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Servicing Maturing Balloon/Reset Mortgages Quick Reference Guide
Servicing Maturing Balloon/Reset Mortgages
Quick Reference Guide
June 2012
Servicing Maturing Balloon/Reset Mortgages Quick Reference Guide
NOTICE
The information in this Quick Reference Guide is designed to provide general guidance to
Freddie Mac Servicers who are servicing maturing Balloon/Reset Mortgages. This information
is intended as an aid -- not as a substitute for -- complying with the requirements for servicing
maturing Balloon/Reset Mortgages, as set forth in the Single-Family Seller/Servicer Guide (the
Guide). Each Freddie Mac-approved Servicer must comply with all the provisions of the Guide,
and of all other Purchase Documents, as that term is defined in the Guide. This Quick Reference
Guide is not a Purchase Document.
Servicing Maturing Balloon/Reset Mortgages Quick Reference Guide
Table of Contents
What is a Balloon/Reset Mortgage? ....................................................................................................... 1
What is the Reset Option?....................................................................................................................... 1
What are the Reset Conditions? .............................................................................................................. 1
What is the Reset Timeline? ................................................................................................................... 2
Required Notices to Borrower ................................................................................................................ 2
What to Do if the Borrower Does Not Respond ................................................................................... 23
What are the 5 Disposition Codes? ....................................................................................................... 24
Who is an Eligible and Ineligible Borrower? ....................................................................................... 24
Eligible Borrower.............................................................................................................................. 24
Ineligible Borrower ........................................................................................................................... 24
Form 1130, Balloon/Reset Mortgage Exception Transmittal ........................................................... 24
How to Calculate the Reset Note Rate Example .................................................................................. 27
How to Calculate the Servicing Spread ................................................................................................ 27
Examples of Calculations ................................................................................................................. 27
Important Note .................................................................................................................................. 27
When to Update Your System with New Reset Terms......................................................................... 28
Balloon Due Date Calendar .................................................................................................................. 28
What are the Balloon/Reset Mortgage Non-compliance Fees? ............................................................ 28
What to do when a Balloon/Reset Mortgage Has Not Been Rate Locked and is Past Maturity .......... 28
Frequently Asked Questions ................................................................................................................. 29
Freddie Mac Resources ......................................................................................................................... 31
Appendix A – Glossary Terms ........................................................................................................... A-1
Appendix B – Sample Completed Borrower Required Notice ........................................................... B-1
Freddie Mac Document
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What is a Balloon/Reset Mortgage?
A Balloon/Reset Mortgage is a fixed-rate, level payment, First Lien Mortgage with the following
characteristics:
•
The monthly principal and interest payment is based on an amortization schedule calculated to
pay the original principal balance in full, in 360 months.
•
The unpaid principal balance (UPB) of the Balloon Note is due in a lump sum (Balloon
Payment) on the Balloon Maturity Date.
•
The Borrower has a Reset Option on the Balloon Maturity Date.
As used in this Quick Reference Guide, the term “Balloon/Reset Mortgage” refers to a Balloon/Reset
Mortgage that has a Balloon Note with an original term of 5 or 7 years.
Capitalized terms used in this Quick Reference Guide have the meaning ascribed to them in the SingleFamily Seller/Servicer Guide (“Guide”) Glossary. Additional terms are defined in Guide Section A83.3
and italicized when used in the Guide chapter; these terms are also italicized in this Quick Reference
Guide for your convenience. A Glossary that contains definitions of some of the terms used in the Guide
and this Quick Reference Guide is attached as Appendix A.
What is the Reset Option?
The Reset Option is a Borrower’s option to extend the term to 30 years and modify his or her
Balloon/Reset Mortgage on the Balloon Maturity Date as provided in the Balloon Note Addendum and
Balloon Rider (collectively referred to as Reset Rider), subject to meeting all of the Reset Conditions.
What are the Reset Conditions?
1. The Borrower must still be the owner and occupant of the property.
2. The Borrower must be current in his or her monthly Mortgage payments and cannot have been more
than 30 days late on any of the 12 scheduled monthly payments due immediately preceding the
Balloon Maturity Date.
3. There are no liens, defects, or encumbrances against the property, or other adverse matters affecting
title of the property (except for real estate taxes).
4. The Reset Note Rate cannot be more than 5 percent above the original Balloon Note rate.
5. The Borrower must make a written request to you to exercise the Reset Option.
Freddie Mac Document
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What is the Reset Timeline?






13-14 months before the Balloon Maturity Date, the Servicer must send the early notice to the
Borrower.
120 to 100 days before the Balloon Maturity Date, the Servicer must send the required notice to the
Borrower.
Servicers should provide a prepaid postage return envelope with the required notice to make it easier
for the Borrower to respond to the notice.
60 days before the Balloon Maturity Date, the Servicer can lock in the Freddie Mac Required Net
Yield (RNY)
50 days before the Balloon Maturity Date, the Servicer should try to contact non-responsive
Borrowers. The Servicer should use overnight delivery to send a second or follow-up required notice
letter to an unresponsive Borrower. A required notice letter sent by overnight delivery decreases the
opportunity for a Borrower to claim insufficient notice of an upcoming Balloon Maturity Date when
both of the following occur:
o You have had no response from a Borrower by a predetermined date that you have set (on or
about 50 days before the Balloon Maturity Date).
o Your attempts to contact the Borrower by telephone have been unsuccessful.
45 days before the Balloon Maturity Date, the Servicer must receive the Borrower’s response.
Required Notices to Borrower
The required notices are written notices the Servicer must send to the Borrower to comply with the
Balloon Note Addendum and Balloon Rider advising the Borrower of the Balloon Payment due on the
Balloon Maturity Date and of the Reset Option.
Examples of Borrower Notices
The following pages are examples of the following required notices:
• Borrower Current Was Not Delinquent
• Borrower Current, Was Delinquent
• Borrower Now Delinquent
Behind each of the first two notice examples are examples of a Borrower’s Letter Intent (referred to in
Guide Section A83.3 in the definition of “election to reset”). There are two alternative forms available
for your use: one if you are ordering Traditional Title Insurance coverage and the other one if you are
ordering Special Reset Title Insurance coverage). For an example of a completed Sample Required
Notice to a Borrower, Current, Was Not Delinquent, see Appendix B.
Freddie Mac Document
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EXAMPLE : Required Notice to Borrower - Current, Was Not Delinquent
Reminder: You must adapt the sample letter and statement to the applicable reset rider, to
whatever processes you have set up and to comply with applicable law.
[Date]
[Borrower(s) Name(s)]
[Mailing Address]
[City, State, Zip]
RE:
Balloon Mortgage Loan Number: [
Property Address [
]
]
Dear [Borrower(s)]:
Your mortgage on the above property is a balloon mortgage that will mature on [Balloon Maturity Date]. On this date you
will have a lump sum payment due that will include the full unpaid principal balance of your mortgage, plus any accrued
interest and other amounts due.
You have two options available to you to take care of the lump sum payment that is due. You can:
1. Extend and modify your mortgage if you meet certain conditions. We call this process a “reset.”
or
2. Pay your mortgage in full on or before [Balloon Maturity Date].
Each option is described below.
Important Note
The reset option is not automatic. If you will not be paying your mortgage in full, you must follow the instructions below
and in the attachment to reset your mortgage.
Resetting your mortgage
The documents you signed when you obtained your mortgage give you the option of resetting your mortgage if you meet
certain conditions that are described in those documents. Resetting your mortgage means we extend the term of your
mortgage for [25 [for a 5-year Balloon/Reset Mortgage] or 23 [for a 7-year Balloon/Reset Mortgage]] years at a modified
interest rate.
You may reset your mortgage if you meet all of the Reset Conditions as specified in your Balloon Note Addendum and
Balloon Rider. If you conclude that you cannot meet one or more of these conditions, but you still want to reset your
mortgage, you must discuss this with us as soon as possible and we will work with you to meet your needs.
1.
2.
3.
You still own and occupy the property referenced above. [You must delete the words “and occupy” here if they were
crossed out or deleted from the Reset Rider at origination.]
You have not been more than 30 days late on any of the 12 scheduled monthly payments due before [Balloon Maturity
Date]. As of the date of this letter, our records show that you have not been 30 or more days late in your payments due
since [Due Date of the monthly payment due 12 months before the Balloon Maturity Date]. However, to qualify for
the reset you must make all of your remaining scheduled monthly payments on time.
You have no other liens (including a second mortgage, a home equity line of credit, or a real estate or income tax lien,
etc.), defects or encumbrances or any other adverse matters that affect title to the property, other than the first lien of
the balloon mortgage. [If you are not escrowing for real estate taxes, insert the following language: Also, your real
estate tax payments must be current.] [If the Reset Rider allowed for secondary financing in existence on the date of
the Reset Rider you must add the following: However, you may have a second mortgage if it is the same second
mortgage you had at the time your mortgage was originated and it contains language clearly subordinating the second
mortgage to the Reset Mortgage.]
Freddie Mac Document
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[Date]
Page 2
4.
You notify us in writing no earlier than [60 calendar days before the Balloon Maturity Date] [If the Reset Rider does
not contain the “no earlier than 60 calendar days language”, you must omit the “no earlier than 60 calendar day”
language] and no later than [45 calendar days before the Balloon Maturity Date] that you want to exercise the reset
option.
IMPORTANT NOTE: IF YOU FAIL TO NOTIFY US IN WRITING OF YOUR ELECTION TO
EXERCISE THE RESET OPTION BY [45TH CALENDAR DAY BEFORE THE BALLOON
MATURITY DATE], YOU WILL LOSE THE RESET OPTION AND ALL AMOUNTS YOU OWE ON
YOUR MORTGAGE WILL BE DUE AND PAYABLE ON [BALLOON MATURITY DATE].
5.
The modified interest rate, which your mortgage documents call the “reset note rate,” is not more than five percent
(5%) above the current interest rate on your mortgage. We will determine whether you meet this reset condition
after we receive your notice that you elect to reset and after we calculate what the reset note rate will be. The
formula for calculating the reset note rate is contained in the Balloon Note Addendum and Balloon Rider, which are
part of the mortgage documents you signed when you obtained your mortgage.
Paying your mortgage in full
The amount you owe on [Balloon Maturity Date] is estimated to be:
1. Unpaid principal balance
2. Accrued interest
3. Fees or other charges due
[List fee or charge]
$
[List fee or charge]
$
Total Due
$
$
$
The total due is an estimate that assumes the remainder of your scheduled monthly payments will be received by us on the
first day of each month that they are due and that no additional fees or other charges are incurred.
If you will be paying your mortgage in full, please
1.
2.
3.
Complete the enclosed “Borrower’s Intention/Request Statement” and return it to us as soon as possible
Contact us at [address and/or telephone number] before you send in the payoff, so we can give you the exact amount that
is due on your mortgage
Make sure your payoff funds will reach us by [Balloon Maturity Date], to avoid additional interest and other charges
Freddie Mac Document
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Servicing Maturing Balloon/Reset Mortgages Quick Reference Guide
Uncertain of your status
If you are uncertain about what to do or if you don’t meet the reset conditions as specified in your Balloon Note Addendum
and Balloon Rider and described above, and you can’t pay your mortgage in full, then contact us immediately so we can
discuss whether you may qualify for a reset under terms that are similar to, but not exactly the same as the terms stated in
your mortgage documents or complete the Borrower’s Intention/Request Statement and send it to us no later than [state due
date]. If you have any questions about the maturity of your mortgage, you can call us at [telephone number].
Sincerely,
[Name]
[Title]
Attachment/1
Freddie Mac Document
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Servicing Maturing Balloon/Reset Mortgages Quick Reference Guide
Use this Statement if You will be Ordering Traditional Title Insurance Coverage
Borrower’s Intention/Request Statement
Borrower’s Notice to Servicer as Required by the
Balloon Note Addendum and Balloon Rider
Check one of the three boxes on the left
I/We will pay my/our mortgage in full on or before the maturity date.


I/We elect to exercise my/our reset option and I/we certify that I/we meet (or will meet
within 30 days) all the reset conditions contained in my/our Balloon Note Addendum and
Balloon Rider.
Check each of the following boxes that apply to your circumstances
I/We currently own the property securing the balloon mortgage.






Freddie Mac Document
[omit this bullet if occupancy is not a Reset Condition in the Reset Rider.]
I/We currently occupy the property securing the mortgage as my/our
 Primary residence
 Second home
I/We have not filed for bankruptcy protection, nor am/are I/we under a
bankruptcy repayment plan.
I/We do not have any other liens, defects, encumbrances or adverse matters
affecting the title to the property except the balloon mortgage.
[If the Reset Rider allowed for secondary financing in existence on the date of
the Reset Rider you must add the following: However, you do not need to
check this box if the only other lien you have is the second mortgage you
originated at the same time your balloon mortgage was originated and it
contains language clearly subordinating the second mortgage to the Reset
Mortgage.]
I/We do have another lien, defect, encumbrance or adverse matter affecting the
title to the property securing the mortgage besides the balloon mortgage.
However, I/we will pay off or resolve the lien, defect, encumbrance or adverse
matter and provide you with proof of such resolution within the next 30 days.
[If the Reset Rider allowed for secondary financing in existence on the date of
the Reset Rider this bullet should read as follows: I/We do have another lien,
defect, encumbrance or adverse matter affecting the title to the property
securing the mortgage besides the balloon mortgage and the second mortgage
that was originated at the same time the balloon mortgage was originated or we
have a second mortgage that was originated at the same time the balloon
mortgage was originated but it does not contain language clearly subordinating
the second mortgage to the Reset Mortgage. However, I/we will pay off or
resolve the lien, defect, encumbrance or adverse matter and provide you with
proof of such resolution within the next 30 days.]
[add this box if you are not escrowing for real estate taxes]
I/We directly pay my/our real estate taxes and as of the date of this statement,
my/our real estate tax payments are current.
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Borrower Intention/Request Statement
Traditional Title Insurance Coverage
Page 2

I/We cannot pay off my/our mortgage, and would like to reset my/our mortgage.
However, I/we do not meet the reset conditions contained in the Balloon Note Addendum
and Balloon Rider, so I/we want to know what other options might be available.
Check each of the following boxes that apply to your circumstances



I/We do not still own the property securing the mortgage
[Omit this bullet if occupancy is not a Reset Condition in the Reset Rider.]
I/We do not occupy the property as my/our primary residence or second home.
I/We do have another lien, defect or encumbrance or adverse matter affecting
the property securing the mortgage and cannot pay it off or clear it up within
30 days. [If the Reset Rider allowed for secondary financing in existence on
the date of the Reset Rider, this bullet should read as follows: I/We do have
another lien, defect, encumbrance or adverse matter affecting the title to the
property securing the mortgage besides the balloon mortgage and the second
mortgage that was originated at the same time the balloon mortgage was
originated and cannot pay the lien off or clear it up within the next 30 days.]
IMPORTANT NOTE:
Freddie Mac Document
Date and sign the certification and acknowledgments on the
reverse side.
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Borrower Intention/Request Statement
Traditional Title Insurance Coverage
Page 3
By signing this Borrower Intention/Request Statement, I/we certify and acknowledge the following:
1. I/We certify that all information provided in this statement is true and correct as of the date set forth
opposite my/our signature(s) and acknowledge my/our understanding that any intentional or negligent
misrepresentations(s) of the information contained in this statement may result in civil liability and/or
criminal penalties. Additionally, false and incorrect information will make the reset option null and
void and I/we will be required to pay my/our mortgage in full.
2. I/We understand and agree that you will obtain the [Federal Home Loan Mortgage Corporation’s or
Federal National Mortgage Association’s] required net yield (RNY) to calculate the reset note rate
and my/our new monthly payments as follows:
If you receive my/our statement
 By [time of day and time zone] Monday through Friday (excluding legal holidays), you will
obtain the RNY no later than [time of day and time zone] on the day you receive my/our
statement
 After [ time of da y a nd time z one] M onday t hrough F riday ( excluding l egal hol idays), you w ill
obtain the RNY no later than [time or da y and time zone] on the next business day after the day
you have received my/our statement.
Date
Borrower’s Signature
Date
Borrower’s Signature
Date
Borrower’s Signature
Date
Borrower’s Signature
Telephone Number: _____________________________ Is this a ( ) Day or ( ) Evening number?
[FIX FORMATTING HERE, type style and sizes are different]Return this statement to:
[Servicer Name]
[Attention]
[Mailing Address]
[City, State Zip Code]
We must receive this statement between [60th calendar day before Balloon Maturity Date] and
[45th calendar day before Balloon Maturity Date] for you to be eligible to exercise the reset
option.
[If the Reset Rider does not contain the “no earlier than 60 calendar day” notification period, the
above paragraph should be changed as follows:
We must receive this statement no later than [45th calendar day before Balloon Maturity Date]
for you to be eligible to exercise the reset option.]
Loan Number:____________________________
Freddie Mac Document
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Servicing Maturing Balloon/Reset Mortgages Quick Reference Guide
Use this Statement if You will be Ordering Special Reset Mortgage Title Insurance Coverage
Borrower’s Intention/Request Statement
Borrower’s Notice to Servicer as Required by the
Balloon Note Addendum and Balloon Rider
Check one of the three boxes on the left


I/We will pay my/our mortgage in full on or before the maturity date.
I/We elect to exercise my/our reset option and I/we certify that I/we meet (or will meet
within 30 days) all the reset conditions contained in my/our Balloon Note Addendum and
Balloon Rider.
Check each of the following boxes that apply to your circumstances


I/We currently own the property securing the balloon mortgage.
[Omit this bullet if occupancy is not a Reset Condition in the Reset Rider.]
I/We currently occupy the property securing the mortgage as my/our
 Primary residence

 Second home

I/We have not filed for bankruptcy protection, nor am/are I/we under a
bankruptcy repayment plan.

[add this box if you are not escrowing for real estate taxes]
I/We directly pay my/our real estate taxes and as of the date of this statement,
my/our real estate tax payments are current.
I/We cannot pay off my/our mortgage, and would like to reset my/our mortgage.
However, I/we do not meet the reset conditions contained in the Balloon Note Addendum
and Balloon Rider, so I/we want to know what other options might be available.
Check the following box if it applies to your circumstances

I/We do not still own the property securing the mortgage.

[Omit this bullet if occupancy is not a Reset Condition in the Reset
Rider.]
I/We do not occupy the property as my/our primary residence or second home.
IMPORTANT NOTE:
Date and sign the certification and acknowledgments
on the reverse side.
Freddie Mac Document
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Servicing Maturing Balloon/Reset Mortgages Quick Reference Guide
Borrower Intention/Request Statement
Special Reset Mortgage Title Insurance
Page 2
By signing this Borrower Intention/Request Statement, I/we certify and acknowledge the following:
1. I/We certify that all information provided in this statement is true and correct as of the date set forth
opposite my/our signature(s) and acknowledge my/our understanding that any intentional or negligent
misrepresentations(s) of the information contained in this statement may result in civil liability and/or
criminal penalties. Additionally, false and incorrect information will make the reset option null and
void and I/we will be required to pay my/our mortgage in full.
2. I/We understand and agree that you will obtain the [Federal Home Loan Mortgage Corporation’s or
Federal National Mortgage Association’s] required net yield (RNY) to calculate the reset note rate
and my/our new monthly payments as follows:
If you receive my/our statement
 By [time of day and time zone] Monday through Friday (excluding legal holidays), you will
obtain the RNY no later than [time of day and time zone] on the day you receive my/our
statement
 After [ time of da y a nd time z one] M onday t hrough F riday ( excluding l egal hol idays), you w ill
obtain the RNY no later than [time or da y and time zone] on the next business day after the day
you have received my/our statement
Date
Borrower’s Signature
Date
Borrower’s Signature
Date
Borrower’s Signature
Date
Borrower’s Signature
Telephone Number: _____________________________ Is this a ( ) Day or ( ) Evening number?
Return this statement to:
[Servicer Name]
[Attention]
[Mailing Address]
[City, State Zip Code]
We must receive this statement between [60th calendar day before Balloon Maturity Date] and [45th calendar day
before Balloon Maturity Date] for you to be eligible to exercise the reset option.
If the Reset Rider does not contain the “no earlier than 60 calendar day” notification period, the
above paragraph should be changed as follows:
We must receive this statement no later than [45th calendar day before Balloon Maturity Date]
for you to be eligible to exercise the reset option.]
Loan Number:____________________________
Freddie Mac Document
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Servicing Maturing Balloon/Reset Mortgages Quick Reference Guide
Example - Required Notice to Borrower - Current, But Was Delinquent
Reminder: You must adapt the sample letter and statement to the applicable Reset Rider, to
whatever processes you have set up and to comply with applicable law.
[Date]
[Borrower(s) Name(s)]
[Mailing Address]
[City, State Zip]
RE:
Balloon Mortgage Loan Number: [
Property Address [
]
]
Dear [Borrower(s):]
Your mortgage on the above property is a balloon mortgage that will mature on [Balloon Maturity Date]. On this
date you will have a lump sum payment due that will include the unpaid principal of your mortgage, plus any
accrued interest and other charges that are due.
You have two options available to you to take care of the lump sum payment that is due. You can:
1. Extend and modify your mortgage if you meet certain conditions. We call this process a “reset.”
or
2. Pay the mortgage in full on or before [Balloon Maturity Date].
Important Note
The reset option is not automatic. If you will not be paying your mortgage in full, you must follow the
instructions below and in the attachment to reset your mortgage.
Reset option
The documents you signed when you obtained your mortgage give you the option of resetting your mortgage if
you meet certain conditions that are described in those documents. Resetting your mortgage means we extend the
term of the mortgage for [25 [for a 5-year Balloon/Reset Mortgage] or 23 [for a 7-year Balloon/Reset Mortgage] ]
years at a modified interest rate. The reset conditions from your mortgage documents are:
1.
2.
3.
You still own and occupy the property referenced above. [You must delete the words “and occupy” here if
they were crossed out or deleted from the Reset Rider at origination.]
You have not been more than 30 days late on any of the 12 scheduled monthly payments due before [Balloon
Maturity Date]. As of the date of this letter, our records show that you have not been 30 or more days late in
your payments due since [Due Date of the monthly payment due 12 months before the Balloon Maturity
Date]. However, to qualify for the reset you must make all of your remaining scheduled monthly payments
on time.
You have no other liens (including a second mortgage, a home equity line of credit, or a real estate or income
tax lien, etc.), defects or encumbrances or any other adverse matters that affect title to the property, other
than the first lien of the balloon mortgage. [If you are not escrowing for real estate taxes, insert the following
language: Also, your real estate tax payments must be current.] [If the Reset Rider allowed for secondary
financing in existence on the date of the Reset Rider you must add the following: However, you may have a
second mortgage if it is the same second mortgage you had at the time your mortgage was originated and it
contains language clearly subordinating the second mortgage to the Reset Mortgage.]
Freddie Mac Document
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[Date]
Page 2
4. You notify us in writing no earlier than [60 calendar days before the Balloon Maturity Date] and no later
than [45 calendar days before the Balloon Maturity Date] that you want to exercise the reset option.
IMPORTANT NOTE: IF YOU FAIL TO NOTIFY US IN WRITING OF YOUR ELECTION TO
EXERCISE THE RESET OPTION BY [45TH CALENDAR DAY BEFORE THE BALLOON
MATURITY DATE], YOU WILL LOSE THE RESET OPTION AND ALL AMOUNTS YOU OWE
ON YOUR MORTGAGE WILL BE DUE AND PAYABLE ON [BALLOON MATURITY DATE].
5. The modified interest rate, which your mortgage documents call the “reset note rate,” is not more than five
percent (5%) above the current interest rate on your mortgage. We will determine whether you meet this
reset condition after we receive your notice that you elect to reset and after we calculate what the reset note
rate will be. The formula for calculating the reset note rate is contained in the Balloon Note Addendum and
Balloon Rider, which are part of the mortgage documents you signed when you obtained your mortgage.
Our records indicate you do not meet condition 2 above because you have been more than 30 days delinquent in
one or more of your monthly payments during this period. A [[statement detailing which payments were late] or
[a payment history]] is attached. Since you do not meet one of the reset conditions, you are not eligible for a reset
under the exact terms stated in your mortgage documents. However, you may be eligible for a reset under terms
that are similar to, but not exactly the same as the terms stated in your mortgage documents.
If you want to be considered for a reset of your mortgage, then please read and follow the instructions that we
have attached to this letter.
Paying your mortgage in full
The amount you owe on [Balloon Maturity Date] is estimated to be:
 Unpaid principal balance
$
 Accrued interest
$
 Fee or other charges due
[List Fee or charge]
$
[List Fee or charge]
$ ______________
Total Due
$
The total due is an estimate, which assumes the remainder of your scheduled monthly payments will be received
by us on the first day of each month they are due and that no additional fees or other charges are incurred.
If you will be paying your mortgage in full, please:
1. Complete the enclosed “Borrower’s Intention/Request Statement” and return it to us as soon as possible
2. Contact us at [address and/or telephone number] before you send in the payoff, so we can give you the exact
amount that is due on your mortgage
3. Make sure your payoff funds will reach us by [Balloon Maturity Date], to avoid additional interest and other
charges
Freddie Mac Document
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Uncertain of your status
If you are uncertain about what to do or if you don’t meet the reset conditions as specified in your
Balloon Note Addendum and Balloon Rider and described above, and you can’t pay your mortgage in
full, then contact us immediately so we can discuss whether you may qualify for a reset under terms that
are similar to, but not exactly the same as the terms stated in your mortgage documents or complete the
Borrower’s Intention/Request Statement and send it to us no later than [state due date]. If you have any
questions about the maturity of your mortgage, you can call us at [telephone number].
Sincerely,
[Name]
[Title]
Attachment/1
Freddie Mac Document
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Use this Statement if You will be Ordering Traditional Title Insurance Coverage
Borrower’s Intention/Request Statement
Borrower’s Notice to Servicer as Required by the
Balloon Note Addendum and Balloon Rider
Check one of the three boxes on the left
I/We will pay my/our mortgage in full on or before the maturity date.


I/We elect to exercise my/our reset option and I/we certify that I/we meet (or will meet
within 30 days) all the reset conditions contained in my/our Balloon Note Addendum and
Balloon Rider.
Check each of the following boxes that apply to your circumstances
I/We currently own the property securing the balloon mortgage.






Freddie Mac Document
[omit this bullet if occupancy is not a Reset Condition in the Reset Rider.]
I/We currently occupy the property securing the mortgage as my/our
 Primary residence
 Second home
I/We have not filed for bankruptcy protection, nor am/are I/we under a
bankruptcy repayment plan.
I/We do not have any other liens, defects, encumbrances or adverse matters
affecting the title to the property except the balloon mortgage.
[If the Reset Rider allowed for secondary financing in existence on the date of
the Reset Rider you must add the following: However, you do not need to
check this box if the only other lien you have is the second mortgage you
originated at the same time your balloon mortgage was originated and it
contains language clearly subordinating the second mortgage to the Reset
Mortgage.]
I/We do have another lien, defect, encumbrance or adverse matter affecting the
title to the property securing the mortgage besides the balloon mortgage.
However, I/we will pay off or resolve the lien, defect, encumbrance or adverse
matter and provide you with proof of such resolution within the next 30 days.
[If the Reset Rider allowed for secondary financing in existence on the date of
the Reset Rider this bullet should read as follows: I/We do have another lien,
defect, encumbrance or adverse matter affecting the title to the property
securing the mortgage besides the balloon mortgage and the second mortgage
that was originated at the same time the balloon mortgage was originated or we
have a second mortgage that was originated at the same time the balloon
mortgage was originated but it does not contain language clearly subordinating
the second mortgage to the Reset Mortgage. However, I/we will pay off or
resolve the lien, defect, encumbrance or adverse matter and provide you with
proof of such resolution within the next 30 days.]
[add this box if you are not escrowing for real estate taxes]
I/We directly pay my/our real estate taxes and as of the date of this statement,
my/our real estate tax payments are current.
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Borrower Intention/Request Statement
Traditional Title Insurance Coverage
Page 2

I/We cannot pay off my/our mortgage, and would like to reset my/our mortgage.
However, I/we do not meet the reset conditions contained in the Balloon Note Addendum
and Balloon Rider, so I/we want to know what other options might be available.
Check each of the following boxes that apply to your circumstances



I/We do not still own the property securing the mortgage
[Omit this bullet if occupancy is not a Reset Condition in the Reset Rider.]
I/We do not occupy the property as my/our primary residence or second home.
I/We do have another lien, defect or encumbrance or adverse matter affecting
the property securing the mortgage and cannot pay it off or clear it up within
30 days. [If the Reset Rider allowed for secondary financing in existence on
the date of the Reset Rider, this bullet should read as follows: I/We do have
another lien, defect, encumbrance or adverse matter affecting the title to the
property securing the mortgage besides the balloon mortgage and the second
mortgage that was originated at the same time the balloon mortgage was
originated and cannot pay the lien off or clear it up within the next 30 days.]
IMPORTANT NOTE:
Freddie Mac Document
Date and sign the certification and acknowledgments on the
reverse side.
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Borrower Intention/Request Statement
Traditional Title Insurance Coverage
Page 3
By signing this Borrower Intention/Request Statement, I/we certify and acknowledge the following:
1. I/We certify that all information provided in this statement is true and correct as of the date set forth
opposite my/our signature(s) and acknowledge my/our understanding that any intentional or negligent
misrepresentations(s) of the information contained in this statement may result in civil liability and/or
criminal penalties. Additionally, false and incorrect information will make the reset option null and
void and I/we will be required to pay my/our mortgage in full.
2. I/We understand and agree that you will obtain the [Federal Home Loan Mortgage Corporation’s or
Federal National Mortgage Association’s] required net yield (RNY) to calculate the reset note rate
and my/our new monthly payments as follows:
If you receive my/our statement
 By [time of day and time zone] Monday through Friday (excluding legal holidays), you will
obtain the RNY no later than [time of day and time zone] on the day you receive my/our
statement
 After [ time of da y a nd time z one] M onday t hrough F riday ( excluding l egal hol idays), you w ill
obtain the RNY no later than [time or da y and time zone] on the next business day after the day
you have received my/our statement.
Date
Borrower’s Signature
Date
Borrower’s Signature
Date
Borrower’s Signature
Date
Borrower’s Signature
Telephone Number: _____________________________ Is this a ( ) Day or ( ) Evening number?
Return this statement to:
[Servicer Name]
[Attention]
[Mailing Address]
[City, State Zip Code]
We must receive this statement between [60th calendar day before Balloon Maturity Date] and
[45th calendar day before Balloon Maturity Date] for you to be eligible to exercise the reset
option.
Loan Number:____________________________
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Use this Statement if You will be Ordering Special Reset Mortgage Title Insurance
Coverage
Borrower’s Intention/Request Statement
Borrower’s Notice to Servicer as Required by the
Balloon Note Addendum and Balloon Rider
Check one of the three boxes on the left


I/We will pay my/our mortgage in full on or before the maturity date.
I/We elect to exercise my/our reset option and I/we certify that I/we meet (or will meet
within 30 days) all the reset conditions contained in my/our Balloon Note Addendum and
Balloon Rider.
Check each of the following boxes that apply to your circumstances


I/We currently own the property securing the balloon mortgage.
[Omit this bullet if occupancy is not a Reset Condition in the Reset Rider.]
I/We currently occupy the property securing the mortgage as my/our
 Primary residence

 Second home

I/We have not filed for bankruptcy protection, nor am/are I/we under a
bankruptcy repayment plan.

[add this box if you are not escrowing for real estate taxes]
I/We directly pay my/our real estate taxes and as of the date of this statement,
my/our real estate tax payments are current.
I/We cannot pay off my/our mortgage, and would like to reset my/our mortgage.
However, I/we do not meet the reset conditions contained in the Balloon Note Addendum
and Balloon Rider, so I/we want to know what other options might be available.
Check the following box if it applies to your circumstances

I/We do not still own the property securing the mortgage.

[Omit this bullet if occupancy is not a Reset Condition in the Reset
Rider.]
I/We do not occupy the property as my/our primary residence or second home.
IMPORTANT NOTE:
Freddie Mac Document
Date and sign the certification and acknowledgments
on the reverse side.
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Borrower Intention/Request Statement
Special Reset Title Insurance Coverage
Page 2
By signing this Borrower Intention/Request Statement, I/we certify and acknowledge the following:
2. I/We certify that all information provided in this statement is true and correct as of the date set forth
opposite my/our signature(s) and acknowledge my/our understanding that any intentional or negligent
misrepresentations(s) of the information contained in this statement may result in civil liability and/or
criminal penalties. Additionally, false and incorrect information will make the reset option null and
void and I/we will be required to pay my/our mortgage in full.
3. I/We understand and agree that you will obtain the [Federal Home Loan Mortgage Corporation’s or
Federal National Mortgage Association’s] required net yield (RNY) to calculate the reset note rate
and my/our new monthly payments as follows:
If you receive my/our statement
 By [time of day and time zone] Monday through Friday (excluding legal holidays), you will
obtain the RNY no later than [time of day and time zone] on the day you receive my/our
statement
 After [ time of da y a nd time z one] M onday t hrough F riday ( excluding l egal hol idays), you w ill
obtain the RNY no l ater than [time or day and time zone] on the next business day after the day
you have received my/our statement
Date
Borrower’s Signature
Date
Borrower’s Signature
Date
Borrower’s Signature
Date
Borrower’s Signature
Telephone Number: _____________________________ Is this a ( ) Day or ( ) Evening number?
Return this statement to:
[Servicer Name]
[Attention]
[Mailing Address]
[City, State Zip Code]
We must receive this statement between [60th calendar day before Balloon Maturity Date] and [45th calendar day
before Balloon Maturity Date] for you to be considered to exercise the reset option.
Loan Number:____________________________
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Example - Required Notice to Borrower - Now Delinquent
Reminder: You must adapt the sample letter and statement to the applicable Reset Rider, to
whatever processes you have set up and to comply with applicable law.
[Date]
[Borrower(s) Name(s)]
[Mailing Address]
[City, State Zip]
RE:
Balloon Mortgage Loan Number: [
Property Address [
]
]
Dear [Borrower(s)]:
Your mortgage on the above property is a balloon mortgage that will mature on [Balloon Maturity Date]. On this
date you will have a lump sum payment due that will include the unpaid principal of your mortgage, plus any
accrued interest and other amounts that are due. You must pay your mortgage in full on or before [Balloon
Maturity Date].
Your mortgage documents provided you with an option to take care of the lump sum payment by extending and
modifying your mortgage, if you met certain conditions. However, one condition to be eligible for this extension
and modification is that you cannot have been more than 30 days late in your monthly payments in the 12-month
period before the maturity date, [Balloon Maturity Date]. Our records indicate you are currently more than 30
days delinquent in your monthly payments and are therefore not eligible for the reset option.
This letter explains what you must do to pay your mortgage in full.
The amount you owe on [Balloon Maturity Date] is estimated to be:
 Unpaid principal balance
$
 Accrued interest
$
 Fee or other charges due
[List Fee or charge]
$
[List Fee or charge]
$______________
Total Due
$
=============
The total due is an estimate, which assumes your payments are brought current and the remainder of your
scheduled monthly payments will be received by us on the first day of each month they are due, and that no other
charges are incurred. When paying your mortgage in full, please
1. Complete the enclosed “Borrower’s Intention/Request Statement” and return it to us as soon as possible
2. Contact us at [address and/or telephone number] before you send in the payoff, so we can give you the exact
amount that is due on your mortgage
3. Make sure your payoff funds will reach us by [Balloon Maturity Date], to avoid additional interest and other
charges
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[Date]
Page 2
[You need to insert your own language here, consistent with your regular collection letters and offers of
assistance. If you will be using the “Borrower’s Intention/Request Statement,” include instructions for its
completion in this part of the letter.]
To comply with the terms of your mortgage documents, which you signed when you obtained your mortgage, we
are providing you with the following information concerning the reset option that would have been available to
you if you were current in your monthly payments.
The mortgage documents provided for an option to extend for [25 [for a 5-year Balloon/Reset Mortgage] or 23
[for a 7-year Balloon/Reset Mortgage]] years at a modified interest rate. To qualify for this extension and
modification, your mortgage documents require that:
1.
You still own and occupy the property referenced above. [You must delete the words “and occupy” here if
they were crossed out or deleted from the Reset Rider at origination.
2.
You have not been more than 30 days late on any of the 12 scheduled monthly payments due before [Balloon
Maturity Date].
3.
You have no other liens (including a second mortgage, a home equity line of credit, or a real estate or income
tax lien, etc.), defects or encumbrances or any other adverse matters that affect title to the property, other
than the first lien of the balloon mortgage. [If you are not escrowing for real estate taxes, insert the following
language: Also, your real estate tax payments must be current.] [If the Reset Rider allowed for secondary
financing in existence on the date of the Reset Rider you must add the following: However, you may have a
second mortgage if it is the same second mortgage you had at the time your mortgage was originated and it
contains language clearly subordinating the second mortgage to the Reset Mortgage.]
4.
You notify us in writing no earlier than [60 calendar days before the Balloon Maturity Date] and no later than
[45 calendar days before the Balloon Maturity Date] that you want to exercise the Reset Option.
5.
The modified interest rate, which your mortgage documents call the “reset note rate” is not more than five
percentage points (5%) above the current interest rate on your mortgage.
Again, our records indicate that you do not meet condition number 2 because you are currently more than 30 days
delinquent in your monthly payments.
If you will be unable to bring your mortgage current and pay the balance in full on the maturity date, you must
[contact us immediately at [telephone number] so we can discuss your present circumstances.] or [return the
Borrower’s Intention/Reset Statement to us immediately so we can discuss your present circumstances.]
Sincerely,
[Name]
[Title]
[Attachment/1]
Freddie Mac Document
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Borrower’s Intention/Request Statement
Borrower’s Notice to Servicer as Required by the
Balloon Note Addendum and Balloon Rider
Check one of the following 2 boxes


I/We will pay my/our mortgage loan in full on or before the maturity date.
I/We will cannot pay my/our mortgage in full on or before the maturity date.
Check each of the following boxes that apply to your circumstances

I/We want to keep our home and want to discuss what options might be
available to help me/us meet my/our mortgage obligation.

I/We can’t afford to keep our home and want to discuss what options might be
available so we can avoid foreclosure.
[omit this bullet if occupancy is not a Reset Condition in the Reset Rider]
I/We currently occupy the property as my/our



Freddie Mac Document
 Primary residence
 Second home
I/We do not have any other liens, defects, encumbrances or adverse matters
affecting title to the property except the balloon mortgage. [If the Reset Rider
allowed for secondary financing in existence on the date of the Reset Rider
you must add the following: However, you do not need to check this box if the
only other lien you have is the second mortgage you originated at the same
time your balloon mortgage was originated and it contains language clearly
subordinating the second mortgage to the Reset Mortgage.]
I/We do have another lien, defect, encumbrance or adverse matter affecting
title to the property securing the mortgage besides the balloon mortgage.
However, I/we will pay off or resolve the lien, defect, encumbrance or adverse
matter and provide you with proof of such resolution within the next 30 days.
[If the Reset Rider allowed for secondary financing in existence on the date of
the Reset Rider this bullet should read as follows: I/We do have another lien,
defect, encumbrance or adverse matter affecting the title to the property
securing the mortgage besides the balloon mortgage and the second mortgage
that was originated at the same time the balloon mortgage was originated or we
have a second mortgage that was originated at the same time the balloon
mortgage was originated but it does not contain language clearly subordinating
the second mortgage to the Reset Mortgage. However, I/we will pay off or
resolve the lien, defect, encumbrance or adverse matter and provide you with
proof of such resolution within the next 30 days.]
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Borrower Intention/Request Statement
Page 2
___________________
Date
_______________________________________________________
Borrower’s Signature
___________________
Date
_______________________________________________________
Borrower’s Signature
Telephone number:
_______________________
Is this a ( ) Day or ( ) Evening number?
Return this statement within 21 days of the date of our letter to:
[Servicer Name]
[Attention]
[Mailing Address]
[City, State Zip Code]
Freddie Mac Document
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What to Do if the Borrower Does Not Respond
Refer to Guide Sections A83.18, Notifying Freddie Mac of no Borrower response, and A83.19, No
response and Mortgage covered by mortgage insurance, for more information about steps to take when
the Borrower does not respond to the required notice.
Form 1134
The Form 1134, Maturing Balloon/Reset Mortgage Worksheet, is not required but may assist you with
the process and calculations necessary when a Balloon/Reset Mortgage matures. The Form 1134 is
available at the Freddie Mac Learning Center. The following link contains a user interactive Form 1134
to provide you with a form that auto-calculates the data you enter into the online form:
http://www.freddiemac.com/learn/lo/forms/Form_1134.html.
This is an example of the four pages of the online form:
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What are the 5 Disposition Codes?
There are 5 disposition codes that the Servicer reports to Freddie Mac. They are as follows:
Disposition Codes You May Transmit to Us
Code:
Definition for the Borrower
R
Elects to Reset and claims to meet all the Reset Conditions
S
Wants to Reset, but does not meet one or more of the Reset Conditions and you have
approved the Reset through the Servicer-delegated review path
P
Wants to Reset, but does not meet one or more of the Reset Conditions and the Borrower’s
request for a Reset must be submitted through the Freddie Mac review path
I
Intends to pay off the Balloon/Reset Mortgage
N
Has not responded to the required notice, so you are not sure of the Borrower’s intention
Who is an Eligible and Ineligible Borrower?
Eligible Borrower
If the Borrower responds to the required notice that the Borrower elects to reset, the Servicer
must determine if the Borrower meets all Reset Conditions contained in their Reset Rider and is
an Eligible Borrower. If the Borrower is an Eligible Borrower, the RNY used to calculate the
Reset Note Rate would be indicated by the Balloon Note Addendum and Rider.
Ineligible Borrower
Is if the Borrower responds to the required notice that the Borrower elects to reset, but the
Borrower does not meet one or more of the Reset Conditions contained in their Reset Rider, the
Servicer must determine if the Borrower’s reset can be processed through the Servicer-delegated
review path or Freddie Mac review path. If the Borrower is an Ineligible Borrower, the Freddie
Mac RNY will be used to calculate the Reset Note Rate, even if the Balloon Note Addendum and
Rider indicate the use of the Fannie Mae RNY.
Form 1130, Balloon/Reset Mortgage Exception Transmittal
If the Borrower is an Ineligible Borrower and the reset must be processed through the Freddie Mac
review path, the Servicer must complete and submit the Form 1130. The following link accesses Form
1130 in which you can enter data into the online form:
http://www.freddiemac.com/sell/forms/pdf/1130_effective_10_01_11.pdf.
Following is an example of the two pages of the online form:
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How to Calculate the Reset Note Rate Example
1. Take the RNY (Either Freddie Mac’s or Fannie Mae’s, as applicable)
2. Add ½ of 1 percent (.50% or 50 basis points)
3. Subtotal
4. Round the subtotal to the nearest 1/8th of 1 percent (.125%)
(This means some subtotals will be rounded down and others rounded up)
8.06%
+ .50%
8.56%
8.50%
Examples of 1/8th intervals
8.000%
8.125%
8.250%
8.375%
8.500%
8.625%
8.750%
8.875%
How to Calculate the Servicing Spread
Once you have determined the Reset Note Rate, you must calculate the Servicing Spread as follows:
Examples of Calculations
1. Reset Note Rate (regardless if the Reset Note Rate
was calculated using the Freddie Mac or the Fannie
Mae RNY)
8.50%
- 8.06%
= 0.44%
8.625%
- 8.070%
= 0.555%
2. Minus the Freddie Mac RNY
3. Equals the Servicing Spread
The results of this calculation are the new Servicing Spread on the Reset Mortgage you will earn. You
must use this figure to complete Form 1074.
Important Note
The Servicing Spread must be equal to or greater than the Minimum Contract Servicing Spread on the
Balloon/Reset Mortgage. If the Servicing Spread is less than the Minimum Contract Servicing Spread
on the Balloon/Reset Mortgage, you will be charged a discount fee.
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When to Update Your System with New Reset Terms
Once you have confirmed the “Reset Mortgage” has been certified in Freddie Mac’s system, you must
report the new Reset Mortgage information in the next accounting cycle.
Balloon Due Date Calendar
The Balloon Due Date calendar provides the due dates you need to process maturing Balloon Reset
Mortgages. You can find the Balloon Due Date calendar at the following link:
http://www.freddiemac.com/learn/service/balloon_resets.html
What are the Balloon/Reset Mortgage Non-compliance Fees?
With respect to maturing Balloon/Reset Mortgages, if you do not comply with the due dates in the
Balloon Due Date calendar, Freddie Mac will assess compensatory fees and bill the Servicer through the
Performing Loans monthly Servicer Billing Statement, in the following instances:
1.
Late Disposition — The Servicer fails to report a disposition code on a Balloon/Reset Mortgage by
4:30 p.m. Eastern time on or before the 44th calendar day prior to the Balloon Maturity Date. If the
44th calendar day prior to the Balloon Maturity Date is a non-Business Day, then the Servicer must
report the disposition code by 4:30 p.m. Eastern time on the next Business Day. Refer to Section
A83.17 for additional requirements.
2.
Late Document Delivery — Freddie Mac (see Directory 9 in the Guide) receives the fully
completed Form 1034B, Custodial Certification Schedule, executed by the Document Custodian
later than 10 calendar days after the Balloon Maturity Date, the document due date.
3.
Late Reset — The Servicer will be assessed a compensatory fee if Freddie Mac does not receive the
completed and fully executed Form 1034B in sufficient time for Freddie Mac (see Directory 9 in the
Guide) to record the certification by the second Business Day prior to the accounting cycle cutoff in
the month following the Balloon Maturity Date.
Refer to Guide Section A83.60 for additional information.
What to do when a Balloon/Reset Mortgage Has Not Been Rate
Locked and is Past Maturity
The Servicer must not post any payments to the Mortgage balance except payment in full under any
circumstance after the Balloon Maturity Date pursuant to Guide Sections A83.63 and A83.64. The
Servicer can refer to Guide Chapter A83 for further guidance on the next steps to take for the Borrower.
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Frequently Asked Questions
Listed below are frequently asked questions about Balloon/Reset Mortgages. After reviewing each, if
you still need further assistance, please contact the [email protected].
1. If I am trying to rate lock a loan after the 45th calendar day, what disposition code do I
transmit?
You must transmit disposition code ‘S’ (Servicer-delegated review path) for reset rate locks after the
45th calendar day.
2. If the Borrower responds after the 45th calendar day prior to the Balloon Maturity Date, how
can I update the disposition code?
You can update the disposition code until the last business day prior to the Balloon Maturity Date by
transmitting the applicable code through the Service Loans application or by sending a email to
[email protected].
3. I originally notified Freddie Mac that the Borrower intended to refinance or payoff the loan.
However, the Borrower would now like to reset. Can the Borrower still reset?
You must get the request to reset in writing, and then check to see that all the Reset Conditions are
met (Chapter A83 of the Guide).
If the disposition code was reported between the 60th and 45th calendar days prior to the Balloon
Maturity Date and the Borrower meets all of the Reset Conditions, you must update the disposition
code from ‘I’ (Intended Payoff) to ‘R’ (Elects to Reset).
If the disposition code was reported between the 44th calendar day prior to maturity and the last
business day prior to the Balloon Maturity Date and there are other unmet Reset Conditions but
those unmet conditions can be approved by you, you must update the disposition code from ‘I’ to
‘S’. If there are unmet Reset Conditions that cannot be approved by Servicer, you must update the
disposition code from ‘I’ to ‘P’ (Problem loan to be sent to [email protected] for
review).
4. The Borrower intends to pay off the loan but the funds will not be received by the Balloon
Maturity Date. What is the next step?
If the Borrower does not reset the loan or pay it in full by the Balloon Maturity Date, Servicer must
not accept any principal and interest payments from the Borrower after the Balloon Maturity Date
other than the full balloon payment that satisfies all amounts due on the mortgage, pursuant to
Section A83.63 of the Guide. Servicer must report the loan as delinquent within the required time
frames.
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5. Borrowers occasionally respond to the required notice prior to the 60th calendar day before the
Balloon Maturity Date. Can I transmit a rate lock request and obtain the Freddie Mac
required net yield (RNY) earlier than 60 calendar days prior to the Balloon Maturity Date?
No, you cannot obtain the Freddie Mac RNY prior to the 60th calendar day before the Balloon
Maturity Date. The only disposition codes that can be transmitted before the 60th calendar day are
‘I’ (Intended Payoff) and ‘P’ (Problem). You must wait until the 60th calendar day prior to the
Balloon Maturity Date to transmit disposition codes ‘R’ (Elects to reset) or ‘S’ (rate lock through the
Servicer-delegated review path).
6. If the 44th calendar day prior to the Balloon Maturity Date falls on a Saturday, when should I
report the “No Response From Borrower” disposition code?
If the 44th day falls on a non-business day (weekend or holiday), you must report the applicable
disposition code by 4:30 p.m. Eastern time on the next business day. You can also refer to the Due
Date calendar for the 44th day before the Balloon Maturity Date.
7. If a Balloon/Reset Mortgage pays off two business days prior to the 44th calendar day prior to
the Balloon Maturity Date, do I still need to transmit a disposition code?
Yes, your Investor Accounting area has two business days to report and remit the payoff activity to
us. In order to meet Freddie Mac’s requirement for timely disposition code transmissions, you
should still transmit the intent to payoff disposition code, otherwise a late disposition fee may be
assessed.
8. I have a loan with an 8/1/20xx Balloon Maturity Date that resets timely. When do I report the
new rate to Freddie Mac? What is reported to Freddie Mac for the accounting cycle cutoff
that happens during the month of maturity?
The new accounting net yield and reset terms for a Balloon/Reset Mortgage with a maturity date of
8/1/20xx would be reported at the 9/15/20xx cutoff, assuming that the reset was received timely and
certified by Freddie Mac. For the accounting cycle cutoff during the month the loan matures
(8/15/xx), you would be reporting and remitting interest at the original accounting net yield rate.
9. How do I get access to Service Loans application that is needed to process and manage my
maturing Balloon/Reset Mortgage information?
Contact 1-800-freddie.
10. How do I access the Balloon/Reset rate lock function to report a disposition code through
Service Loans application?
Refer to Chapter 7 of the Service Loans Application User Guide.
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11. Using the Service Loans application, how and when do I access the Form 1074, Freddie Mac
Reset Mortgage Confirmation after I have rate locked a Balloon/Reset Mortgage?
Refer to Chapter 8 of the Service Loans Application User Guide for assistance. If the rate lock
transmission is received by Freddie Mac between 10:00 a.m. and 4:30 p.m. Eastern time, Form 1074
will be sent the next business day following the date of transmission. If Freddie Mac receives the
transmission after 4:30 p.m. and before 10:00 a.m. Eastern time, you will receive Form 1074 two
business days following the date of the transmission.
12. Where do I send the completed loan modification and Form 1034B?
You need to send the completed loan modification and Form 1034B to your Document Custodian for
certification. Once certified, you will need to forward the certified Form 1034B to Freddie Mac’s
Settlement Operations dept. at 1551 Park Run Drive, MS D5D, McLean, VA 22102. If the
Mortgage is more than six months past the Balloon Maturity Date, you will also have to send the
Form 1074 and copy of the loan modification for certification.
13. What are the non-compliance Balloon/Reset Mortgage fees?
Late Disposition Fee - is assessed if you fail to report a disposition code on a Balloon/Reset
Mortgage by 4:30 p.m. Eastern Time on the 44th calendar day prior to the Balloon Maturity Date.
If the 44th calendar day is a non-Business Day, you must report the disposition code by 4:30 p.m.
Eastern Time on the next Business Day.
Late Document Delivery Fee - is assessed if the certified Form 1034B, Custodial Certification
Schedule is received by Settlement Operations dept. at 1551 Park Run Drive, MS D5D, McLean,
VA 22102, later than 10 calendar days after the Balloon Maturity Date. If the 10th calendar day
after the Balloon Maturity Date is not a Business Day, then the documents must be received by
Settlement Operations dept. by the last Business Day before the 10th calendar day.
Late Reset Fee - is assessed if the certified Form 1034B, Custodial Certification Schedule is not
received and updated by Settlement Operations Dept. at 1551 Park Run Drive, MS D5D, McLean,
VA 22102, by the second Business Day before the accounting cycle cutoff in the month following
the Balloon Maturity Date.
14. What do I do once the loan is past maturity and the Borrower is still making payments?
Refer to Guide Section A83.63 for guidance.
Freddie Mac Resources
Additional resources are available at www.freddiemac.com/learn/service/balloon_resets.html.
Refer to the Guide, Chapter A83.
Contact the [email protected] mailbox.
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Appendix A – Glossary Terms
The following terms are derived from the Guide Glossary, Chapter A83, and the Quick Reference
Guide. The Chapter A83.3 defined terms are italicized for clarity.
Glossary Term
Balloon
Loan
Modification
Definitions
Balloon Maturity
Date
For Balloon/Reset Mortgages, the Balloon Maturity Date is the maturity date of
the Balloon Note.
 The Balloon Maturity Date for a 5-year Balloon/Reset Mortgage is the date
that is 25 years after the scheduled Due Date of the first monthly principal
and interest payment.
 The Balloon Maturity Date for a 7-year Balloon/Reset Mortgage is the date
that is 23 years after the scheduled Due Date of the first monthly principal
and interest payment.
Balloon
Note
For a Balloon/Reset Mortgage, the Balloon Note is the Note executed by the
Borrower, which provides for a Balloon Payment on the Balloon Maturity
Date.
Balloon Note
Addendum
For a Balloon/Reset Mortgage, the Balloon Note Addendum is an addendum to
the Balloon Note that sets forth the terms of the Reset Option.
Balloon Payment
For a Balloon/Reset Mortgage, the Balloon Payment is the sum of the unpaid
principal balance, accrued but unpaid interest through the Balloon Maturity
Date and all other sums required to pay the Balloon/Reset Mortgage in full on
the Balloon Maturity Date.
Balloon Reset
Disposition
Reporting
Balloon Reset Disposition Reporting is the function with the Freddie Mac
Service Loans application that the Servicer uses to:
• Search for maturing Balloon/Reset Mortgages by date
• View maturing Balloon/Reset Mortgages
• Perform maturing Balloon/Reset Mortgage Disposition reporting
• Print and download Balloon/Rest Mortgage Disposition record details
• Review confirmation of disposition reporting
Balloon
Rider
For a Balloon/Reset Mortgage, the Balloon Rider is the rider to the Security
Instrument that sets forth the terms of the Reset Option and that must be
recorded with the Security Instrument.
Freddie Mac Document
The Balloon Loan Modification is the Mortgage document executed by the
Borrower to evidence the Borrower’s Election to Reset and the terms of the
Reset Mortgage. The Borrower must execute two original Balloon Loan
Modifications. The current version of this Mortgage document is the Freddie
Mac Uniform Instrument Multistate Balloon Loan Modification - Single
Family (Form 3293, 1/01).
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Glossary Term
Borrower
Intention/
Request
Statement
Definitions
Early Notice
The Early Notice is the written notice you must send to the Borrower between
the 13th and 14th month before the Balloon Maturity Date to remind the
Borrower that he or she has a Balloon/Reset Mortgage, that there is a
conditional Reset Option and that there are Reset Conditions.
Election to Reset
An Eligible Borrower’s election to exercise the Reset Option. The election to
reset is referred to as the “Borrower’s letter of intent” in the Service Loans
application.
Eligible Borrower
For a Balloon/Reset Mortgage, an Eligible Borrower is a Borrower who meets
all the Reset Conditions stated in the Balloon Note Addendum and Balloon
Rider and who has elected to exercise the Reset Option.
Ineligible
Borrower
For a Balloon/Reset Mortgage, an Ineligible Borrower is a Borrower who
cannot meet all the Reset Conditions stated in the Balloon Note Addendum and
Balloon Rider and who cannot pay off the Balloon/Reset Mortgage.
Required Net
Yield (RNY)
The Required Net Yield is the amount of interest Freddie Mac receives from
each Mortgage that it purchases.
Required
Notice
The Required Notice is the written notice you must send to the Borrower to
comply with the Balloon Note Addendum and Balloon Rider advising the
Borrower of the Balloon Payment due on the Balloon Maturity Date and of the
Reset Option.
Reset (Resetting)
A Reset is the act of changing the interest rate and extending the term of a
Balloon/Reset Mortgage for either an Eligible or an Ineligible Borrower.
Reset
Date
For a Reset Mortgage, the Reset Date is the effective date of the Reset Note
Rate and is always the same as the Balloon Maturity Date.
Reset
Option
The Reset Option is the Borrower’s option to modify and extend a Balloon
Note on the Balloon Maturity Date as provided in the Balloon Note Addendum
and Balloon Rider, subject to the Borrower satisfying all the Reset Conditions.
For a 5-year Balloon/Reset Mortgage, the term will extend for an additional 25
years. For a 7-year Balloon/Reset Mortgage, the term will extend for an
additional 23 years.
Freddie Mac Document
A Borrower Intention/Request Statement is the sample statement designed by
Freddie Mac for a Servicer to use with a Required Notice to a Borrower whose
Balloon/Reset Mortgage is maturing. The statement is used to help determine
if the Borrower
 Will be paying off the Balloon/Reset Mortgage at maturity
 Elects to exercise the Reset Option
 Wants to Reset, but does not meet one or more of the Reset Conditions
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Glossary Term
Service Loans
Application
Definitions
Special Reset
Mortgage Title
Insurance
Special Reset Mortgage Title Insurance is a type of title insurance designed
specifically for Freddie Mac Reset Mortgages. This coverage insures that the
priority, validity and enforceability of the Mortgage has not been affected by
the Reset.
Traditional Title
Insurance
Traditional Title Insurance is the standard American Land Title Association
(ALTA) form coverage issued by title insurers. To obtain this coverage, an
insured must obtain a Title Report.
Freddie Mac Document
Freddie Mac Service Loans application is an Internet-based application that
provides Servicers with Servicing functionality to manage and report activity
for Mortgages serviced for Freddie Mac.
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Appendix B – Sample Completed Borrower Required Notice
Appendix A contains an example of a completed Sample Required Notice to a Borrower, Current, Was
Not Delinquent based on specified Mortgage data.
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Mortgage and Property Data
Category
Data Field
Data
Borrower and
Property
Information
Mortgage
Information
Names
Property address
Mailing address
Freddie Mac loan number
Servicer loan number
Date of Note
Original loan amount
Balloon Note rate
Minimum Contract Servicing
Spread
Type of Mortgage
Balloon Maturity Date
UPB on the Balloon Maturity
Date (assumes 59 monthly
payments have been paid)
Monthly Escrow payment for
real estate taxes and insurance
Insured by mortgage insurance
Documents used at origination
John A. Smith and Mary B. Smith
789 Maple Avenue; Tampa, FL 39999
Same as Property address
494553445
0712334345451
September 19, 2007
$150,000
9.25%
0.375%
Payment status
Servicer
Information
Reset
Information
Accrued late charges due
Name
Address
Freddie Mac Seller/Servicer #
Time zone
Mail schedule
Contact name
Contact title
Contact telephone number
Payment voucher system
Document Custodian
Freddie Mac Required Net Yield
Servicing Spread
New monthly P&I payment
New maturity date
Transaction costs (Traditional
Title Insurance coverage will be
obtained)
Freddie Mac Document
5-Year Balloon/Reset Mortgage
October 1, 2012
$144,218.70
$200.00
No
Freddie Mac Uniform Instruments:
 Balloon Note, Form 3290, 5/93
 Balloon Note Addendum, Form 3291, 10/90
 Balloon Rider, Form 3190, 10/90
Payments are current, with no Delinquency in the
12-month period before October 1, 2012
None
ABC Mortgage Company, Inc.
1234 Main Street; Jacksonville, FL 32230
999999
Eastern time
Mail is received once a day by 11:00 a.m.
Kelly P. Jones
Servicing Representative
800-234-7890
Coupon book
Designated Custodian
8.06%
0.440%
$1,161.29
October 1, 2032
$150.00 Title Report
$125.00 Title insurance policy endorsement
$ 16.50 Recording fees
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Completed Sample Required Notice to Borrower - Current, Was Not Delinquent Using the
provided data (this would be Appendix A, with cover sheet containing Mortgage and
property data)
June 15, 2012
John A. & Mary B. Smith
789 Maple Avenue
Tampa, FL 39999
RE:
Balloon Mortgage Loan Number: 0712334345451
Property Address: 789 Maple Avenue; Tampa, FL 39999
Dear Mr. & Mrs. Smith:
Your mortgage on the above property is a balloon mortgage that will mature on October 1, 2012. On this date
you will have a lump sum payment due that will include the full, unpaid principal balance of your mortgage, plus
any accrued interest and other amounts due.
You have two options available to you to take care of the lump sum payment that is due. You can:
1. Extend and modify your mortgage if you meet certain conditions. We call this process a “reset.”
or
2. Pay your mortgage in full on or before October 1, 2012.
Each option is described below.
Important Note
The reset option is not automatic. If you will not be paying your mortgage in full, you must follow the
instructions below and in the attachment to reset your mortgage.
Resetting your mortgage
The documents you signed when you obtained your mortgage give you the option of resetting your mortgage if
you meet certain conditions that are described in those documents. Resetting your mortgage means we extend the
term of your mortgage for 25 years at a modified interest rate.
You may reset your mortgage if you meet all of the Reset Conditions as specified in your Balloon Note
Addendum and Balloon Rider. If you conclude that you cannot meet one or more of these conditions, but you
still want to reset your mortgage, you must discuss this with us as soon as possible and we will work with you to
meet your needs.
1. You still own and live in the property referenced above.
2. You have not been more than 30 days late on any of the 12 scheduled monthly payments due before October
1, 2012. As of the date of this letter, our records show that you have not been 30 or more days late in your
payments due since October 1, 2011. However, to qualify for the reset you must make all of your remaining
scheduled monthly payments on time.
3. You have no other liens (including a second mortgage, a home equity line of credit, or a real estate or income
tax lien, etc.), defects or encumbrances or any other adverse matters that affect the title to the property, other
than the first lien of the balloon mortgage.
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4. You notify us in writing no earlier than August 2, 2012, and no later than August 17, 2012, that you want to
exercise the reset option.
IMPORTANT NOTE: IF YOU FAIL TO NOTIFY US IN WRITING OF YOUR ELECTION TO
EXERCISE THE RESET OPTION BY AUGUST 17, 2012, YOU WILL LOSE THE RESET OPTION
AND ALL AMOUNTS YOU OWE ON YOUR MORTGAGE WILL BE DUE AND PAYABLE ON
OCTOBER 1, 2012.
5. The modified interest rate, which your mortgage documents call the “reset note rate,” is not more than five
percent (5%) above the current interest rate on your mortgage. We will determine whether you meet this reset
condition after we receive your notice that you elect to reset and after we calculate what the reset note rate
will be. The formula for calculating the reset note rate is contained in the Balloon Note Addendum and
Balloon Rider, which are part of the mortgage documents you signed when you obtained your mortgage.
Paying your mortgage in full
The amount you owe on October 1, 2012, is estimated to be:
 Unpaid principal balance
$144,218.70
 Accrued interest
$ 1,111.69
__________
Total Due
$145,330.39
The total due is an estimate that assumes the remainder of your scheduled monthly payments will be received by
us on the first day of each month that they are due and that no additional fees or other charges are incurred.
If you will be paying your mortgage in full, please
1. Complete the enclosed “Borrower’s Intention/Request Statement” and return it to us as soon as possible
2. Contact us at (800) 234-7890 before you send in the payoff, so we can give you the exact amount that is due
on your mortgage.
3. Make sure your payoff funds will reach us by October 1, 2012, to avoid additional interest and other charges.
Uncertain of your status
If you are uncertain about what to do or if you don’t meet the reset conditions as specified in your
Balloon Note Addendum and Balloon Rider and described above, and you can’t pay your mortgage in
full, then contact us immediately so we can discuss whether you may qualify for a reset under terms that
are similar to, but not exactly the same as the terms stated in your mortgage documents or complete the
Borrower’s Intention/Request Statement and send it to us no later than August 2, 2012. If you have any
questions about the maturity of your mortgage, you can call us at (800) 234-7890.
Sincerely,
Kelly P. Jones
Servicing Representative
Attachment/1
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Use this Statement if You will be Ordering Traditional Title Insurance Coverage
Borrower’s Intention/Request Statement
Borrower’s Notice to Servicer as required by the
Balloon Note Addendum and Balloon Rider
Check one of the boxes on the left
I/We will pay my/our mortgage in full on or before the maturity date.


I/We elect to exercise my/our reset option and I/we certify that I/we meet (or will meet
within 30 days) all the reset conditions contained in my/our Balloon Note Addendum and
Balloon Rider.
Check each of the following boxes that apply to your circumstances
I/We currently own the property securing the balloon mortgage.




I/We currently occupy the property securing the mortgage as
my/our
 Primary residence
 Second home
I/We have not filed for bankruptcy protection, nor am/are I/we under a
bankruptcy repayment plan.
I/We do not have any other liens, defects, encumbrances or
adverse matters affecting the title to the property except the
balloon mortgage.


I/We do have another lien, defect, encumbrance or adverse matter affecting the
title to the property securing the mortgage besides the balloon mortgage.
However, I/we will pay off or resolve the lien, defect, encumbrance or adverse
matter and provide you with proof of such resolution within the next 30 days.
I/We cannot pay off my/our mortgage, and would like to reset my/our mortgage.
However, I/we do not meet the reset conditions contained in the Balloon Note Addendum
and Balloon Rider, so I/we want to know what other options might be available.
Check each of the following boxes that apply to your circumstances

I/We do not still own the property securing the mortgage

I/We do not occupy the property as my/our primary residence or
second home.

I/We do have another lien, defect or encumbrance or adverse matter affecting
the property securing the mortgage and cannot pay it off or clear it up within
30 days.
IMPORTANT NOTE:
Freddie Mac Document
Date and sign the certification and acknowledgments
on the reverse side.
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Borrower Intention/Request Statement
Page 2
By signing this Borrower Intention/Request Statement, I/we certify and acknowledge the following:
1. I/We certify that all information provided in this statement is true and correct as of the date set forth
opposite my/our signature(s) and acknowledge my/our understanding that any intentional or negligent
misrepresentations(s) of the information contained in this statement may result in civil liability and/or
criminal penalties. Additionally, false and incorrect information will make the reset option null and
void and I/we will be required to pay my/our mortgage in full.
2. I/We understand and agree that you will obtain the Federal Home Loan Mortgage Corporation’s
required net yield (RNY) to calculate the reset note rate and my/our new monthly payments as
follows:
If you receive my/our statement
 By 11:00 a.m. Eastern time, Monday through Friday (excluding legal holidays), you will obtain
the RNY no later than 4:30 p.m. Eastern time, on the day you receive my/our statement.
 After 11:00 a.m. Eastern time, Monday through Friday (excluding legal holiday) you will obtain
the RNY no later than 4:30 p.m. Eastern time, on the next business day after the day you have
received my/our statement.
Date
Borrower’s Signature
Date
Borrower’s Signature
Telephone Number: _____________________________ Is this a ( ) Day or ( ) Evening number?
Return this statement to:
ABC Mortgage Company, Inc.
Attn: Balloon/Reset Mortgage Department
1234 Main Street
Jacksonville, FL 32230
We must receive this statement between August 2, 2012 and August 17, 2012, for you to be eligible to
exercise the reset option.
Loan Number: 0712334345451
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