Fannie Mae and Freddie Mac Arms Length Affidavits

  • 11/17/2011 12:40 PM
    Message # 752780

    The American Land Title Association believes that they are close to reaching an agreement with Fannie Mae and Freddie Mac to amend the Affidavits they have been requiring on short sales. As the Affidavits currently read, all parties executing the form claim to have personal knowledge of intentions of the buyer and seller that are beyond the scope of what a title agent of attorney could have a way of discerning. If a title agent or attorney executes the Affidavit, he or she would be giving additional insurance that we are not authorized to write. As an industry, we have been working diligently to eliminate this additional burden on title agents. We are pleased to hear of the progress but encourage you to continue to refuse to execute these Affidavits if you cannot amend them. Our refusal as an industry to do so will keep pressure on the GSE's to make the appropriate amendments. 


    Last modified: 11/22/2011 2:20 PM | Anonymous
  • 11/22/2011 2:00 PM
    Reply # 757084 on 752780
    This has now been made official.  You can learn more details in FLTA's 2011 Bulletin 21 
  • 02/15/2012 4:11 PM
    Reply # 826248 on 752780

    Would someone be able to send to me a copy of the new Freddie Mac Affidavit that has been actually utilized in a closing.

      I am having issues with lenders that have not updated the language and are refusing to make the changes per the Freddie Mac bulletin.

    If I could present one to the lenders, I think I could get them to revise their current affidavit.

    Please feel free to send to me a blacked out copy, redacting all personal info.

  • 02/28/2012 8:31 PM
    Reply # 838740 on 752780
    Since I'm no longer handling closings, I don't have what may be out there in the field.

    The Freddie Mac Single-Family Seller/Servicing Guide at sec. B65.40 sets forth the content of the affidavit in a fair bit of detail.  

    Here's the actual language:

    "In addition, the Servicer must obtain a short sale affidavit wherein the parties to the transaction attest that the sale constitutes an "arm's length" transaction. An "arm's length transaction" is a transaction between parties who are independent of one another, and unrelated and unaffiliated by family, marriage or commercial enterprise, other than the purchase and sale of the Mortgaged Premises between the Borrower(s) and the purchaser(s) that is the specific subject of the proposed short sale as disclosed to the Servicer. This affidavit is to be executed before or at the time of closing of the sale of the Mortgaged Premises by all Borrower(s), purchaser(s), real estate brokers representing any of the parties, the escrow/closing agent performing the closing of the sale, and the transaction facilitator facilitating the sale (if any) certifying under penalty of perjury that to the best of each signatory's knowledge and belief :

    (a)  The sale of the Mortgaged Premises is an "arm's length" transaction, between parties who are unrelated and unaffiliated by family, marriage, or commercial enterprise;

    (b)  There are no agreements, understandings or contracts between the parties that the Borrower will remain in the Mortgaged Premises as a tenant or later obtain title or ownership of the Mortgaged Premises, except to the extent that the Borrower is permitted to remain as a tenant on the Mortgaged Premises for a short term, as is common and customary in the market but no longer than ninety (90) days, in order to facilitate relocation;

    (c)  Neither the Borrower(s) nor the purchaser(s) will receive any funds or commissions from the sale of the Mortgaged Premises . The Borrower may receive a payment if it is offered by the Servicer, approved by Freddie Mac and reflected on the HUD-1 Settlement Statement.

    (d)  There are no agreements, understandings or contracts relating to the current sale or subsequent sale of the Mortgaged Premises that have not been disclosed to the Servicer

    (e)  All amounts to be paid to any party, including holders of other liens on the Mortgaged Premises, in connection with the short payoff transaction have been disclosed to and approved by the Servicer and will be reflected on the HUD-1 Settlement Statement

    (f)  Each signatory understands, agrees and intends that the Servicer and Freddie Mac are relying upon the statements made in the affidavit as consideration for the reduction of the payoff amount of the Mortgage and agreement to the sale of the Mortgaged Premises;

    (g)  A signatory who makes a negligent or intentional misrepresentation agrees to indemnify the Servicer and Freddie Mac for any and all loss resulting from the misrepresentation including, but not limited to, repayment of the amount of the reduced payoff of the Mortgage;

    (h)  The certification will survive the closing of the transaction; and

    (i)  Each signatory understands that a misrepresentation may subject the party making the misrepresentation to civil and/or criminal liability

    The affidavit must contain the name of the Servicer, Servicer loan number for the subject Mortgage, the mailing address of the Mortgaged Premises and the date the sales contract that is the subject of the short sale was ratified by the parties.

    All signatures to the affidavit must be notarized and dated. The affidavit must contain the printed name and signature of each signatory. The signature of a real estate agent or settlement agent signing in a representative capacity for the brokerage or settlement service provider is acceptable so long as the representative capacity is clearly identified. The Servicer may modify and integrate its own requirements into the affidavit form so long as the minimum requirements contained in this section are present. The short sale affidavit must be a separately identifiable document, distinct from other closing or pre-closing documents, such as the sales contract."

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