material defect in the documentation for the Mortgage, or ‚ a failure by a seller or servicer to comply with any requirements or terms set forth in the Guide and other Mortgage purchase documents. 39
‚ We will repurchase a Mortgage or (within two years of the settlement of the related PCs) substitute for the Mortgage a Mortgage of comparable type, unpaid principal balance, remaining term and yield, if: ‚ a court of competent jurisdiction or a federal government agency duly authorized to oversee or regulate Freddie Mac's mortgage purchase business determines that Freddie Mac's purchase of the Mortgage was unauthorized and Freddie Mac determines that a cure is not practicable without unreasonable eÅort or expense, or ‚ such court or government agency requires a repurchase of the Mortgage. ‚ We may repurchase or require or permit the seller or servicer to repurchase: ‚ a convertible ARM when the borrower exercises the option to convert the related interest rate from an adjustable rate to a Ñxed rate, ‚ a Balloon/Reset Mortgage shortly before it reaches its scheduled maturity or reset date, and ‚ a ModiÑable Mortgage at the time the borrower agrees to modify the terms of the Mortgage. Any repurchase of a Mortgage by a seller or servicer will be at its then unpaid principal balance, less any principal on the Mortgage that the seller or servicer has advanced to Freddie Mac. Freddie Mac's repurchase of any Mortgage will be at its then unpaid principal balance, less any outstanding advances of principal on the Mortgage that Freddie Mac has paid to Holders. Events of Default ""Events of Default'' under the Agreement are: ‚ Our failure to pay principal or interest that lasts for 30 days. ‚ Our failure to perform in any material way any other obligation under the Agreement, if the failure lasts for 60 days after we receive notice from the Holders of at least 65% of the outstanding principal amount of any aÅected PC Pool. ‚ SpeciÑed events of bankruptcy, insolvency or similar proceedings involving us (but not including the appointment of a conservator or similar oÇcial for us). Rights Upon Event of Default If an Event of Default under the Agreement is not remedied, the Holders of a majority of the outstanding principal amount of any aÅected PC Pool may remove us and nominate a successor as to that PC Pool, except as to our guarantee obligations. That nominee will replace us unless we object within 10 days after the nomination. In that event, either we or anyone who has been a bona Ñde Holder of an aÅected PC for at least six months may ask a court to appoint a successor. The court may then appoint our successor except as to our guarantee obligations. If we were to experience signiÑcant Ñnancial diÇculties and the Director of the OÇce of Federal Housing Enterprise Oversight, our federal safety and soundness regulator, were to appoint a conservator, we believe, based on an opinion of counsel analyzing various provisions in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 and other relevant law, that the 40
proportional undivided interests of Holders in the related Mortgages would be preserved and borrowers' payments and other recoveries on those Mortgages would continue to be passed through to the Holders. Payments due to Holders pursuant to our guarantees could be made only from our general funds to the extent and so long as they were available. If we were unable to meet our guarantee obligations, the primary sources of funds available to investors would be payments by Mortgage borrowers and recoveries on the Mortgages. In that case, payments to Holders could be adversely aÅected by loan delinquencies and defaults. Control by Holders Except in limited circumstances following an Event of Default, no Holder of a PC has any right to vote or to otherwise control in any manner the management and operation of any PC Pool. In addition, Holders of PCs may institute legal actions and proceedings with respect to the Agreement, the Mortgages or the PCs only in limited circumstances, and no Holder has the right to prejudice the rights of any other Holder under the Agreement or to seek preference or priority over any other Holder. Amendment We may amend the Agreement without the consent of any Holders to: ‚ Cure any ambiguity or correct or add to any provision in the Agreement, if the amendment does not adversely aÅect Holders in any material way. ‚ Maintain the qualiÑcation of any PC Pool as a grantor trust for federal income tax purposes. ‚ Avoid the imposition of any state or federal tax on a PC Pool. ‚ Modify our procedures for calculating payments to Holders or passing through prepayments. With the consent of the Holders of a majority of the outstanding principal amount of any aÅected issue of PCs, we also may amend the Agreement in any other way. However, unless each aÅected Holder consents, we may not amend the Agreement to impair the rights of a Holder to receive payments (including guarantee payments) when due or to sue for any payment that is overdue. Tax Information Within a reasonable time after the end of each calendar year, we or our agent will furnish to each investor who was a Holder on any record date during such year information we deem necessary or desirable to enable Holders and beneÑcial owners of PCs to prepare their federal income tax returns, if applicable. Termination Our obligations and responsibilities under the Agreement to a Holder of a PC will terminate upon (1) the full payment to the Holder of all principal and interest due the Holder based on the applicable Pool Factor or by reason of our guarantees or (2) the payment to the Holder of all amounts held by Freddie Mac and required to be paid under the Agreement. However, our 41
guarantee will be reinstated in the event that any principal or interest payment made to a Holder is for any reason returned by the Holder pursuant to an order, decree or judgment of a court of competent jurisdiction to the eÅect that the Holder was not entitled to retain such payment pursuant to the Agreement. In addition, we will furnish information we deem necessary to enable Holders to prepare their federal income tax returns for the year in which the termination occurs. Various Matters Regarding Freddie Mac We and our directors, oÇcers, employees and agents will not be liable to Holders for any action taken or omitted in good faith or for errors in judgment. However, neither we nor they will be protected against any liability that results from willful misfeasance, bad faith, gross negligence or reckless disregard of obligations. We are required to hold and administer Mortgages in a PC Pool using the same standards as we use for similar mortgages that we own. Except for our guarantee obligations or other payment obligations, we will not be liable for any Holder's direct damages unless we fail to exercise the same degree of ordinary care that we exercise in the conduct of our own aÅairs. We will not be liable for any Holder's consequential damages. In addition, we do not need to appear in any legal action that is not incidental to our responsibilities under the Agreement and that we believe may result in any expense or liability. However, we may undertake any legal action that we believe is necessary or desirable in the interests of the Holders. We will bear the legal costs of any such action. We may acquire PCs. PCs we hold will be treated the same as PCs held by other Holders. The Agreement will be binding upon any successor to Freddie Mac. Governing Law The Agreement is to be interpreted in accordance with federal law. If there is no applicable federal precedent and if the application of New York law would not frustrate the purposes of the Freddie Mac Act, the Agreement or any transaction under the Agreement, then New York law will be deemed to reÖect federal law. CERTAIN FEDERAL INCOME TAX CONSEQUENCES General Any discussion of tax matters in this OÅering Circular and any applicable supplement was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed on such person. Such discussion was written to support the promotion and marketing of the PCs. Investors should consult their own independent tax advisors regarding the PCs and each investor's particular circumstances. The following is a general discussion of the material federal income tax consequences relating to the purchase, ownership and transfer of PCs. It does not address all the federal income tax consequences that may apply to particular categories of investors. Some investors may be subject to special rules. The tax laws and other authorities for this discussion are subject to change or diÅering interpretations, and any change or interpretation may apply retroactively. You should 42
consult your own tax advisors to determine the federal, state, local and any other tax consequences that may be relevant to you. Although we are a government-sponsored enterprise, neither the PCs nor the income received from them is exempt from federal income, estate or gift taxes under the Internal Revenue Code of 1986, as amended (the ""Code''). Further, neither the Code nor the Freddie Mac Act exempts the PCs or income on them from taxation by any state, any United States possession or any local taxing authority. If you deliver Mortgages under our MultiLender Swap Program in exchange for PCs, you should be aware that you may be required to recognize gain or loss on all or a portion of such Mortgages. Tax Status The arrangement under which a PC is created and sold and the related PC Pool is administered will be classiÑed as a grantor trust under subpart E, part I of subchapter J of the Code and not as an association taxable as a corporation. As an investor in a PC, you will be treated for federal income tax purposes as the owner of a pro rata undivided interest in the underlying Mortgages. If you own PCs, you must report on your federal income tax return your pro rata share of the entire income from the Mortgages in the related PC Pool, in accordance with your method of accounting. Income will include gross interest income at the interest rates on the Mortgages and incidental fees, if any. You generally will be able to deduct, under Section 162 or 212 of the Code, your pro rata share of servicers' fees or any of our management and guarantee fees, including incidental fees paid by the borrowers and retained by the servicer or us and all administrative and other expenses of the PC Pool, in accordance with your method of accounting. The Code limits the deductions for these miscellaneous itemized deductions for some investors. PCs generally will be considered to represent ""real estate assets'' within the meaning of Section 856(c)(5)(B) of the Code. Interest income from the PCs generally will be considered to represent ""interest on obligations secured by mortgages on real property'' within the meaning of Section 856(c)(3)(B) of the Code. In the event that any Mortgage has an LTV ratio in excess of 100% (that is, the principal balance of any Mortgage exceeds the fair market value of the real property securing it), the interest income on the excess portion of the Mortgage will not be ""interest on obligations secured by mortgages on real property'' within the meaning of Section 856(c)(3)(B) of the Code and such excess portion of the Mortgage will not be a ""real estate asset'' within the meaning of Section 856(c)(5)(B) of the Code. The excess portion should represent a ""Government security'' within the meaning of Section 856(c)(4)(A) of the Code. If a PC contains a Mortgage with an LTV ratio in excess of 100%, a holder that is a real estate investment trust should consult its tax advisor concerning the appropriate tax treatment of such excess portion. PCs will constitute ""loans. . . secured by an interest in real property which is. . . residential real property'' within the meaning of Section 7701(a)(19)(C)(v) of the Code for purposes of determining whether an institution qualiÑes as a ""domestic building and loan association.'' 43
Buydown or Extended Buydown Mortgages It is not clear for federal income tax purposes whether buydown funds advanced by the originator of the Mortgage would be treated as funds of the borrower, with the borrower correspondingly treated as obligated for the full stated interest rate on the Mortgage. We plan to report for federal income tax purposes using the stated interest rate on the Mortgage. If the Internal Revenue Service (the ""Service'') were to view the borrower's obligation on a net basis, you would be treated as owning two separate debt instruments, one an obligation of the borrower and the other a separate obligation of the originator for the ""bought down'' amounts. In such event, you would recognize some acceleration of taxable income to the period of the buydown accounts and the obligation of the originator may fail to qualify for the special treatments under Sections 856(c)(3)(B), 856(c)(5)(B) and 7701(a)(19)(C)(v) of the Code described under Tax Status above. Discount and Premium If you purchase a PC, you will be treated as purchasing an interest in each of the underlying Mortgages at a price determined by allocating the purchase price paid for that PC among the Mortgages in proportion to their fair market values at the time of purchase. To the extent that the portion of the purchase price allocated to a Mortgage is less than or greater than the portion of the principal balance of the Mortgage allocated to the PC, the interest in the Mortgage will be deemed to have been acquired with discount or premium, respectively. The treatment of any discount will depend on whether the discount represents original issue discount or market discount. You should consult your own tax advisors to determine whether Section 1272(a)(6) of the Code, as expanded by the Taxpayer Reform Act of 1997, could aÅect the accrual of discount or amortization of premium on your PCs or otherwise aÅect the tax accounting for your PCs. If you recognize gain or loss attributable to discount or premium that is not characterized as original issue discount, market discount or amortizable bond premium (described below), your gain or loss will be treated as capital gain or loss if the PC is held as a capital asset. Original Issue Discount You will be required to report as ordinary income your pro rata share of any original issue discount related to the Mortgages underlying the PC pursuant to Sections 1271-1273 and 1275 of the Code. Original issue discount may arise as a result of initial incentive or ""teaser'' interest rates on ARMs or points charged at origination. You will be required to accrue original issue discount into current income only if it exceeds a de minimis amount. The Mortgages also would be subject to the original issue discount rules if, as discussed below, the ""stripped bond'' provisions of the Code were determined to be applicable. We intend to treat deferred interest on a Payment Capped ARM as original issue discount, which you will be required to include in income in the period in which such deferred interest accrues. Market Discount The market discount rules of Sections 1276-1278 of the Code will apply to treat market discount in excess of a de minimis amount as ordinary income. You must recognize accrued market 44
discount to the extent of gain realized on disposition or to the extent of principal payments that you receive. The market discount rules provide that: ‚ Market discount will be considered to accrue under a straight-line method unless you elect to calculate it under a constant interest method. ‚ Interest that you paid or that accrues on indebtedness that you incurred or continued to purchase or carry Mortgages acquired at a market discount will be allowed as a deduction only to the extent that such interest, reduced by the interest on the Mortgages includible in income, including original issue discount, is greater than the market discount that accrued but was not taken into account during the taxable year such interest was paid or accrued. Any such interest expense that is deferred will, in general, be allowed as a deduction when the related market discount income is recognized. ‚ Alternatively, you may elect to include market discount in income currently, under either a straight-line method or a constant interest method, on all market discount obligations you hold except those acquired in taxable years before the year of the election. An election to include market discount as income currently can be revoked only with the Service's consent. In this event, the rules about ordinary income on disposition and interest deferral discussed above will not apply. The exact application of the market discount rules is not clear. Premium If you have purchased your interest in any Mortgage at a premium, the premium may be amortizable under a constant interest method at your election under Section 171 of the Code. The premium is treated as an oÅset to interest income includable with respect to the Mortgage. An election to amortize premium will apply to all debt instruments you hold at the beginning of the tax year for which you make the election and to all such instruments acquired after the election. An election to amortize premium can be revoked only with the Service's consent. Constant Yield Method You may elect to include in gross income all interest that accrues on a Mortgage by using the constant yield method. For purposes of this election, interest would include stated interest, de minimis original issue discount, original issue discount, de minimis market discount and market discount, as adjusted by any premium. You should consider the relationship between this election and the elections described above under Market Discount and Premium. Sale or Exchange of a PC If you sell a PC, you will recognize gain or loss equal to the diÅerence between your adjusted tax basis in the PC and the amount you realized in the sale (not including amounts attributable to accrued and unpaid interest, which will be treated as ordinary interest income). In general, your adjusted tax basis in the PC will equal what you paid for the PC, plus the amount of any discount income you previously reported on the PC, less the amount of any premium you previously oÅset against interest income on the PC and the amount of any principal payments you received on the PC. 45
You must report accrued but unrecognized market discount as ordinary income, but your gain or loss otherwise will be a capital gain or loss if you held the PC as a capital asset. The capital gain or loss will be long-term or short-term, depending on whether you owned the PC for the long-term capital gain holding period (currently more than one year). Capital gains of individuals with respect to capital assets held for more than one year may be eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Application of the Stripped Bond Rules When we issue a PC, Revenue Ruling 71-399, 1971-2 C.B. 433, issued to us by the Service, indicates that any diÅerence between interest payable at the mortgage interest rate and the sum of (a) interest payable at the class coupon plus (b) fees applicable to the Mortgages (servicers' fees or any of our management or guarantee fees) should be accounted for as discount income or premium expense. If such sum exceeds the mortgage interest rate, the diÅerence is characterized as ""discount'' and considered additional gross income. If such sum is less than the mortgage interest rate, the net diÅerence is characterized as ""premium expense.'' In Revenue Ruling 71-399, the Service ruled that discount income is to be included as ordinary income in accordance with the beneÑcial owner's method of accounting, and that premium expense may be deductible in accordance with applicable rules. The Service, however, may contend that by reason of enactment of the stripped bond rules of Section 1286 of the Code (or its predecessor, Section 1232B), Revenue Ruling 71-399 is no longer applicable in characterizing such diÅerence. The Service has issued guidance taking the position that, when Mortgages are sold and the servicer is entitled to receive amounts that exceed reasonable compensation for the mortgage servicing to be performed, the Mortgages are treated as stripped bonds within the meaning of Section 1286 of the Code. If this treatment applies, for tax purposes you would not be treated as having a pro rata undivided interest in the underlying Mortgages, but rather you would be treated as owning ""stripped bonds'' to the extent of your share of principal payments and ""stripped coupons'' to the extent of the class coupon plus reasonable servicing fees and guarantee fees. Under Section 1286, you would be treated as if the payments to be received in respect of your ownership interest in the Mortgages were purchased at an original issue discount equal to the diÅerence between the price at which you are considered to have paid for such payments and the total amount of such payments. You would include in income such original issue discount in accordance with the rules for original issue discount under the Code. EÅectively, you would report both interest and discount on the Mortgages as ordinary income as income accrues under a constant yield method under Series 1271-1273 and 1275 of the Code. The Service has also issued guidance providing that a purchaser of a Mortgage that is a stripped bond must treat it as a market discount bond if the amount of original issue discount on the stripped bond is considered to be zero after application of the de minimis rule of Section 1273(a)(3) of the Code or if the annual stated rate of interest payable on the stripped bond is 100 basis points or less below the annual stated rate of interest payable on the Mortgage. These conditions apparently are based on the premise that the interest payments which remain associated with the stripped bond are treated, for purposes of the original issue and market discount provisions of the Code, as stated interest payable with respect to the stripped bond. If these conditions are met, you would be required to account for any market discount in accordance with the rules for market discount as described above under Discount and Premium. 46
It is unclear whether the position taken by the Service in the guidance would be upheld if challenged. Backup Withholding, Foreign Withholding and Information Reporting If you are a U.S. Person, you may be subject to federal backup withholding tax under Section 3406 of the Code on payments on your PCs, unless you comply with applicable information reporting procedures or are an exempt recipient. Any such amounts withheld would be allowed as a credit against your federal income tax liability. Payments made to an investor who is an individual, a corporation, an estate or a trust that is not a U.S. Person, or to a Holder on behalf of such an investor, generally will not be subject to federal income or withholding tax if: ‚ The Mortgages underlying the investor's PCs all were originated after July 18, 1984. ‚ The PC is not held by the investor in connection with a trade or business in the United States (or, if an income tax treaty applies, is not attributable to a U.S. permanent establishment). ‚ The investor is not, with respect to the United States, a personal holding company or corporation that accumulates earnings in order to avoid United States federal income tax. ‚ The investor is not a U.S. expatriate or former U.S. resident who is taxable in the manner provided in Section 877(b) of the Code. ‚ The investor provides a statement (on Internal Revenue Service Form W-8BEN or a similar substitute form) signed under penalties of perjury that includes its name and address and certiÑes that it is not a U.S. Person in accordance with applicable requirements. Payments to an investor who is not a U.S. Person that represent interest on Mortgages originated before July 19, 1984 may be subject to federal withholding tax at the rate of 30 percent or any lower rate provided by an applicable tax treaty. Regardless of the date of origination of the Mortgages, federal backup withholding tax will not apply to payments on a PC made to an investor who is not a U.S. Person if the investor furnishes an appropriate statement of non-U.S. status. We will make available to each Holder of a PC, within a reasonable time after the end of each calendar year, information to assist Holders and investors in preparing their federal income tax returns. The information made available to you may not be correct for your particular circumstances. For these purposes, the term ""U.S. Person'' means any one of the following: ‚ An individual who, for federal income tax purposes, is a citizen or resident of the United States. ‚ A corporation (or other business entity treated as a corporation for federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia. 47
‚ An estate whose income is subject to United States income tax, regardless of its source. ‚ A trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. Persons have the authority to control all substantial decisions of the trust. ‚ To the extent provided in Treasury Department regulations, certain trusts in existence on August 20, 1996, and treated as U.S. Persons prior to such date, that elect to be treated as U.S. Persons. If a partnership (or other entity treated as a partnership for federal income tax purposes) holds PCs, the treatment of a partner will generally depend upon the status of the particular partner and the activities of the partnership. If you are a partner in such a partnership, you should consult your own tax advisors. ERISA CONSIDERATIONS A Department of Labor regulation provides that if an employee beneÑt plan subject to the Employee Retirement Income Security Act of 1974, as amended (""ERISA'') acquires a ""guaranteed governmental mortgage pool certiÑcate,'' then, for purposes of the Ñduciary responsibility and prohibited transaction provisions of ERISA and the Code, the plan's assets include the certiÑcate and all of its rights in the certiÑcate, but do not, solely by reason of the plan's holding of the certiÑcate, include any of the mortgages underlying the certiÑcate. Under this regulation, the term ""guaranteed governmental mortgage pool certiÑcate'' includes a certiÑcate ""backed by, or evidencing an interest in, speciÑed mortgages or participation interests therein'' if Freddie Mac guarantees the interest and principal payable on the certiÑcate. The regulation makes it clear that Freddie Mac and other persons, in providing services for the Mortgages in a PC Pool, would not be subject to the Ñduciary responsibility provisions of Title I of ERISA, or the prohibited transaction provisions of Section 406 of ERISA or Code Section 4975, merely by reason of the plan's investment in a PC. LEGAL INVESTMENT CONSIDERATIONS You should consult your own legal advisors to determine whether PCs are legal investments for you and whether you can use PCs as collateral for borrowings. In addition, Ñnancial institutions should consult their legal advisors or regulators to determine the appropriate treatment of PCs under any applicable risk-based capital and similar rules. If you are subject to legal investment laws and regulations or to review by regulatory authorities, you may be subject to restrictions on investing in some types of PCs or in PCs generally. Institutions regulated by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the OÇce of Thrift Supervision, the National Credit Union Administration, the Treasury Department or any other federal or state agency with similar authority should review applicable regulations, policy statements and guidelines before purchasing or pledging PCs. 48
DISTRIBUTION ARRANGEMENTS We issue PCs through cash sales or in exchange for Mortgages. We may oÅer PCs under our Cash Program on a daily basis through any of the following methods: ‚ Auction. ‚ Competitive bid oÅering. ‚ Allocation to members of a recognized group of dealers that purchase or sell PCs in accordance with agreements with us. ‚ Direct placement with securities dealers or investors. Under our Guarantor Program, we purchase Mortgages from a single seller and, in exchange, deliver PCs representing interests in those same Mortgages. Under our MultiLender Swap Program, we purchase Mortgages and in exchange issue PCs with a principal balance equal to the aggregate principal balance of the purchased Mortgages. Participants in the MultiLender Swap Program that deliver certain types of Mortgages receive a Freddie Mac Giant PC. Mortgage sellers who acquire PCs or Freddie Mac Giant PCs in exchange for Mortgages may hold those PCs or Freddie Mac Giant PCs or sell them to investors upon acquisition or at a later time. SECONDARY MARKETS, MORTGAGE SECURITY PERFORMANCE AND MARKET SUPPORT ACTIVITIES Certain dealers may buy, sell and make a market in PCs. The secondary market for PCs may be limited. If a dealer sells a PC, currently the dealer is required to conÑrm the sale; notify the purchaser of the settlement date, purchase price, concessions and fees; and make available to the purchaser, by electronic means or otherwise, a copy of this OÅering Circular, the applicable Pool Supplement and any applicable Additional Supplement. You can obtain prices for PCs by contacting the securities dealers selling and making a market in those PCs. You can obtain a list of PC dealers by contacting Investor Inquiry as shown on page 3. We support the liquidity and depth of the market for PCs through various activities, including: ‚ Educating dealers and investors about the relative merits of trading and investing in PCs; ‚ Purchasing and selling PCs and other mortgage-related securities through our retained portfolio; and ‚ Introducing new mortgage-related securities products and initiatives. We may increase, reduce or discontinue these or other related activities at any time, which could aÅect the liquidity and depth of the market for PCs. We support the execution of our credit guarantee business by adjusting our guarantee fee. For example, if the price performance of, and demand for, our PCs is not comparable to mortgage-backed securities issued by the Federal National Mortgage Association (""Fannie Mae'') on future mortgage deliveries by sellers, we may use market-adjusted pricing where we provide guarantee fee price adjustments to partially oÅset weaknesses in prevailing security prices and increase the competitiveness of our credit guarantee business. 49
Our strategies to support PC price performance include the purchase and sale by our retained portfolio of PCs and other agency securities, including Fannie Mae securities. Depending upon market conditions, including the relative prices and relative supply of and demand for PCs and comparable Fannie Mae securities, there may be substantial variability in any period in the total amount of securities we purchase or sell for our retained portfolio in accordance with this strategy. In the fourth quarter of 2004, as part of our eÅort to realign our business around our mission and core business, we ceased our PC market making and support activities accomplished through our Securities Sales & Trading Group business unit and our external money manager program. Our Information Statements contain additional information about our security performance and market support activities. CERTAIN RELATIONSHIPS AND TRANSACTIONS We may have various business relationships with dealers that deal in PCs, originators, sellers or servicers of Mortgages, and aÇliates of those Ñrms. For example, they may from time to time underwrite, invest in or make markets in PCs or other securities we issue, provide Ñnancial advice to us, provide money management, consulting or investment banking services to us, purchase Mortgages or other Ñnancial products from us, sell Mortgages or other Ñnancial products to us, engage in swap, forward, dollar roll, repurchase, reverse repurchase and other Ñnancial transactions with us, resecuritize PCs or other securities we have issued, or enter into licensing or other commercial agreements with us.
Appendix I INDEX OF TERMS The following is a list of deÑned terms used in this OÅering Circular and the pages where their deÑnitions appear.
Accrual Period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Additional Supplements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Agreement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Annual ARMs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ARM PC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ARMs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Assumable Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Balloon/Reset Mortgages ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Biweekly Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Buydown Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Business Day ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cash ProgramÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CD Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CMT IndexÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Code ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Contract Rate Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Conventional Mortgages ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cooperative ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cooperative Share Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CUSIP NumberÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Eleventh District COFIÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ERISA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Events of Default ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Extended Buydown MortgageÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Fannie MaeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Federal COF Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ FHA/VA Mortgages ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Final Payment DateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Freddie Mac ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Freddie Mac Act ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Gold PC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Guarantor Program ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ GuideÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H.15 Release ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Holder ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Home Equity Line of Credit (HELOC) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Hybrid ARMs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Initial Interest ARMs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Initial Interest Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Level Payment MortgagesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ LIBOR ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ LTVÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ MarginÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ModiÑable Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Monthly Reporting Period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Mortgages ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ MultiLender Swap Program ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ National COF Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Negative Amortization Factor ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Payment Capped ARMs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
29 2 3 14 4 4 16 13 16 17 27 24 15 15 43 15 12 17 17 31 15 48 40 17 49 15 12 30 4 3 4 24 19 15 31 17 14 13 14 13 12 16 19 13 22 27 4 24 16 26 14
Payment Capped ARM PCs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 Payment DateÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27 PC Coupon ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 PC Pool Number ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 PC Pools ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 PCs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Cover Pool Factor ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 Pool Supplement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 Prepayment Protection Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 Prime Rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 PreÑx ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 Rate Capped ARMs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13 Record Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29 Reinstated FHA/VA Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 Relocation Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 Second Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 ServiceÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 Semi-annual Secondary Market Treasury Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 Simple Interest Mortgage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 Twelve-Month Average CMT Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 U.S. PersonÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47
Appendix II EXAMPLE POOL SUPPLEMENT This example Pool Supplement illustrates the form and content of the Pool Supplement we post on our internet website for each PC Pool. It is not provided to describe any existing PC Pool. Pool Supplements for PC Pools containing Ñxed-rate Mortgages generally will exclude the data Ñelds which are applicable only to ARM PCs and include the data Ñelds which apply to Gold PCs. See Appendix III Ì Terms Used in Pool Supplements for deÑnitions of the terms used in this example Pool Supplement. The number associated with each data Ñeld in this example Pool Supplement corresponds to the number associated with the related deÑnition in Appendix III.
PC Pool Number XXXXXX Pool Supplement
(To PC OÅering Circular Dated October 14, 2005)
FREDDIE MAC Mortgage Participation CertiÑcates Adjustable-rate Mortgages with Interest Only Periods Capitalized terms used in this Pool Supplement (other than capitalized terms that are deÑned in this document) have the same meanings as in Freddie Mac's Mortgage Participation CertiÑcates OÅering Circular dated October 14, 2005, as it may be supplemented from time to time (the ""PC OÅering Circular''). This Pool Supplement incorporates by reference the PC OÅering Circular. The CertiÑcates may not be suitable investments for you. You should not purchase CertiÑcates unless you have carefully considered and are able to bear the associated prepayment, interest rate, yield and market risks of investing in them, as described in the PC OÅering Circular. You should purchase the CertiÑcates only if you have read and understood this Pool Supplement, the PC OÅering Circular, any related Additional Supplement and any documents that we have incorporated by reference in the PC OÅering Circular. We guarantee the payment of interest and principal on the CertiÑcates as described in the PC OÅering Circular. You can Ñnd a description of the applicable PC Coupon in the PC OÅering Circular under ""Description of the PCs Ì Payments of Interest''. For an initial period of time, we will pay scheduled installments of interest at the PC Coupon rate. After this initial period, we will pay principal together with interest at the PC Coupon rate. Principal and interest payments on the CertiÑcates are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. The CertiÑcates are not tax-exempt securities. Because of applicable securities law exemptions, Freddie Mac has not registered the CertiÑcates with any federal or state securities commission. No securities commission has reviewed this Pool Supplement. The PC Pool number in the pool statistics of this Pool Supplement identiÑes the pool of Mortgages to which the CertiÑcates relate. The pool statistics of this Pool Supplement contain statistical information about the PC Pool, including a PC PreÑx that identiÑes the speciÑc type of mortgages in the PC Pool. Certain information in this Pool Supplement is updated monthly on our internet website. PC Pool Supplement dated II-1
PC Pool Number XXXXXX DESCRIPTION OF PC POOL
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 PC Type ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ TREASURY INITIAL INTEREST WAC ARM PC PC Pool Number ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ XXXXXX CUSIP Number ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ XXXXXXXXX PC Coupon‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.340% Original Principal Amount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $8,457,268.00 PC Issue Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 01/01/2005 First Payment Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 03/15/2005 PC Final Payment Date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 02/15/2035 POOL INFORMATION Seller ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ XXXXXXXX WAC‰‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.055% AOLS* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $176,208 WAOLS* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $204,447 WALA* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ XX WAOLT* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ XX WARM* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 359 WAOCS* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 711 WAOLTV* ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 82 WAMTAM*° ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ LegendÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
UNKNOWN ORIGINAL CREDIT SCORE AND ORIGINAL LTV*
% of UPB # of Loans % of Loans
20 Unknown Credit Score ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 Unknown LTV ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
‰ ‰‰ * ° Updated monthly for ARM PCs only. Updated monthly for Gold PCs only. Updated monthly for Gold PCs and ARM PCs. Initial Interest PCs only.
PC Pool Number XXXXXX ARM SPECIFIC INFORMATION
22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Initial PeriodÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Adjustment Period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Index ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Lookback Period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Next Adjustment Date‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Weighted Average Months to Adjust (WAMTA)‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Initial Cap (Increase) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Initial Cap (Decrease) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Periodic Cap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Convertible ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PC Margin‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Weighted Average Margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PC Lifetime Ceiling‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Weighted Average Lifetime Ceiling‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PC Lifetime Floor‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Weighted Average Lifetime Floor‰ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Prepayment Protection Mortgages ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Servicing: Min 10.0 bps/Max 24.9 bps ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 12 1 YR WEEKLY CMT 45 08/01/2009 59.960 5.000% 5.000% 2.000% N 2.035% 2.750% 11.340% 12.055% 0.000% 0.000% N N
40 FIRST AMORTIZATION PAYMENT DATE* (Initial Interest Mortgages Only)
First P&I Date* Aggregate UPB* % of UPB* # of Loans* % of Loans*
08/01/2009 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 09/01/2009 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10/01/2009 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$1,623,747.97 5,470,506.43 1,363,013.92
19.20% 64.68% 16.12%
Remaining Maturity Low-High*
10 30 8
20.83% 62.05% 16.67%
Loan Age Low-High*
First P&I Date (continued)
Note Rate Low-High‰‰
08/01/2009 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 09/01/2009 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10/01/2009 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
6.107% 5.991% 6.246%
5.625 - 7.125% 5.375 - 6.875% 5.625 - 6.500%
358 359 360
358-358 359-359 360-360
0 0 2
0-009 0-005 0-003
HIGH AND LOW MORTGAGE DATA‰
41-42 Remaining Maturity Low-High 43-44 Note Rate Low-High 45-46 Margin Low-High 47-48 Lifetime Ceiling Low-High 49-50 Lifetime Floor Low-High
5.375% - 7.125%
2.750% - 2.750%
11.375% - 13.125%
0.000% - 0.000%
‰ Updated monthly for ARM PCs only. ‰‰ Updated monthly for Gold PCs only. * Updated monthly for Gold PCs and ARM PCs.
PC Pool Number XXXXXXX ARM PC COMPONENT LEVEL DATA‰
51 Component Coupon Adjustment Date 52 Component First P&I Payment Date° 53 Component UPB 54 Component Number of Loans 55 Component Coupon 56-57 Component Coupon Low-High
08/01/2009 ÏÏ 09/01/2009 ÏÏ 10/01/2009 ÏÏ
8/1/2015 8/1/2015 8/1/2015
$1,623,747.97 5,470,506.43 1,363,013.92
10 4 2
5.392% 5.276% 5.531%
4.910% - 6.410% 4.660% - 6.160% 4.910% - 5.785%
Adjustment 58 Component Date (continued) Margin
59-60 Component 61 Component Margin Lifetime Low-High Ceiling
62-63 Component Lifetime Ceiling Low-High
64 Component 65-66 Component Floor Floor Low-High
08/01/2009 ÏÏ 09/01/2009 ÏÏ 10/01/2009 ÏÏ
2.035% 2.035% 2.035%
2.035% - 2.035% 2.035% - 2.035% 2.035% - 2.035%
11.392% 11.276% 11.531%
10.910% - 12.410% 10.660% - 12.160% 10.910% - 11.785%
1.857% 1.857% 1.857%
1.857% - 1.857% 1.857% - 1.857% 1.857% - 1.857%
71 Note Rate‰‰ 72 Original Loan Size* 73 Remaining Maturity* 74 Loan Age* 75 Loan Term* 76 Original Credit Score* 77 Original LTV*
67 68 69 70
Quartile Quartile Quartile Quartile
1 ÏÏÏÏÏ 2 ÏÏÏÏÏ 3 ÏÏÏÏÏ 4 ÏÏÏÏÏ
Gold PCs Only
66,000 - 42,000 142,000 - 208,000 208,000 - 268,000 268,000 - 334,000
148-239 239-240 240-240 240-240
0-000 0-000 0-001 1-009
234-240 240-240 240-240 240-240
645 679 700 746
679 700 746 773
38 80 80 90
080 080 090 095
78 LOAN PURPOSE*
Type % of UPB # of Loans % of Loans
Purchase ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ReÑnance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unknown ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
65.87% 34.13% 0.00%
34 14 0
70.83% 29.17% 0.00%
79 PROPERTY TYPE*
# of Units % of UPB # of Loans % of Loans
1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2-4ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unknown ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
100.00% 0.00% 0.00%
48 0 0
100.00% 0.00% 0.00%
80 OCCUPANCY TYPE*
Type % of UPB # of Loans % of Loans
Owner Occupied ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Second Home ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Investment Property ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Unknown ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
‰ ‰‰ * ° Updated monthly for ARM PCs only. Updated monthly for Gold PCs only. Updated monthly for Gold PCs and ARM PCs. Initial Interest PCs only.
50.97% 5.98% 43.05% 0.00%
21 3 24 0
43.75% 6.25% 50.00% 0.00%
PC Pool Number XXXXXX 81 FIRST PAYMENT DISTRIBUTION*
Not Paying % of UPB Not Paying # of Loans Not Paying % of Loans
82 LOAN ORIGINATION DISTRIBUTION*
Year Aggregate UPB % of UPB # of Loans % of Loans
83 GEOGRAPHIC DISTRIBUTION*
State Aggregate UPB % of UPB # of Loans % of Loans
CaliforniaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Nevada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Florida ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Colorado ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ New Jersey ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Texas ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Arizona ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Washington ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Georgia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Virginia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ New York ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Oregon ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ohio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Nebraska ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ
$2,916,560.00 1,001,389.45 825,534.91 650,252.00 601,150.00 526,162.98 525,825.00 433,542.99 301,999.99 225,000.00 150,000.00 123,452.00 89,300.00 87,099.00
34.49% 11.84% 9.76% 7.69% 7.11% 6.22% 6.22% 5.13% 3.57% 2.66% 1.77% 1.46% 1.06% 1.03%
12 5 5 4 3 3 4 4 3 1 1 1 1 1
25.00% 10.42% 10.42% 8.33% 6.25% 6.25% 8.33% 8.33% 6.25% 2.08% 2.08% 2.08% 2.08% 2.08%
84 SERVICER DISTRIBUTION*
Servicer* % of UPB* # of Loans* % of Loans*
Servicer (continued) Note Rate Low-High‰‰ Loan Age Low-High*
Remaining Maturity Low-High‰‰
* Updated monthly for Gold PCs and ARM PCs. ‰‰ Updated monthly for Gold PCs only.
5.375 - 7.125%
0 - 009
358 - 360
PC Pool Number XXXXXX 85 SELLER DISTRIBUTION*
Seller* % of UPB* # of Loans* % of Loans*
Seller (continued) Note Rate Low-High‰‰
Loan Age Low-High*
Remaining Maturity Low-High*
* Updated monthly for Gold PCs and ARM PCs. ‰‰ Updated monthly for Gold PCs only.
5.375 - 7.125%
0 - 009
358 - 360
Appendix III TERMS USED IN POOL SUPPLEMENTS This Appendix III deÑnes certain terms used in Pool Supplements. The number associated with a deÑnition in this Appendix III corresponds to the number associated with the related data Ñeld in Appendix II. Description of PC Pool 1. PC Type: A general description of the type of Mortgages in the PC Pool.
2. PC Pool Number: A unique numeric or alphanumeric designation assigned by Freddie Mac to identify a PC. The Ñrst two or three characters of a Pool Number indicate the ""PC PreÑx.'' 3. CUSIP Number: A unique nine-digit alphanumeric designation assigned by the CUSIP Service Bureau to each PC. The CUSIP Number is used to identify the PC on the books and records of the Federal Reserve Banks' book-entry system. 4. PC Coupon: The per annum rate at which interest is passed through monthly to a Holder of a PC, based on a 360-day year of 12 30-day months. 5. Original Principal Amount: The aggregate principal balance of the Mortgages in a PC Pool at the date of PC Pool formation. 6. PC Issue Date: The Ñrst day of the month and year of issuance of the PC, which is the Ñrst day that interest accrues for the Ñrst payment to Holders of PCs. 7. First Payment Date: The date on which Freddie Mac passes through the Ñrst payment of principal and/or interest to Holders of PCs. 8. PC Final Payment Date: The last possible Payment Date on which Freddie Mac could pass through payments of principal and interest to Holders of PCs. Payment Date: The 15th day of each month unless the 15th day is not a Business Day, in which case the next succeeding Business Day. UPB: The unpaid principal balance of a Mortgage on a speciÑed date; ""aggregate UPB'' refers to the aggregate unpaid principal balance of all Mortgages in a PC Pool on a speciÑed date. Pool Information 9. Seller: IdentiÑes the name and address of the entity that sold the Mortgages in a PC Pool to Freddie Mac. This may or may not be the originator or servicer of the Mortgages. 10. WAC (Weighted Average Coupon): the Mortgages in a PC Pool. The weighted average of the current interest rate of
11. AOLS (Average Original Loan Size): The simple average of the UPBs of the Mortgages in a PC Pool as of their origination dates. Refer to WAOLS for the weighted average. 12. WAOLS (Weighted Average Original Loan Size): The weighted average of the UPBs of the Mortgages in a PC Pool as of their origination dates. Refer to AOLS for the simple average. III-1
13. WALA (Weighted Average Loan Age): The weighted average of the current number of months since the origination dates of the Mortgages in a PC Pool. 14. WAOLT (Weighted Average Original Loan Term): The weighted average of the number of scheduled monthly payments of the Mortgages in a PC Pool. 15. WARM (Weighted Average Remaining Maturity): For Gold PCs, the weighted average of the current number of scheduled monthly payments that, after giving eÅect to full and partial unscheduled principal payments, remain on the Mortgages in a PC pool. For ARM PCs, the weighted average of the current number of scheduled monthly payments, which remain on the mortgages in a PC pool. For PC pools backed by balloon/reset mortgages, the WARM reÖects the WATB (Weighted Average Term to Balloon), which is the weighted average remaining number of months to the balloon maturity or reset date of the mortgages. 16. WAOCS (Weighted Average Original Credit Score): The weighted average, as of the origination date, of the borrowers' credit scores for the Mortgages in a PC Pool. The original WAOCS consists of known credit scores as of the settlement date of the PC and the Ñrst monthly update after the settlement date may reÖect additional known credit scores. 17. WAOLTV (Weighted Average Original Loan to Value): The weighted average of the ratios between each Mortgage's UPB as of the origination date and either (1) in the case of a purchase, the lesser of the appraised value of the mortgaged premises on the origination date or the purchase price of the mortgaged premises or (2) in the case of a reÑnancing, the appraised value of the mortgaged premises on the origination date. 18. WAMTAM (Weighted Average Months to Amortize): For Initial Interest PCs only, the weighted average number of months from the Ñrst day of the current month to the First P&I Payment Date of the mortgages in the PC, adjusted by adding one month (for ARM PCs only) to reÖect the timing of the corresponding PC First P&I Payment Date. 19. Legend: A text Ñeld used to disclose additional information about the Mortgages or the PC, including whether an Additional Supplement is available for the PC. This Ñeld will be blank if there is no applicable legend for a PC Pool. Unknown Original Credit Score and Original LTV 20. Unknown Credit Score: The number of Mortgages, percentage of Mortgages and percentage of aggregate UPB of the Mortgages in a PC Pool that have credit scores that are not available. 21. Unknown LTV: The number of Mortgages, percentage of Mortgages, and percentage of the aggregate UPB of the Mortgages in a PC Pool that have LTV ratios that are not available. ARM SpeciÑc information (ARMs Only) 22. Initial Period: For Hybrid ARMs only, the period of time between the Ñrst payment due date of the Mortgages and the Ñrst interest adjustment date. The initial period will be designated by one of the numbers below, which deÑnes the eligible months to Ñrst interest adjustment date for the III-2
Mortgages in an ARM PC Pool. For example, an Initial Period equal to 3 and an Adjustment Period equal to 12 denotes a 3/1 Hybrid ARM. 2 • Initial Period between 18 and 30 months 3 • Initial Period between 30 and 42 months 4 • Initial Period between 42 and 54 months 5 • Initial Period between 54 and 66 months 6 • Initial Period between 66 and 78 months 7 • Initial Period between 78 and 90 months 8 • Initial Period between 90 and 102 months 9 • Initial Period between 102 and 114 months 10 • Initial Period between 114 and 126 months 15 • Initial Period between 174 and 186 months 23. Adjustment Period: The frequency (in months) that the Mortgages in an ARM PC Pool will adjust. For Hybrid ARMs, the Adjustment Period is the frequency that the Mortgages in an ARM PC Pool will adjust after the Ñrst interest adjustment date. 24. Index: A Öuctuating index speciÑed in the Mortgage note, the value of which is used to adjust the interest rate of the Mortgages in an ARM PC Pool. 25. Lookback Period: For each Mortgage in an ARM PC Pool, the number of days from the publication of the Index value used to adjust the note rate to the interest adjustment date for that particular Mortgage. 26. Next Adjustment Date: adjusts. For ARM PCs only, the next date on which the PC Coupon
27. Weighted Average Months to Adjust (WAMTA): For ARM PCs only, the weighted average of the number of months from PC Pool formation to the next date on which the PC Coupon adjusts. 28. Initial Cap (Increase): The maximum amount that the interest rate may increase at the Ñrst interest adjustment date for the Mortgages in an ARM PC Pool. If the Ñeld is blank and the Initial Cap is not speciÑed in the Legend Ñeld, the Initial Cap equals the Periodic Cap; a value of zero (0.000%) indicates that there is no upward adjustment permitted. 29. Initial Cap (Decrease): The maximum amount that the interest rate may decrease at the Ñrst interest adjustment date for the Mortgages in an ARM PC Pool. If the Ñeld is blank and the Initial Cap is not speciÑed in the Legend Ñeld, the Initial Cap equals the Periodic Cap; a value of zero (0.000%) indicates that there is no downward adjustment permitted. 30. Periodic Cap: The maximum amount that the interest rate may increase or decrease at each interest adjustment date after the Ñrst interest adjustment date for the Mortgages in an ARM PC Pool. However, if an Initial Cap is not separately disclosed for an ARM PC, the Periodic Cap is the Initial Cap. A Periodic Cap of zero (0.00%) indicates that there is no Periodic Cap and Mortgages are subject to the lifetime ceiling and margin only. III-3
31. Convertible: Indicates whether the Mortgages in an ARM PC Pool may convert from an adjustable interest rate to a Ñxed interest rate during a speciÑed conversion window. The conversion window is either a speciÑed period of time during which, or speciÑc dates on which, the borrower can exercise the option to convert from an adjustable interest rate to a Ñxed interest rate. 32. PC Margin: The weighted average of the Mortgage Margins of the Mortgages in an ARM PC Pool, net of servicing, management and guarantee fees. For purposes of these deÑnitions, ""Mortgage Margin'' means the number of percentage points that is added to the current Index value to establish the new interest rate at each interest adjustment date for a Mortgage. 33. Weighted Average Margin: The original weighted average of the Mortgage Margins of the Mortgages in an ARM PC Pool. 34. PC Lifetime Ceiling: The weighted average of the lifetime ceilings of the Mortgages in an ARM PC Pool, net of servicing, management and guarantee fees. The lifetime ceiling is the maximum interest rate to which an ARM interest rate may increase over the life of the Mortgage. 35. Weighted Average Lifetime Ceiling: The original weighted average of the lifetime ceilings of the Mortgages in an ARM PC Pool. The lifetime ceiling is the maximum interest rate to which the Mortgage interest rate may increase over the life of the Mortgage. 36. PC Lifetime Floor: The weighted average of the lifetime Öoors of the Mortgages in an ARM PC Pool, net of servicing, management and guarantee fees. The lifetime Öoor is the minimum interest rate to which an ARM interest rate may decrease over the life of the Mortgage. 37. Weighted Average Lifetime Floor: The original weighted average of the lifetime Öoors of the Mortgages in an ARM PC pool. The lifetime Öoor is the minimum interest rate to which the Mortgage interest rate may decrease over the life of the Mortgage. 38. Prepayment Protection Mortgages: Indicates whether the Mortgages in an ARM PC pool are Prepayment Protection Mortgages (PPMs). PC Pools containing Ñxed-rate PPMs will be identiÑed by a unique PC preÑx. 39. Servicing Min 10.0 bps/Max 24.9 bps: For ARM PCs only, the minimum servicing spread is the least amount of interest income, as established by Freddie Mac, that must be retained by the servicer as compensation for servicing Mortgages. ""Y'' in this Ñeld indicates that the minimum servicing spread is 10 basis points. ""N'' in this Ñeld indicates that the minimum servicing spread is 25 basis points. 40. First Amortization Payment Date (Applicable for Initial Interest Mortgages Only) For Initial Interest PCs only, the Ñrst fully amortizing principal and interest payment date of the mortgages in a pool, adjusted by adding one month (for ARM PCs only) to reÖect the timing of the corresponding PC First P&I Payment Date. For PC Pools backed by Initial Interest Ñxed-rate Mortgages only, the UPB, percentage of the aggregate UPB, number of mortgages, percentage of the aggregate number of mortgages, WAC, highest and lowest note rates, WARM, highest and lowest remaining maturity, WALA, and highest and lowest loan age of the mortgages in a PC pool having the same Ñrst date on which principal as well as interest will be due. III-4
For PC Pools backed by Initial Interest ARMs only, the UPB, percentage of the aggregate UPB, number of mortgages, percentage of the aggregate number of mortgages, WAC, highest and lowest note rates, WARM, highest and lowest remaining maturity, WALA, and highest and lowest loan age of the mortgages in a PC pool having the same Ñrst date on which principal as well as interest will be due. High and Low Mortgage Data (ARMs Only) 41. Remaining Maturity Low: The shortest remaining term to maturity, as of PC Pool formation, of the Mortgages in an ARM PC Pool, expressed in months. 42. Remaining Maturity High: The longest remaining term to maturity, as of PC Pool formation, of the Mortgages in an ARM PC Pool, expressed in months. 43. Note Rate Low: The lowest note rate, as of PC Pool formation, of the Mortgages in an ARM PC Pool. 44. Note Rate High: ARM PC Pool. 45. Margin Low: an ARM PC Pool. 46. Margin High: in an ARM PC Pool. The highest note rate, as of PC Pool formation, of the Mortgages in an
The lowest Mortgage Margin, as of PC Pool formation, of the Mortgages in The highest Mortgage Margin, as of PC Pool formation, of the Mortgages
47. Lifetime Ceiling Low: The lowest lifetime ceiling, as of PC Pool formation, of the Mortgages in an ARM PC Pool. The lifetime ceiling is the maximum interest rate to which an ARM interest rate may increase. 48. Lifetime Ceiling High: The highest lifetime ceiling, as of PC Pool formation, of the Mortgages in an ARM PC Pool. The lifetime ceiling is the maximum interest rate to which an ARM interest rate may increase. 49. Lifetime Floor Low: The lowest lifetime Öoor, as of PC Pool formation, of the Mortgages in an ARM PC Pool. The lifetime Öoor is the minimum interest rate to which an ARM interest rate may decrease. 50. Lifetime Floor High: The highest lifetime Öoor, as of PC Pool formation, of the Mortgages in an ARM PC Pool. The lifetime Öoor is the minimum interest rate to which an ARM interest rate may decrease. ARM PC Component Level Data 51. Component Coupon Adjustment Date: The next scheduled interest adjustment date of the Mortgages in an ARM PC pool having the same interest adjustment date, adjusted by adding one month to reÖect the timing of the corresponding PC coupon adjustment date. 52. Component First P&I Payment Date (Initial Interest ARM PCs Only): The Ñrst fully amortizing principal and interest payment date of a group of Mortgages in an Initial Interest ARM PC Pool having the same Component Coupon Adjustment Date, adjusted by adding one month to reÖect the timing of the corresponding PC First P&I Payment Date. III-5
53. Component UPB: The aggregate UPB of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date. For Initial Interest ARM PCs, the aggregate UPB of the mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date. 54. Component Number of Loans: The number of loans in an ARM PC pool having the same Component Coupon Adjustment Date. For Initial Interest ARM PCs, the number of loans in an ARM PC pool having the same Component Coupon Adjustment Date and the same Component First P&I Payment Date. 55. Component Coupon: The weighted average of the interest rates of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the weighted average of the interest rates of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 56. Component Coupon Low: The lowest interest rate of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the lowest interest rate of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 57. Component Coupon High: The highest interest rate of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the highest interest rate of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 58. Component Margin: The weighted average of the Mortgage Margins in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the weighted average of the Mortgage Margins in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 59. Component Margin Low: The lowest Mortgage Margin in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the lowest Mortgagee Margin in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 60. Component Margin High: The highest Mortgage Margin in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the highest Mortgage Margin in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 61. Component Lifetime Ceiling: The weighted average of the lifetime ceilings of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the weighted average of the lifetime ceilings of the Mortgages in an ARM PC pool having the same Component Coupon III-6
Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 62. Component Lifetime Ceiling Low: The lowest lifetime ceiling of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the lowest lifetime ceiling of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 63. Component Lifetime Ceiling High: The highest lifetime ceiling of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the highest lifetime ceiling of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 64. Component Lifetime Floor: The weighted average of the lifetime Öoors of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the weighted average of the lifetime Öoors of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. 65. Component Lifetime Floor Low: The lowest lifetime Öoor of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the lowest lifetime Öoor of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees 66. Component Lifetime Floor High: The highest lifetime Öoor of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date, net of servicing, management and guarantee fees. For Initial Interest ARM PCs, the highest lifetime Öoor of the Mortgages in an ARM PC pool having the same Component Coupon Adjustment Date and Component First P&I Payment Date, net of servicing, management and guarantee fees. Quartile Distribution Quartiles are based on each 25th percentile of each PC's Original Principal Amount. 67. Quartile 1 represents the range from the lowest value of the data to the data corresponding to the 25th percentile of the PC's Original Principal Amount. 68. Quartile 2 represents the range from the data corresponding to the 25th percentile of the PC's current principal balance to the data corresponding to the 50th percentile of the PC's Original Principal Amount. 69. Quartile 3 represents the range from the data corresponding to the 50th percentile of the PC's current principal balance to the data corresponding to the 75th percentile of the PC Original Principal Amount. 70. Quartile 4 represents the range from the data corresponding to the 75th percentile of the PC's Original Principal Amount to the highest data. III-7
Quartiles represent the distribution of the following attributes for all Mortgages in a PC Pool: 71. Note Rate (Gold PCs Only): The interest rate on a Mortgage note. 72. Original Loan Size: Loan amount as of the note date of the Mortgage. 73. Remaining Maturity: Remaining term to Maturity Date, or term to balloon maturity or reset date for Balloon/Reset Mortgages. 74. Loan Age: Number of months from the note date. 75. Loan Term: Number of scheduled monthly payments that are due over the life of the Mortgage. 76. Original Credit Score: A number summarizing an individual's credit proÑle that indicates the likelihood that the individual will repay future obligations. 77. Original LTV: Original loan-to-value ratio. 78. Loan Purpose The number of Mortgages, percentage of Mortgages and percentage of the aggregate UPB of the Mortgages in a PC Pool that are either reÑnance Mortgages or purchase Mortgages. If the loan purpose is not available, the Loan Purpose will be ""Unknown.'' 79. Property Type The number of Mortgages, percentage of Mortgages and percentage of the aggregate UPB of the Mortgages in a PC Pool that are secured by one-unit properties and by two-to-four-unit properties. If the property type is not available, the Property Type will be ""Unknown.'' 80. Occupancy Type The number of Mortgages, percentage of Mortgages and percentage of the aggregate UPB of the Mortgages in a PC Pool that are secured by primary residences, second homes, and investment properties. If the occupancy type is not available, Occupancy Type will be ""Unknown.'' 81. First Payment Distribution The number of Mortgages, percentage of Mortgages and percentage of the aggregate UPB of the Mortgages in a PC Pool that have not yet reached their Ñrst Payment Date. 82. Loan Origination Distribution The number of Mortgages, percentage of Mortgages and percentage of the aggregate UPB of the Mortgages in a PC Pool that were originated in a given year. For seller-owned modiÑed Mortgages, modiÑed Mortgages, converted Mortgages and construction-to-permanent Mortgages, the modiÑcation/converted date replaces the origination date. III-8
83. Geographic Distribution The number of Mortgages, percentage of Mortgages and percentage of the aggregate UPB of the Mortgages in a PC Pool that are secured by properties in a given state. 84. Servicer Distribution The WAC, highest and lowest note rates, WALA, highest and lowest age, WARM, highest and lowest remaining maturity, number of Mortgages, percentage of Mortgages, and percentage of the aggregate UPB of the Mortgages in each entity that services at least 1% of the Mortgages in a PC pool (updated to reÖect transfer of servicing). Entities servicing less than 1% of the Mortgages in a PC pool are reÖected under the heading ""ServicersG1%''. 85. Seller Distribution The WAC, highest and lowest note rates, WALA, highest and lowest loan age, WARM, highest and lowest remaining maturity, number of Mortgages, percentage of Mortgages, and percentage of the aggregate UPB of the Mortgages for each entity that sold to Freddie Mac at least 1% of the Mortgages in a PC pool. Entities that sold to Freddie Mac less than 1% of the Mortgages in a PC pool are reÖected under the heading ""SellersG1%''.
UNITED STATES OF AMERICA
FEDERAL HOUSING FINANCE AGENCY
In Re Conservatorship of: Federal Home Loan Mortgage Corporation
NOTICE REGARDING DETEFWINATION AND APPOINTMENT OF CONSERVATOR This Notice confirms that, in accordance with the powers granted to me and to the Federal Housing Finance Agency under Section 1 145 of the Federal Housing Finance Regulatory Reform Act of 2008, Subdivision A of P. L. 110-289 (codified at 12 U.S.C. Section 4617), 1 determined to appoint a conservator for the Federal Home Loan Mortgage Corporation ("Freddie Mac").
Conse ator for Freddie Mac.
t 8:30 p.m. on September 6,2008, I appointed the Federal Housing Finance Agency
FEDERAL HOUSTNG FINANCE AGENCY As Conservator for Federal Home Loan Mortgage Corporation ("Freddie Mac")
Septe ber 18,2008
PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF SANTA BARBARA
At the time of service I was over 18 years of age and not a party to this action. I am attorney for plaintiff. My address is: 950 Roble Lane, Santa Barbara, CA 93 103. On the date entered below I served true copies of the following document(s)
FIRST AMENDED COMPLAINT (VERIFIED) Helen Cayton, Atty for CWRC Adam S. Hamburg, Atty for Wells Fargo Prenovost, Norinandin, Bergh & Dawe Wright, Finlay & Zak LLP2 122 No.
Broadway, Suite 200 Santa Ana, CA 92706-26 14 7 14-547-2444 fax 7 14-835-2889 "ahamburgapnbd.corn"
4664 MacArthur Court, Suite 200 Newport Beach, CA 92660 949-477-5050 ext.1024 fax 949-608-9142
Courtesy copy sent by email to: Director@fhfa.gov; DeputyDirectoremail@example.com;
BY CMIECF NOTICE OF ELECTRONIC PILING: I electronically filed the
document(s) with the Clerk of the Court by using the CM/ECF system. Participants in the case who are registered CM/ECF users will be served by the CMIECF system. Participants in the case who are not registered with CMIECF users will be served by mail or by any other ineans permitted by the court rules, and/or agreed by the parties.
I declare under penalty of perjury under the laws of the United States of America
that the foregoing is true and correct and that I am a member of the bar of the Court at whose direction the service was made. Executed on the date below at Santa Barbara, CA
Dated: 5-9-20 13
FAC filed 5/9/20 13
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