Freddie Mac amended its policy on mandatory short sale affidavits after the National Association of Realtors® and American Land Title Association (ALTA) had pushed for the change.
Freddie Mac originally created the affidavits to prevent fraud. They require the buyer, the seller, the real estate brokers, the escrow/closing agent and any transaction facilitator to certify a number of things, including that the short sale is an arm’s length transaction and that the buyer won’t resell within 120 days unless substantial improvements have been made. However, the affidavits created a significant liability risk for Realtors.
• The latest version of Freddie Mac’s affidavit includes a new phrase: to “the best of each signatory’s knowledge and belief.” The addition of the “knowledge and belief” standard significantly reduces Realtors’ liability.
• The new affidavit still has a sentence that the signer isn’t making “a negligent or intentional misrepresentation.” Only a signatory making a negligent or intentional misrepresentation must indemnify the servicer and Freddie Mac for any loss. No signatory is responsible for the certification of any other signatory.
• Although Freddie Mac requires all signatories to sign a single affidavit; the amended policy no longer allows the affidavit to be an addendum to the sales contract. NAR advises Realtors not to sign a document implying they are parties to the sales contract.