So it turns out Freddie requires an arm's length affidavit, but each servicer may have their own form that they use to cover this. To be clear, the Freddie Mac seller/servicer guide states:

"

In addition, the Servicer must obtain an 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:

(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;
(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) 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;
(f) Each signatory agrees to indemnify the Servicer and Freddie Mac for any and all loss resulting from any negligent or
intentional misrepresentation made in the affidavit including, but not limited to, repayment of the amount of the reduced
payoff of the Mortgage;
(g) The certification will survive the closing of the transaction; and
(h) Each signatory understands that a misrepresentation may subject the responsible party to civil and/or criminal liability

All signatures to the affidavit must be notarized. The affidavit may be included with the sales contract, an addendum, or other
pre-closing or closing documents as long as all signatures are obtained before or at the time of closing.
In the event the closing agent to the sale is prohibited from signing the affidavit by applicable local, State, or federal law, the
Servicer may waive the closing agent's signature requirement upon request. The Servicer must condition the waiver upon the
closing agent's agreement that it will not also act as the closing agent on a subsequent transaction involving the Mortgaged
Premises within one year of closing the short payoff transaction. In all other circumstances, signatures from all parties identified
above are required as a condition to Freddie Mac's agreement to accept a short payoff of the Mortgage.
If a party reveals an agreement, understanding or contract relating to the current sale or subsequent sale of the Mortgaged
Premises that indicates the transaction is not an "arm's length" transaction, that the purchaser intends to re-sell the Mortgaged
Premises in 120 days or less without having substantially refurbished or added value to the Mortgaged Premises, or otherwise
indicates bad faith, collusion or fraud on the part of the parties, the Servicer must withdraw agreement to the short payoff of the
Mortgage and immediately notify Freddie Mac at mortgage_fraud_reporting@freddiemac.com."

 

I contacted Freddie Mac to see if they have a form that they give to servicers, and they said that each servicer's legal council would have to draft the form for the Arm's Length Affidavit. Seems odd to me since they basically wrote the entire form.

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