Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
LP Standard Fixed Rate & ARM’s Conforming Loan Limits PRIMARY HOME PURCHASE & RATE/TERM 1,2,3,4,5,6,7,8 Property Type 2
Max LTV w/o Sec Fin
Max LTV w/ Sec Fin
Max TLTV w/ Sec Fin
Max HTLTV w/Sec Fin
Min Fico w/LP Accept Findings
1Unit Primary
95%
90%
95%
95%
620
24 Unit Primary
80%
75%
80%
80%
620
Max DTI 8
LP/50%
SECOND HOME PURCHASE & RATE/TERM REFINANCE 1,2,3,4,5,6,7 Second Home
85%
80%
85%
85%
620
LP/50%
INVESTMENT PURCHASE 1,2,3,4,7 1 Unit Investment Purchase 24 Unit Investment Purchase
85%
80%
85%
85%
620
LP/50%
75%
70%
75%
75%
620
LP/50%
INVESTMENT RATE/TERM REFI 1,2,3,5,6,7 1 Unit Investment Refinance 24 Unit Investment Refinance
75%
70%
75%
75%
620
LP/50%
75%
70%
75%
75%
620
LP/50%
CASH OUT REFI 1,2,3,5,6,7
1 Unit Primary
80%
75%
80%
80%
620
LP/50%
2 4 Unit Primary
75%
70%
75%
75%
620
LP/50%
1 Unit Second Home
75%
70%
75%
75%
620
LP/50%
1 Units Investment
75%
70%
75%
75%
620
LP/50%
24 Units Investment
70%
65%
70%
70%
620
LP/50%
1 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
LP STANDARD FIXED RATE & ARM’s CONFORMING LOAN LIMITS
1. This matrix is applicable to all standard conventional Fixed Rate loans decisioned in FHLMC Loan Prospector “LP”. 2. Florida Condos refer to Geographic Restrictions in Matrix for Maximum LTV, TLTV, & HTLTV 3. Terms 5/1 ARM, 7/1 ARM, 15 year, 20 year, and 30 years 4. Loans >80% LTV are subject to additional M.I. company requirements in addition to LTV/TLTV/HTLV parameters and other criteria stated in this product guide, SPM P&P requirements must also be met and could potentially supersede applicable M.I. company’s guidelines for loans requiring M.I. 5. Continuity of Obligation requirements apply to ALL refinances 6. Six months’ ownership seasoning is required on all CashOut Refinances. 7. For Loan Amounts up to $417,000 1 Unit, $533,850 2 Unit, $645,300 3 Unit, $801,950 4 Units 8. Maximum DTI lesser of LP or 50%
https://entp.hud.gov/idapp/html/hicostlook.cfm Link for Maximum Loan amount for geographic area Super Conforming Loans
2 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
LP SUPER CONFORMING FIXED RATE & ARM’s 1,2,3,4,5,7,8,9,10,11 ONLY 1 Unit 80% subject to MI & MI guidelines 8. Refer to FHLMC Geographical Loan Limits for Subject Property County 9. Max DTI ratio 50% 10. All Super Conforming Loans require a full appraisal no PIA or other reduced valuations tools permitted 11. Maximum DTI lesser of LP or 50%
3 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
Ability to Repay and Qualified Mortgage Rule AGE OF DOCUMENTATION
APPRAISAL REPORTS
· Effective with all loan applications dated on or after January 10, 2014 (Retail) or applications received on or after January 10, 2014 (Wholesale), all loans must meet the Ability to Repay and Qualified Mortgage provision of the DoddFrank Act. Please refer to SPM Compliance for further details and/or questions · All credit documentation must be dated within 90 days at the time of underwriting and 120 days old on the note date, including credit reports, employment, income, and asset documentation. · Paystubs & Asset Statements should be dated within 30 days of the initial application
o For conforming loan amounts only, For all Loan Prospector Mortgages, the Minimum Assessment Feedback “MAF” will advise of the minimum level of appraisal or inspection necessary. o Some transactions are not eligible for the minimum assessment, and require a full appraisal regardless of the findings provided by Loan Prospector: o Non Arm’s Length o AIT o Property located in a declared Disaster Area o Flipping Transactions o Mixed Use Property (as evidenced by Tax Returns) o Super Conforming Loan Amount ( >$417,000) o The FINAL LP must reflect the MAF in the file, unless the transaction requires a full appraisal report as noted above. o When LP recommends an exterioronly inspection (#2055 or #466), an upgrade to interior and exterior inspection is required when: • Sufficient info about the interior & exterior physical characteristics from thirdparty data sources cannot be obtained • Appraiser cannot reconcile all significant discrepancies (size, condition etc.) from available data sources • Exterior only inspection does not provide sufficient information to develop an accurate & adequately supported appraisal, includes inability to view property from street. • New Construction and has not yet been occupied • Property undergoing renovation or rehab § The property does not conform to the neighborhood § There are apparent adverse physical deficiencies or environmental conditions § Data sources do not provide sufficient information about the property to perform the appraisal § Purchase transactions when the transaction is the sale of an REO property § The last transaction on the property being purchased was a foreclosure
4 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM § The condition rating is C5 or C6 based on the UAD and the data sources used to develop the appraisal or the appraiser's observations during the exterioronly property inspection § The quality rating is Q6 based on the UAD and the data sources used to develop the appraisal or the appraiser's observations during the exterioronly inspection • Loan Amount > $417,000 Super Conforming Loan amounts require full Appraisal Report § Form 2070 – Loan Prospector Condition and Marketability Report: An appraiser –completed inspection used in conjunction with FHLMC Home Value Model and may be used only with Loan Prospector. Designed to report the condition & marketability of a 1 unit property only. When the Feedback Certificate indicates the MAF of Form 2070, the appraisal must be upgraded to an appraisal with interior & exterior inspections if: § Appraiser unable to adequately view the subject property from the street § Appraiser observes any factor that may have an adverse effect on the marketability of the subject property § Quality or Condition appears unacceptable to the typical purchaser in the area § Condition and Marketability factors indicate such an upgrade is required § Subject Property is REO or last transaction on subject was a foreclosure § Loan Amount > $417,000 Super Conforming Loan amounts require full Appraisal Report § When the FNMA form 2075 is used, the appraiser must upgrade to an appraisal as states in FNMA requirements. § Property Inspection Alternative (PIA): PIA may only be used with Loan Prospector. § To be eligible for PIA, the transaction must meet all the following: § Fee Simple Ownership: Leaseholds not eligible § Fully completed & occupied as a residence § No rehabilitation or renovation § No appraisal or inspection s been performed § No conditions the would adversely affect the market value, condition, or marketability § Borrower not affiliated or related in any way to builder, developer, or seller § Subject Property is not a REO and/or the last transactions was not a foreclosure § Loan Amount > $417,000 Super Conforming Loan amounts require full Appraisal Report o Property Inspection Alternative (PIA): PIA may only be used with Loan Prospector. To be eligible for PIA, the transaction must meet all the following: o Fee Simple Ownership: Leaseholds not eligible o Fully completed & occupied as a residence o No rehabilitation or renovation o No appraisal or inspection s been performed o No conditions the would adversely affect the market value, condition, or marketability o Borrower not affiliated or related in any way to builder, developer, or seller o Subject Property is not a REO and/or the last transactions was not a foreclosure o Loan Amount> $417,000 Super Conforming Loan amounts require full Appraisal Report .
5 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM o The following are not eligible for PIA: o Leasehold Estates o Construction Conversion & Renovation Mortgages o Loan Amount > $417,000 Super Conforming Loan amounts require full Appraisal Report o Upgrade requirements for PIA: o There is a home inspection report or other info that indicates the presence of adverse condition and/or marketability o The Seller is aware of the presence of any Contaminated Site or Hazardous Substance affecting the property or the neighborhood in which the property is located o Subject Property is REO or last transaction on subject was a foreclosure o Loan Amount > $417,000 Super Conforming Loan amounts require full Appraisal Report · Full Appraisal reports will continue to follow applicable SPM and FHLMC policies · SUPER CONFORMING LOANS: · FULL APPRAISAL REPORTS – 1004 OR EQUIVIALENT W/ 1004 MC ON (LN>$417,000) · No Supervisory Appraisers allowed, appraiser must be fully qualified & licensed to perform the initial appraisal and appraisal field review reports · Then subject property is an attached condominium, the appraiser must provide at least 2 comparable sales from outside the subject property and outside the influences of the developer, builder, or property seller · FIELD REVIEW REQUIRED when Value > $1,000,000 and LTV/CLTV >75% · General Property Eligibility: The Property must: · Be safe, sound, habitable, and undamaged by fire or windstorms or other perils · Be complete · Meet all the conditions of the appraisal if an appraisal was performed and made ‘Subject to” conditions · Represent the highest and best use of the property as improved · Legal or legal NonConforming use · Have legal access (ingress & egress) · Have year round access · Have utilities that meet community standards · Have mechanical systems that meet community standards · Have property insurance coverage that meets FHLMC requirements & coverage for hazards specific to the geographical location of the property (i.e. Hurricane Insurance, Flood Insurance…..) · Not subject to a pending legal proceeding for condemnation in whole or part · Appraisers: The appraiser must be Statecertified or Statelicensed real estate appraiser in the State in which the subject property is located, have knowledge and experience in appraising the property type in the market area and have access to the applicable data sources. An appraiser who appears on the Freddie Mac Exclusionary List is unacceptable to perform appraisals. · Accessory Units: A 1unit detached property may have an incidental accessory unit that is incidental to the overall value & appearance of the subject property. Examples of such properties include a
6 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM dwelling with a unit above a detached garage, a dwelling with a guest apartment, or a dwelling with a basement unit. The appraiser must describe the accessory unit, and analyze any effect on the value of marketability of the subject property. Minimally the appraiser should provide at least one comparable with similar accessory units to support market acceptance & marketability. · Excessive acreage: The appraiser must appraise the entire site, regardless of the amount of acreage. The site description must accurately describe the entire site and any improvements to include any outbuildings. The comparable sales should have similar acreage. When differences in acreage exist between the subject property and the comparable sales, any adjustments or lack of adjustments made to the comparable sales for significant differences must be explained in the comments area or on an attached addendum, and the appraiser must explain the effect these differences have on the subject property's value or marketability · Final Inspection and Completion Report: For appraisals that are made subject to completion per plans & specifications, or repairs, alterations or conditions, a final inspection of the property is required and a completion report (441 or 1004d) must be provided that documents that the property has been completed. For appraisal that are made subject to completion per plans & specification, or are subject to repairs or alterations: · The Appraisal must perform the final inspection and sign the completion report · Completion report must include updated photographs · For appraisal made subject to final inspection by licensed professional, the licensed professional must perform the inspection and complete any needed repairs. The licensed professional will provide a report stating the repair has been made, signed the report. Verification of the license and in good standing also to be included in file. · Completion report must be dated prior to the Settlement date. · Mixed Use Properties: · The appraiser must provide the following when appraising a mixeduse property: · An appraisal with an interior & exterior inspection · A detailed description of accommodations made for the commercial use of the subject property · A discussion of any adverse impacts of the commercial use · A statement describing any market resistance to the commercial use, and adjustments for any commercial features made to the comparable sales · An opinion of market value based upon the property’s residential nature · Each residential Property with mixed use must meet all of the following requirements: · The property must be located in a residential neighborhood, be primarily residential, and must be typical for the properties in the market · The use must represent a legal, permissible use of the property under the local zoning requirements · The property must be a 1unit Primary Residence and no more that 25% of GLA attributable to the mixed use. · If the property has a commercial use, the Borrower must be the owner & operator of the business
7 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · The dwelling may not be modified in a manner that have an adverse impact on its marketability as a residence · The commercial use must not have an adverse effect on the habitability & safety of the property or site. · Multiple Parcels: The Mortgaged Premises may consist of more than one adjoining parcel of real estate, but cannot include an adjoining parcel that contains an additions residence. When the subject property includes 2 or more adjoining parcels of real estate, the site description must accurately describe the land and any improvements included in each of the parcels. In addition, the comparable sales should have adjoining parcels similar to the subject property. When differences in sites exist between the subject property and comparable sales, ay adjustments or lack of adjustments made to the comparable sales for significant differences must be explained in the comments area or on an attached addendum. In addition, the appraisal report must explain the effect these differences have on the subject property’s value or marketability · NonPermitted Additions: · Properties with “unpermitted” structural additions will be considered under the following conditions: · The subject addition complies with all FHLMC guidelines; · The quality of the work is described in the appraisal and deemed acceptable (“workmanlike quality”) by the appraiser; · The addition does not result in a change in the number of units comprising the subject property (e.g. a 1 unit converted into a 2 unit); · If the appraiser give the unpermitted addition value, the appraiser must be able to demonstrate market acceptance by the use of comparable sales with similar additions and state the following in the appraisal: (1) NonPermitted additions are typical for the market area and a typical buyer would consider the “unpermitted” additional square footage to be part of the overall square footage of the property AND (2)The appraiser has no reason to believe the addition would not pass inspection for a permit. · Outbuildings: Properties with outbuildings, such as a barn or stable, must be considered in the underwriting process to determine whether the property is residential or nonresidential. A property with a small barn or stable may be acceptable if the contributory value of the outbuilding(s) is minimal and the appraiser demonstrates through the use of comparable sales with similar characteristics that it is typical for residential properties in the market areas. However, if the property has a large outbuilding, such as a large barn or multiple outbuildings, it may indicate that the property is agricultural or nonresidential and ineligible as security for FHLMC · Private Roads: The subject property must have legally appropriate ingress & egress (via a recorded easement). The streets serving the subject property must be maintained in a manner that generally meets community standards (Private Road Maintenance Agreement). In addition, the comparable sales should have street maintenance similar to the subject property. In some communities such as Martha’s Vineyard, it may be common not to have a Private Road Maintenance Agreement as demonstrated by similar comparables. In those areas, an exception may be submitted to Corp Ops for a waiver of a Private Road Maintenance Agreement.
8 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · Rural Properties: Rural areas often have less real estate sales activity than more populated locations. Property sales in rural locations often involve a variety of property types, and may have relatively large parcels as compared to other locations. Given the potential challenges with appraising properties in these market areas, the appraiser must be knowledgeable about the varying conditions that characterize properties in a particular geographic area. In such cases, appraisers may have to use older comparable sales, comparable sales that are located a considerable distance from the subject property or comparable sales that are not similar to the subject property. The appraiser must justify and support such use in the appraisal report. Also refer to Outbuildings. · Zoning: The use of the Mortgaged Premises must conform to applicable zoning and use restrictions. FHLMC may purchase a Mortgage secured by property that does not conform to applicable zoning & use restrictions, if the property is a legal nonconforming use (commonly referred to as grandfathered use). Units in attached Condo Projects must be legal conforming. Any adverse effect of nonconforming use must be reflected in the opinion of market value and must also be addressed in the comments section of the appraisal report form.
ARM PRODUCTS Section 30
· · · · · · · · · · ·
ASSETS Section 26 & Section 37.22
Eligible ARMs 5/1 ARM and 7/1 ARM Qualifying Rate of 5/1 ARM is the greater of the Note Rate + 2% or the fully indexed rate Qualifying Rate of 7/1 ARM is the Note Rate ARM Index is 1year LIBOR Lookback Period – First Business Day (FBD) of the month immediately preceding the month in which the Interest Change Date Occurs 5/1 ARM – 1 st Interest Change Date 60 months, and subsequent Interest Changes every 12 months thereafter 7/1 ARM – 1st Interest Change Date 84 months, and subsequent Interest Changes every 12 months thereafter 5/1 ARM Caps 225 7/1 ARM Caps 525 All Borrower Funds & reserves used in the evaluation of the Mortgage must be from eligible sources meeting the requirements of Section 26. The following requirements apply when evaluating deposits on the Borrower's account statements: · (i) Except as stated below, the Seller is not required to document the sources of unverified deposits for purchase or refinance transactions. However, when qualifying the Borrower, the Seller must consider any liabilities resulting from all borrowed funds. · (ii) For purchase transactions, the Seller must document the source of funds for any single deposit exceeding 50% of the total monthly qualifying income for the Mortgage if the deposit is needed to meet the requirements for Borrower Funds and/or reserves. · (iii) When a deposit that is covered by subparagraph (ii) above is not documented and is not needed for Borrower Funds and/or required reserves, the Seller must reduce the funds used for qualifying purposes by the amount of the unverified deposit. For Loan Prospector Mortgages, the
9 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM Seller must enter the reduced amount of the asset into Loan Prospector. · (iv) When a single deposit consists of both verified and unverified portions, the Seller may use just the unverified portion when determining whether the deposit exceeds the 50% requirement in subparagraph (ii) above. · (v) When the source of funds can be clearly identified from the deposit information on the account statement (e.g., direct payroll deposits) or other documented income or asset source in the Mortgage file (e.g. tax refund amounts appearing on the tax returns in the file), the Seller is not required to obtain additional documentation. · (vi) The Seller must document the source of a deposit of any amount regardless of the transaction type if the Seller has any indication that the funds are borrowed or are not from an eligible source under Chapter 26. (At the discretion of the UW) · When using a direct account verification (i.e., verification of deposit (VOD)), the Seller must include documentation of the source of funds when an account is opened within 90 days of verification and/or when the current balance in an account is significantly greater than the average balance. SPM requires a bank statement covering the most recent 30 days to support the VOD · For proceeds of a loan fully secured by the Borrower’s assets, Documentation required include (1) Value of the asset, (2) Ownership of the asset, (3) the amount & terms & conditions of the loan, and (4) evidence of the receipt of the loan proceeds. · Earnest Money Deposit: The source of the earnest money deposit must be from an eligible source of Borrower Funds, and documented as per the LP Documentation Matrix. Care should be taken to make sure that the earnest money deposit is not counted twice in the evaluation of the Mortgage. · Personal IRA & SEPIRA, owned by borrower up to 70% · 401(k), KEOGH, 403(b), & other qualified Employer Retirement Accounts up to 70% of the vested amount less any outstanding loans. In order to use the vested amount of an IRS qualified employer retirement account, the terms of the retirement plan must permit the borrower to make withdrawals regardless of the current employment status, i.e. the accounts must be liquid & assessable to the borrower evidence of liquidation is required when are used for closing. · US Savings Bonds: 100% of value. Provide (1) a written statements from a financial institution confirming that a representative of the financial institution has seen the bonds & listing the serial numbers of the bond(s), date of maturity, type & amount of the bond and stated the Borrower is owner, (2) Evidence of the bond values from the appropriate U.S. Treasury Table, and (3) if assets are used for closing, evidence of liquidation is required. · Cash on Hand: Is not an acceptable source of funds · Refer to Section 26 “Borrower Funds” for additional information or the LP Documentation Matrix · When business assets are used for Downpayment, closing costs, financing costs, prepaids/escrow and reserves, the assets must be verified in accordance with the documentation requirements of Section ASSETS 37.20 – 37.23 and must be related to the business that the Borrower owns 100% and documented in BUSINESS FUNDS the Mortgage File. Section 37.13 · Because the withdrawal of assets from the business account may have a negative impact on the business’ ability to continue operating, the impact of withdrawal must be considered in the analysis of
10 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM the Borrower’s selfemployed income. As part of the analysis, SPM must document a cash flow analysis for the Borrower’s business using the individual and/or business tax returns, as applicable. · The following requirements must be met: · The borrower must be 100% owner of the business (or all borrowers combine own 100%) · Cash Flow Analysis required using minimally 3 months business bank statements to determine no negative impact for Schedule C selfemployment – UW discretion if > 3 months business bank statement will be required. Documentation for source of funds for deposits in the business bank accounts is required · Liquidity/Solvency test based upon the most recent filed Business Return (1065’s, 1120S, & 1120) Requires a minimum of 2 years filed tax returns plus P&L after June 30 th of current year. · Liquidity/Solvency test for sole proprietor is not required · 2 most recent years Business Tax Returns are required when using business assets, regardless of LP findings · Gift or gift of equity from a Related Person 1 : · A gift or gift of equity from a Related Person 1 that does not have to be repaid is an eligible source of Borrower Funds, provided it meets the requirements of this section. If a gift from a Related Person 1 issued with a Mortgage with a LTV > 80%, the gift is permitted only if the Borrower has made a down payment of at least 5% from Borrower Personal Funds. · LTV > 80% The 5% Borrower own Personal Funds does not include business funds nor joint accounts with nonborrowering spouses. · The Related Person 1 is not, and has no affiliation with the builder, real estate agent, or any other interested party to the transaction. · Gifts or Gifts of equity are not eligible source of Borrower Funds for 2 nd Homes or Investment Properties · Documentation requirements: · Fully executed gift letter that states: ASSETS · Name of the Donor and that the funds are given by a Related Person (provide relationship) GIFTS · Identify the Mortgage Premises · State the amount of the gift · Establish that the funds are a gift that does not have to be repaid · Evidence of the transfer of gift funds from the donor to the borrower, and deposited into the Borrower’s account. · A gift of equity must be reflected on the HUD1 form. · Gift or grant from an Agency: a Gift or grant from an Agency that does not have to be repaid, is an eligible source of Borrower Funds (if Mortgage > 80% LTV, borrower has made a down payment of at least 5% from Borrower Personal Funds), provided that: · The gift or grant is given pursuant to an established program; · The Agency is not an interest party; and · The funds were not obtained from an interested party either directly or through a 3 rd party · LTV > 80% The 5% Borrower own Personal Funds does not include business funds nor joint
11 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM accounts with nonborrowering spouses. · Gifts & Grants from Agencies are not eligible sources of Borrower Funds for 2 nd Homes or Investment Properties · Documentation requirements: · Establish the funds were provided by an Agency · Establish that the organization has an established gift or grant program · Establish that the funds are a gift or grant that does not have to be repaid · Provide evidence that the funds were received by the Borrower · Identify the donor’s mailing address · Examples of acceptable documentation are copies of grant program material and either the award letters or terms and condition provided to the Borrower. 1
Related Person is defined as Parent, Spouse, Child, Dependent, Grandparent, relative, related by Blood or Marriage, Adoption, Guardian, Finance’, or Domestic Partner. Please note that the parents of a non purchasing finance’ are not considered eligible donors per FHLMC · · ·
ASSETS RESERVES
·
·
“Reserves” are those assets remaining after Borrower Funds have been paid. All reserves used in the evaluation of the Mortgage for LP must be verified & documented in the loan file. Reserves may include assets eligible as Borrower Personal Funds, & other Borrower Funds (refer to Section 26.2), & the following asset types: Of the following assets, 100% may be used to calculate Borrower reserves: · Stocks, Bonds, Mutual Funds, U.S. Government securities, provide that the value of the funds or securities can be readily verified through financial publications and owned by the borrower 100%. · Cash Value Life Insurance (rather than face value) that is verified. The Borrower must be the owner of the policy & not the beneficiary. · Borrower’s portion of undistributed trust funds. The following assets may be used for reserves subject to certain considerations: · Personal IRA & SEPIRA, owned by borrower up to 70% · 401(k), KEOGH, 403(b), & other qualified Employer Retirement Accounts up to 70% of the vested amount less any outstanding loans. In order to use the vested amount of an IRS qualified employer retirement account, the terms of the retirement plan must permit the borrower to make withdrawals regardless of the current employment status, i.e. the accounts must be liquid & assessable to the borrower. · Savings Bonds may be counted at 100% of face value if mature. If the bonds are not mature, the amount counted toward reserves is based on the redeemable value at the time of UW. Examples of assets that are not eligible to be reserves include: · Nonfinancial assets such as collectibles, coins, stamps, & art work. · Stocks issued by, or notes/loans received from a privately held company · In connection with cashout refinance, the cash proceeds from the refinance transaction · Gifts
12 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
· ·
AUTOMATED UNDERWRITING
· · ·
BORROWER ELIGIBILITY
ALL LOANS MUST RECEIVE LP ACCEPT/ELIGIBLE Loan Prospector Aminus findings are not eligible Manual Underwriting is not allowed Maximum number of borrowers per LP transaction is 5 Follow the LP Documentation Matrix for the minimum documentation requirements additional documentation may be required at underwriter discretion
· US Citizens · Permanent and Nonpermanent Resident Aliens (who is lawfully residing in US) – Section 22.10.1 · Revocable Living Trust (Section 22.10) · Trust Requirements: · The Settlor(s) is the primary beneficiary of the trust · The trustee(s) must be the Settlor (or at least 1 Settlor if >1) · The trustee(s) must be specifically authorized to (a) Borrower money for the benefit of the Underwritten Settlor, and (b) purchase, construct or encumber realty to secure a loan to the Underwritten Settlor · Property Type & occupancy – The Mortgage is secured by (a) 14 Unit Primary Residence occupies by an Underwritten Settlor, or (b) 2 nd home of Underwritten Settlor, or (c) 14 Investment Property · Signatures required on the Loan Documents include both the Underwritten Settlor individually and 1 or more of the trustees on behalf of the trust. · The Mortgage file must contain either a complete copy of the trust agreement or Trust Certification or other summary of the trust agreement if and to the extent the laws of the applicable jurisdiction require or permit a 3 rd party dealing with a trustee to rely on such certification or other summary · Borrowers who receive Government/Public Assistance Income (commonly known as Section 8)are not eligible
13 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
Borrower Residency Documentation
· Permanent Resident Aliens · A copy of the Green Card is required for all permanent resident aliens whose income and/or assets are being used to qualify for a loan. A copy of the front & back of the card is required. · NonPermanent Resident Aliens · All nonpermanent resident alien must provide evidence of a valid, acceptable visa. A copy of the unexpired visa must be included in the loan file evidencing one of the following visa classes: · A Series (A1, A2, A3): these visas are given to officials of foreign governments, immediate family members and support staff. Only those without diplomatic immunity, as verified on the visa, are allowed. · E1 Treaty Trader and E2 Treaty Investor: this visa is essentially the same as an H1 or L1; the title refers to the foreign country's status with the United States. · G series (G1, G2, G3, G4, and G5): these visas are given to employees of international organizations that are located in the United States. Some examples include the United Nations, Red Cross, World Bank, UNICEF and the International Monetary Fund. Verification that the applicant does not have diplomatic immunity must be obtained from the applicant's employer and/or by the viewing the applicant's passport · H1 (includes H1B and H1C), Temporary Worker: this is the most common visa given to foreign citizens who are temporarily working in the United States. · L1, IntraCompany Transferee: an L1 visa is given to professional employees whose company's main office is in a foreign country. · O1A: individuals with an extraordinary ability in the sciences, education, business, or athletics (not including the arts, motion pictures or television industry). · O1B: individuals with an extraordinary ability in the arts or extraordinary achievement in motion picture or television industry. · O2: individuals who will accompany an O1, artist or athlete, to assist in a specific event or performance. · TN, NAFTA visa: used by Canadian or Mexican citizens for professional or business purposes. · TC, NAFTA visa: used by Canadian citizens for professional or business purposes
· Foreign Nationals · Foreign Nationals who have no lawful residency status in the US are not considered to be nonpermanent resident aliens and are not eligible for financing · Diplomatic Immunity · Due to the inability to compel payment or seek judgment, transactions with individual who are not subject to United States jurisdiction are not eligible. This includes embassy personnel with diplomatic immunity. Verification the borrower does not have diplomatic immunity can be determined by reviewing the visa, passport, or the U.S. Department of State’s Diplomatic List at http://www.state.gov/s/cpr/rls/
14 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
Borrower Vesting
CASH RESERVES REQUIREMENTS
· Fractional or percentage vesting is allowed (i.e. Tenants in Common with defined percentage of ownership) · Mortgage must be vested in Natural Person or eligible Revocable Family Trust – (cannot fractional vest in name of Natural Person and Revocable Family Trust) · Vesting in legal entities (i.e. Corporation, S corporation, nonrevocable inter vivos, Life Estate, Land Trust, and Partnership) are not eligible mortgages.
· LTV ≤ 95% follow LP/MI company guidelines · Refer to Second Homes or Investment Homes for their specific transaction requirements
(A) Condo Project review requirements (Section 42.2): · The project complies with the Condo Project eligible requirements set forth in 42.4(b) see below · The Condo Unit Mortgage, the condo Unit & Condo Project comply with project eligibility requirements for 1 of the following project review types: · Streamlined reviews (Section 42.4) CONDO · Established Condo Projects (Section 42.5) GENERAL PROJECT · New Condo Projects (Section 42.6) REVIEW & · 24 Unit Condo Projects (Section 42.7(a)) ELIGIBILITY · Detached Condo Project (Section 42.7(b)) Section 42.2 · Reciprocal project reviews (Section 42.9) · The Condo Unit Mortgage, the Condo Unit & Condo Project comply with the requirements in Section 42.8 “Condo Appraisal & UW requirements; Overview of Condominium Requirements and Project Review Types ·
15 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
· (B) Condo Project Eligible Requirements: The Condo project must comply with the following eligibility requirements. · Ineligible Project: The project must not be an ineligible project. (Section 42.3) · Project Insurance: The project must have insurance that co9mplies with the applicable requirements of Chapter 58. · Title Insurance: The condo unit must be covered by a title insurance policy that complies with the requirements of Chapter 39. · Project Ownership: When control of the HOA has been or will be turned over to the unit owners, the unit owners must have either (a) an undivided ownership interest in the land on which the project is located or (b) a leasehold interest in the land on which the project is located · Ownership and use of the Common Elements: The unit owners must be the sole owners of, and have the right to the use of the Common Elements, including all building, roads, parking and Amenities. The developer must not retain own ownership interest in the Common Elements (except as a unit owner). The Common Elements, including Amenities such as parking & recreational facilities, must not be subject to a lease between the unit owners or the HOA (as lessee) and the developer or any affiliate of the
16 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM developer (as lessor). Parking or other Amenities provided under commercial leases or permit arrangement with the parties unrelated to the developer are acceptable. · Financing of Limited Common Elements: Limited Common Elements are portions of Common Elements reserved for use by 1 or more unit owner but not all owners. Limited Common Elements are defined in the Project Documents, and may include but are not limited to , balconies or patios serving a single unit, assigned parking spaces or storage bins. Limited Common Elements that are purchased as part of the Condo Unit may be financed as part of the Mortgage, and the cost of such limited common elements may be included when determining the sale price and LTV ratio.
CONDO INELIGIBLE PROJECTS Section 42.3
Only limited common elements may be financed along with the Condo Unit. Facilities serving the Condo Unit which are made available to the Condo Unit by a permit, license or lease (other than in a leasehold condom), must not be financed as part of a Mortgage, and the cost of the use of such facilities may not be included when determine the sale price and/or LTV ratio · Projects on Leasehold Estates: If a Condo Project is on a leasehold estate, the lease must comply with the requirements of Chapter 41 · Continuing Project Eligibility: The Seller must not be aware of any change in circumstances since its review of the project that would result in the project no longer satisfying FHLMC requirements. · Mortgages secured by units in any of the following types of projects are not eligible for sale to FHLMC: · Projects required to be required with a federal or State securities agency: Any project that is required to be registered with the U.S. Securities & Exchange Commission or any State securities agency, regardless of the project type: · Hotel/Resorts Projects: A Hotel/Resort Project is a project that is operated as a hotel, resort or other type of hospitality entity or that has any of the characteristics or services described in Hotel/Resort Projects Section 42.10(b) FHLMC determination that a project is a Hotel/Resort Project is conclusive · Project with multidwelling units: A project in which an owner may hold a single deed evidencing ownership of more than 1 dwelling unit. · Project with nonincidental commercial space: A project in which >20% of the total square footage of the project is used for nonresidential or commercial purposes. · TenancyInCommon apartment project: a tenancyincommon apartment project is owned by several owners as tenantsincommon or by a HOA. Individuals have an undivided interest in the residential apartment building (including the units) and land on which the building is located, and may or may not have the right of exclusive occupancy of a specific apartment unit in the building. · Timeshare project or project with segmented ownership: A project in which there is an arrangement under which a purchaser received an interest in real estate and the right to use a unit or amenities, or both for a specified period and on a recurring basis such as the 15 th week of the year, or ownership that is for a limited period such as for the subsequent 5 years.
17 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · Houseboat Project: A project comprised of boats that have been designed or modified to be used primarily as dwelling units. · Project that is a legal nonconforming use: A Condo Project with legal nonconforming use and the jurisdiction in which the project is located does not allow the rebuilding of the improvements to current density in the event of their partial or full destruction. This restriction does not apply to Detached Condo Projects or if the jurisdiction in which the project is located allows the rebuilding of the improvements to their current density in the event of their partial or full destructions. · Project in litigations, arbitration, mediation or other dispute: A project for which the HOS, or developer if the project has not been turned over the unit owners, is party to current litigation, arbitration, mediation or other dispute resolution process and the reason for the dispute involves the safety, structural soundness or habitability of the project except for the instances below: · The litigation amount is known, the insurance company has committed to providing defense & the litigation amount is covered by the insurance policy · The matter involve nonmonetary neighbor disputes regards rights of enjoyment, or · The HOA is the plaintiff in the litigation, and the UW has determined that the matter is minor with insignificant impact to the financial status of the Condo Project · Project sold with excessive Seller contributions: Any project that complies with the definition of a New Condo Project where the builder, developer or property seller is offering contributions that do not comply with the requirements of the Purchase Documents, including Section 25.3. Examples include but are not limited to, rentbacks or leasebacks, payments of PITI or HOA assessments for any period of time, and undisclosed contributions. · Projects with excessive single investor concentration: Any project in which an individual or a single entity such as an investor group (partnership, S Corp, or Corp), owns >10% of the total number of units in the project. Vacant units being actively marketed by the developer are not included in the calculation of the developer’s % of ownership. Any units leased by the developer must be included in the calculation of the developer’s % of ownership. If the project has 1 units. · Continuing Care Retirement Community (CCRC): A CCRC is a residential project designed to meet the health & housing needs of seniors as their needs change over time. CCRC’s are distinguished from agerestricted communities in that the residents in CCRC’s contract in advance for a lifetime commitment from the facility to care for them, regardless of the future health or housing needs. CCRC’s may also be known as LifeCare Facilities · FNMA ineligible projects: Any Condo Project for which FNMA has issued an ineligible project determination · Manufactured Homes: Mortgage secured by Manufactured Homes . · New Condominium Projects in Florida: Mortgages secured by attached units in New Condominium Projects in Florida, except when approved through FNMA project Eligibility (PERS) process. Refer to Section 42.9 for additional information.
18 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · In addition to the project eligibility requirements under General Eligibility, Condos must comply with all of the following requirements to be eligible for the streamlined project review type. (applicable for all streamline project reviews, both located outside Florida and in Florida) · The Condo Unit must be located in an Established Condo Project, which is a Condo Project in which: · The Condo Project (all Condo units, Common Elements and Amenities) and related facilities owned by an Master Association are complete and not subject to any additional phasing, and · At least 90% of the total units in the project have been conveyed to the unit purchasers other than the developer, and · The unit owners control the Homeowners Association · There are no Manufactured Homes in the Condo Project CONDO · The Mortgage must be originated on a spot loan basis and not as part of multiple originations of Mortgages STREAMLINE secured by units in the same Condo Project & sold to FHLMC PROJECT · The loan amount is a conforming loan amount only SuperConforming Loans are ineligible for Streamline REVIEWS Reviews (NOT LOCATED · Maximum LTV, TLTV, and HTLTV ratios IN FLORIDA) · The Mortgage must not exceed the LTV/TLTV/HTLTV ratios for the occupancy type and underwriting path Section 42.4 as indicated in following chart: Streamlined review for attached Condo Units in Established Condo Projects Not Located in Florida Maximum LTV/TLTV/HTLTV Occupancy Type LP Accept Mortgages Primary Residence 90% 2 nd Home 75% Investment Property Not Eligible
CONDO STREAMLINE PROJECT REVIEWS (LOCATED IN FLORIDA) Section 42.4 CONDO ESTABLISHED PROJECTS Section 42.5
Streamlined review for attached Condo Units in Established Condo Projects Located in Florida Maximum LTV/TLTV/HTLTV Occupancy Type LP Accept Mortgages Primary Residence 75% 2 nd Home 70% Investment Property Not Eligible · An Established Condo Project is a Condo Project in which: · The Condo Project (all Condo Units, Common Elements & Amenities) and related facilities own by an Master Association are complete & not subject to additional phasing · At least 90% of the total units in the project have been conveyed to the unit purchasers other than the developer · The unit owners control the HOA
19 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · In addition to the project eligibility requirements in Section 42.2(b) “General Eligibility”, if the Mortgage secured by Condo Units in Established Condo Projects do not comply with the eligibility requirements for a streamlined review in Section 42.4, the Mortgage must comply with all of the following eligibility requirements: · Project completion requirements for Established Condo Project: All units, Common Elements & Amenities must be complete · There are no manufactured Homes in the Condominium Project · Owneroccupancy requirements for Established Condo Projects: · If the Borrower will occupy the Condo Unit as a Primary Residence or 2 nd home, there is no owner occupancy requirement for the Condo Project · If the property will be used as an Investment Property, at least 51% of the total number of Condominium Units in the Condo Project must have been conveyed to the purchasers (other than the developer or a successor to the developer) who occupy their unit as a Primary Residence or 2 nd home.
CONDO NEW PROJECTS SECTION 42.6
· Project budget requirements for Established Projects: The project’s budget must be consistent with the nature of the project & appropriate assessments must be established to manage the project · There must be appropriate allocations for the line items pertinent to the type and status of the Condo Project · At least 10% of the budget must provide funding for replacement reserves for capital expenditures & deferred maintenance based on the project’s age, estimated remaining life, and replacement cost of the major Common Elements · There must be adequate funding for insurance deductible amounts · Delinquent assessments for Established Condo Projects: No more than 15% of the total numbers of units in a project are 30 or more days delinquent on the payment of their HOA assessments. · A New Condo Project is a Condo Project in which: · The Condo Project (all Condo Units, Common Elements & Amenities) and related facilities owned by any Master Association are not complete or are subject to additional phasing · Fewer than 90% of the total number of units in the project have been conveyed to the unit purchasers other than the developer, or · The developer has not turned control of the HOA over to the unit owners. · In addition to the project eligibility requirements in Section 42.2(b) above, New Condo Projects must comply with all of the following: · Project completion requirements: The subject legal phase (or the subject building) and any prior legal phases in which units have been offered for sale are substantially complete. “Substantially complete” indicated that the Common Elements are complete and the units are complete subject to the selection of buyer preference items. · There are no Manufactured Homes in the Condo Project. · Owneroccupancy requirements for New Condo Projects: At least 70% of the total units in the project (or at least 70% of the sum of the subject legal phase and prior legal phase) must have been conveyed or must be under contract to purchasers other than the developer (or it successor) who will
20 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM occupy the units as their Primary Residences or second homes. Legal phases are defined by the Project Documents. Construction phases developed for the convenience of the developer are not necessarily legal phases. For the purpose of calculating owneroccupancy for this project review process, a project consisting of one building cannot have more than one legal phase & any 1 building in a Condo Project comprised of multiple buildings cannot be subject to more than 1 legal phase. · Project budget requirements for New Condo Projects: The HOA assessments must begin once the developer has ceased to pay operating expenses attributable to the Condo Project, whether or not all units have been sold. When any unit owner other than the developer pays assessments, the developer must pay the assessments attributable to the unsold units. The project’s budget (or its projected budget if the project has not been turned over to the units owners) must be consistent with the nature of the project & appropriate assessments must be established to manage the project. · There must be appropriate allocations for line items pertinent to the type and status of the Condo Project · At least 10% of the budget must provide funding for replacement reserves for capital expenditures & deferred maintenance based on the project’s age, estimated remaining life, and replacement cost of major Common Elements · If the project was recently converted, the developer must have initially funded a working capital fund in an amount consistent with the estimated remaining life of the Common Elements · There must be adequate funding for insurance deductible amounts. · Delinquent assessments for New Condo Projects: No more than 15% of the total number of units in a project are 30 or more days delinquent in the payment of their HOA assessments · Compliance with laws: The Condo Project has been created & exists in full compliance with the applicable State law, the requirements of the jurisdiction in which the Condo Project is located, and with all other applicable laws & regulations governing creation of the Condo Project · Limitation on ability to sell/Right of first refusal: Any right of 1 st refusal in the Project Documents will not adversely impact the rights of a mortgagee or its assignee to: · Foreclose or take title to a Condo Unit pursuant to the remedies in the Mortgage · Accept a deed or assignment in lieu of foreclosure in the event of default by a mortgagor, or · Sell or lease a unit acquired by the mortgagee or its assignee · Conversions: For a Condo Project conversion, which is a Condo Project with a prior use, the following requirements must be met: · The licensed engineer must state that the project is structurally sound, & the condition & remaining useful life of the major project components are sufficient to meet the residential needs of the project, and that the licensed engineer has found no evidence that any of these conditions are not met. Major components include the roof, elevators & mechanical systems such as HVAC, plumbing & electricity · All rehabilitation work involved in a Condo Project conversion must be completed in a profession manner · If the conversion was a partial rehabilitation, the Seller must have verified that all repairs affecting
21 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM soundness & habitability are complete, replacement reserves have been allocated for all capital improvements, and the underwriter has determined that the reserves are sufficient to fund the improvements · Mortgage Consent: · The Project Documents must state, or applicable State law must provide, that the Amendments OF a material adverse nature to 1 st Lien mortgagees be agreed to by mortgagees that represent at least 51% of the unit votes (based on 1 vote for each 1 st Mortgage owned) subject to 1 st Lien Mortgages · The Project Documents must state or applicable State law must provide, that any action to terminate the legal status of the project or to use insurance proceeds for any purpose other than to rebuild, must be agreed to by 1 st Lien mortgagees that represent at least 51% of the unit votes (based on 1 vote for each 1 st Mortgage owned) that are subject to 1 st Lien Mortgages · The Project Documents may allow implied approval to be assumed when the then current mortgagee of record fails to submit a response to any written proposal for an amendment within 60 days after the then current mortgagee of record actually receives proper notice of the proposal, provided the notice was delivered by certified or registered mail, with a “return receipt” requested · Examples of actions that require mortgagee consent include, but are not limited to, any of the following: · Abandonment, partition, subdivision, encumbrance, sale or transfer of any Common Elements, other than the grating of easements for public utilities or other public purposes consistent with the intended use of the Common Elements · Any change in the procedure that protects the Seller/Servicer’s interest when handling any losses or proceeds from condemnation, destruction, or liquidation of all or a part of the Condo Project, or from termination of the Condo Project · Any change in voting rights except as allowed for additional phases or annexations in accordance with the initial Project Documents · Any change in the Condo Unit owner’s interest in or obligations to the Condo Project in order to levy assessments or charges, to allocate distribution of homeowners insurance proceeds or condemnation awards, or to determine the owner’s interest in the Common Elements · Changes in the priority of liens for HOA assessments · Reductions in reserves for maintenance, repair and replacement of Common Elements · Redefinition of any unit boundaries · Conversion of units in the Common Elements or Common Elements into units (except for conversion of convertible space in accordance with the initial Project Documents) · Expansion or contraction of the project, or the addition, annexation or withdrawal of property to or from the project except as allowed for additional phases, annexations, or withdrawals of land in accordance with the initial Project · Imposition of any restrictions on the leasing or rental of units · Imposition of any restrictions on a unit owner’s right to sell or transfer out · Rights of Condo mortgagees & guarantors: The Project Documents must give the mortgagee & guarantor of the Mortgage on any unit in a Condo Project the right to timely written notice of:
22 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · Any condemnation or casualty loss that affects either a material portion of the Condo Project or the unit security its Mortgage · Any 60 day delinquency in the payment of assessments or charges owed by the owner of any unit for which it holds the Mortgage · A lapse, cancellation, or material reduction of any insurance policy maintained by the HOA · Any proposed action that requires the consent of a specified percentage of mortgagees · First mortgagee’s rights confirmed: The Project Documents must not give a Condo Unit owner or any other party priority over any rights of the first mortgagee of the Condo Unit pursuant to its Mortgage in case of payment to the unit owner of proceeds from termination, or insurance proceeds or condemnation awards for losses to or a taking of the Condo Units and/or Common Elements. · Marketing units in the Condo Project: The sale program developed for marketing units in a project must recognize & provide procedures for complying with all laws pertaining to the advertising and sale of real estate, the form and content of sales contracts and the method for handling deposit connect with the sale. When the Project Documents allow the HOA to retain the right of first refusal (i.e., the right to provide a substitute buyer or to have the first option to purchase a unit), that right cannot be exercised in any way that constitutes unlawful discrimination, or that is likely to impair the marketability of the units in the project · 24 Unit Condo Projects: In addition to the project eligibility requirements in Section 42.2(b), a Mortgage secured by a Condo Unit in a 24 Unit Condo Project must comply with the following requirements: · The Condo Project must comply with the definition of a 24 Unit Condo Project, which is a project that is comprised of at least 2, but no more than 4 – 1 unit dwellings that are each separately owned with separate legal descriptions CONDO · All units & common elements in the project and in any Master Association must be complete 24 UNIT & · All but 1 unit in the Condo Project must have been conveyed to purchaser (other than the developer) DETACHED who occupy their units as Primary Residences or 2 nd homes CONDO · The Condo Project must not include Manufactured Homes SECTION 42.7 · Detached Condo Projects: In addition to the project eligibility requirements in Section 42.2(b), Condo Unit Mortgage secured by Condo Units in Detached Condo Project must comply with the following requirements: · The Condo Project must comply with the definition of a Detached Condo Project, which is a Condo Project comprised solely of detached, 1 unit dwellings. · Site Condos must show as property type “Condominium” on the LP Certificate Do not run as Detached SFR. · The Condo Project must not include Manufactured Homes · (A) Appraisal requirements for Condo Units CONDO · General Appraisal Requirements: The appraiser must report the project name, the assessments, APPRAISAL & including special assessments & the property rights for each comparable sale and must compare them to UW the subject project. The appraiser must identify the Common Elements including the Amenities available SECTION 42.8 to the unit owners, comment on their condition and analyze how they compare to the Common Elements
23 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM & Amenities of competing projects. Comparable Sales must be from Condo Projects in the same market, be similar to the subject Project and compete for the same purchasers. · Open or Controlled markets: For Condo Units in Established Projects, the appraiser may use 3 comparable sales from within the subject project that are resales exposed to the open, and not under the control of the project developer or property seller of multiple units for conforming loan limits only. SuperConforming loans require a minimum of 2 comparables outside of the project. If the subject property is in a controlled market, least 2 comparable sales must be outside the influence of the developer, builder or property seller. Resales from within the subject project that have been exposed to the open market may be used to comply with this requirement. Comparable sales from outside the subject project must also be outside the influence of the subject property’s developer, builder or property seller. · Units in Detached Condo Projects: The appraiser must use similar detached condo comparable sales from the same project or from similar Detached Condo Projects in the same market area. The appraiser may use detached comparable sales that are not located in a Condo Project only if the appraiser support the use of such sales in the appraisal report & reflects any effect that the condo form of ownership has on the market value & marketability of the subject property. Each appraisal or inspection report must comply with the requirements in Section 44.7, 44.9, 44.12 & 44.15 (Appraisal Forms & Exhibits required) · (B) Underwriting considerations for Condo Projects with mixed uses & with livework Condo Units · Condo Projects with Mixed Uses: FHLMC will purchase eligible Condo Mortgages in Condo Project with a combination of residential, commercial, industrial, office and/or institutional uses provided that the Condo Mortgages comply with Section 42.2 and Section 42.3 · Livework Condo Units; FHLMC will purchase eligible Condo Mortgages in Condo Projects with live work Condo Units provided that: · The Condo Mortgage complies with all applicable FHLMC requirements, including Section 42.2, and · The primary use of the livework Condo Unit is residential & the nonresidential use of such Condo Unit is secondary · Underwriting consideration for Common Elements and Amenities: The Common Elements, including Amenities & Limited Common Elements must be consistent with the nature of the project & be similar to Common Elements in other comparable Condo Projects in the market. CONDO RECIPROCAL PROJECT REVIEW SECTION 42.9
· FNMA approved projects – FHLMC will purchase Mortgages secured by 1unit residential dwellings in Condo Projects that FNMA approved through (1) Final Project Approval thru PERS, or (2) project acceptance certification thru FNMA CPM, if the Mortgage complies with the requirements below
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Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · Reviews to determine whether a project is a Hotel/Resort Project: To ensure that the project is not a Hotel/Resort Project, the UW must review at least the resources listed below as part of its due diligence to determine whether a Mortgage is eligible for sale to FHLMC: · Any offering statements (or their equivalent) and marketing material. These documents must be provided to FHLMC upon request. · Internet web sites, especially web sites for the project itself, the project developer, the entity marketing the project if other than the project developer, and press releases about the project. Printouts of the results of the Internet searches must be retained the in Mortgage file & provided to FHLMC upon request. · Characteristics & Services of a Hotel/Resort Project; If the UW of a project indicates that the project is operated as a hotel, resort or other type of hospitality entity, or that it has any of the characteristics or offers any of the services described below, the project is a Hotel/Resort Project & not eligible for sale to FHLMC. · Project operates or advertises itself as a hotel, resort, inn, motel, lodge or similar type of hospitality entity; includes such terms in its name; has a web site that p resents itself as a hotel, resort, motel, inn, lodge or similar type of hospitality entity; has unite available or advertised for rent through a web site that offers travel services; or is located at the same address or within the same project as a hotel, resort, motel, inn, lodge, or similar type of hospitality entity CONDO · Project has an affiliation or agreement with a hotel, resort, motel, inn, lodge or similar type of hospitality HOTEL/RESORT entity, and the entity offers rental management or registration services for any unit owner of a unit PROJECTS within the project SECTION 42.10 · Unit owners of the project share Common Elements (including Amenities) with a hotel, resort, motel, inn, lodge or similar type of hospitality entity, or the unit owners pay additional fees for the use of the such Common Elements if the unit owner is not part of the rentalmanagement agreement with an entity associated with the project · The project is a conversion of a hotel resort, motel, inn, lodge, or similar type of hospitality entity · The project has characteristics or services typically associate with a hotel, resort, motel, inn, lodge or similar type of hospitality entity. Examples include but are not limited to: · Access to individual units is controlled thru a centralized key system · Restriction on interior decorating or furnishings, units sold “fully furnished”, or purchasers must choose from a list of “approved” furniture, floor & wall coverings · Units have interior doors that adjoin other units · Units contain lockable storage closets, cabinets, safes or mini bars · Room service or food &beverage services are available to unit owners · Signage is present indicating whether there are vacancies · Unit owner’s ability to occupy the unit is restricted · Unit ownership is characterized as an investment opportunity & offers a rental spilt with an entity within the project or associated with the project.
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Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · Purchase or Refinance?: · If the Borrower is not the owner of record of the land, then the transaction is a Purchase · Value is based upon the lower of the sales price or appraised value · If the Borrower is owner of record of the land, then the transaction is a Refinance CONSTRUCTIONS · When the land has been owned by the Borrower for 12 or more months at the time of closing date of TO PERMANENT the interim Construction Financing, the value is based upon the appraised value FINANCING · When the land has been owned by the Borrower for less than 12 months at the time of closing date of Section K33 the Interim Construction Financing, the value is the lesser or (1) Appraised Value or (2) The Acquisition cost (land + total construction costs) · A full appraisal is required, regardless of the LP findings
CONTINUITY OF OBILGATION
CONVERSION OF PRIMARY RESIDENCE Section 37.16.2
· At least one Borrower on the refinance Mortgage was a Borrower on the Mortgage being refinanced; or · At least one Borrower on the refinance Mortgage held title to and resided in the Mortgaged Premises as a Primary Residence for the most recent 12 month period and the Mortgage file contains documentation evidencing that the Borrower, either ■ Has been making timely Mortgage payments, including the payments for any secondary financing, for the most recent 12month period; or ■ Is a Related Person to a Borrower on the Mortgage being refinanced; or · At least one Borrower on the refinance Mortgage inherited or was legally awarded the Mortgaged Premises by a court in the case of divorce, separation or dissolution of a domestic partnership · Existing Property Converting to Investment Property · If the current primary residence will become an investment property & > 30 % equity in the current primary residence can be documented with at least an exterioronly inspection 1 (2055 or 466): • 75 percent of the rental income may be used to offset the mortgage payment in qualifying for the departure residence when the following requirements are met: a. Rental income is documented with a fully executed lease agreement when the borrower’s tax returns reflect a twoyear history of managing investment properties, as evidenced by the most current two years filed and signed Federal IRS 1040 tax returns; and b. Proof the security deposit was received from the tenant and deposited into the borrower’s account and Reserve Requirements are the greater of: ■ 2 months PITI for both properties, or ■ Standard reserve requirements, or ■ Reserve requirements as indicated by AUS · If not using rental income to offset the mortgage payment in qualifying: Reserve Requirements are the greater of: · 2 months PITI for both properties, or · Standard reserve requirements, or · Reserve requirements as indicated by AUS If the current primary residence will become an investment property and at least 30 percent equity in the current primary residence cannot be documented, or the borrower does not have a twoyear history of managing investment properties as evidenced by the
26 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM most current two years filed and signed Federal IRS 1040 tax returns: · Rental income may not be used to offset the mortgage payment and · Both the current & the new mortgage PITI payments must be used to qualify the borrower, & · Reserve Requirements are the greater of: · Six months PITI for both properties, or · Standard reserve requirements, or · Reserve requirements as indicated by AUS · Gift funds cannot be used for reserves. 1
·
·
·
CREDIT
· · ·
·
·
·
Appraisal must be dated within 60 days of the Note
Disputed Tradelines: Credit Reports that show an account in dispute generate a “False Fico Score”. The dispute needs to be resolved, and a new credit report pulled and ran through the AUS credit supplements showing the disputed account resolved are not acceptable. Payoff vs. Paydown: Accounts may not be “paid down to 10 months or less to allow borrower to qualify. Installment or Mortgage accounts must be paid in full. Payoff of revolving accounts in order to qualify the borrower is generally not allowed. When revolving debts are paid off, the accounts should be closed to further use, or the payments should be included in qualifying ratios. Long Term Debt: · The monthly payment on every revolving and openend account with a balance, regardless of the number of payments remaining, must be included in the borrower’s longterm debt and ratio calculation. If the credit report does not reflect a payment, and the actual payment cannot be determined, a minimum payment may be calculated as follows: HELOC – at 1% of the outstanding balance or the payment reflected on the billing statement. Revolving – 5% of balance if no payment provided Deferred Payments – These debts must be included in the qualifying ratio(s) if there are more than 10 months of payments remaining. If the payment is not provided on the credit report or listed as deferred, documentation supporting the required payment must be provided. (Copy of installment loan agreement or direct verification from creditor) Student Loans –the actual payment must be determined, by either the credit report, direct verification from the creditor, or obtain a copy of the note and manually calculate the payment or use 2% of the outstanding balance. All student loans must be included in DTI calculations CoSigned Loans/Contingent Liabilities – Copy of note evidencing account is cosigned and cancelled checks for the most recent 12 months, paid as agreed. If the account has not been paid as agreed, then the payment must be included in the DTI Calculation Contingent Liability – Excluding due to Court Order – If the obligation has been assigned to another person, such as a divorce decree, the payment may be excluded with the following documentation: · Copy of the court order or divorce decree · Copy of the document transferring ownership of the property · If the transfer has not taken place, any late payments should be taken into account when reviewing
27 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM the borrower credit profile. · Business Debts – All business debt reported on the borrower personal tax returns must be included in the monthly payment, unless: · Verification the business liability shows as an expense as evidence by the business tax returns, and · Most recent 12 months cancelled checks showing the liability being paid by the business (out of business bank account), and · Account has been paid as agreed · Lease Payments – Monthly lease payments should be included regardless of the number of payments remaining. If the lease is at near or at the end, a new lease payment should be determined and included in the total monthly debt
CREDIT SCORE
DEBT RATIOS
· Tri Merge Credit Report required All borrower(s) must have at least 1 valid score. UW Discretion as to the determination enough credit present to be a valid score
· Conforming Loans lesser of LP Accept or 50% · Super Conforming loan lesser of LP Accept of 50% · It has been brought to our attention that there is a rounding issue in OPS on DTI ratios. The LP findings round the DTI down and OPS is rounding up. For example we could have a LP approval at 50% (approvable) but OPS shows the DTI as 50.01% (unapprovable). As long as there is a VALIDATED LP findings reflecting a DTI of 50% you are able to proceed with the approval of the loan
DELAGATED Loan amounts > $650,000 require a second signature from the Branch Operations Manager UNDERWRITING DESKTOP UNDERWRITER
· FNMA DU findings are not acceptable File must be ran through Loan Prospector “LP”, and all findings met · When switching from DU to LP MAKE SURE ALL FHLMC REQUIREMENTS ARE MET – INCLUDING BUT NOT LIMITED TO FHLMC LANDLORD 2 YEAR HISTORY
28 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
DEED RESTRICTIONS/ INCLUSIONARY ZONING
FHLMC will purchase Mortgage secured by properties subject to resale restriction including, but not limited to, income based restrictions (also referred to as inclusionary zoning) and age based restrictions, if the requirements of this section are met and the restrictions are in compliance with all federal, State and local laws, rules and regulations. (Sec 22.23) · First Right of Refusal For properties subject to resale restrictions, and right of first refusal must run to the enabling authority or jurisdiction that imposed the resale restrictions, with a time period not exceeding 90 days from the date of written notice to the authority or jurisdiction that the restricted property is being offered for sale. · Resale controls – Properties subject to resale restrictions, except for age restrictions, must have resale controls for a fixed period of time. The controls must be administered by a duly authority of State, local or municipal government or an agent of the authority that has established mechanism to provide applicants screening and processing on an ongoing basis. The controls may not be administered by the developer. · Notice of Default or foreclosure – The mortgagee is not required to send notice of default or foreclosure to any 3 rd party. · Public Land records – Agreements or requirements, i.e., enacted ordinances, statutes, published policies or imposed restriction, must appear in public land records for the project in a manner discoverable by routine title search. · Effect of foreclosure of deedinlieu foreclosure – Any resale restrictions, except for age restrictions, must not survive foreclosure or deedinlieu of foreclosure. · Payment of financial obligations – Any requirement in the deed restrictions requiring the owner of the property to make payments under certain circumstances or requiring repayment of financial subsidies must state that the payment obligation is subordinate to the lien of the 1st Lien Mortgage. · Appraisal requirements for restricted properties – The appraisal must include at least 3 comparables sales with similar resale restrictions. The following requirements must be met: · ·
DEROGATORY CREDIT
Copy of Restricted covenant must be include in loan file ALTA9 title endorsement is required
· Conforming Loan Amounts; · For LP Accept Mortgages on conforming loan amounts, the significance of the derogatory information has already been considered by Loan Prospector & the Borrower’s credit reputation has been deemed acceptable. This would include Bankruptcy 2 , Foreclosure 1 , and DeedinLieu 1 . However, regardless of the Risk Classification received from Loan Prospector, if evidence of a short sale is disclosed on a credit report or elsewhere in the file, the requirements for handling the
29 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM significant adverse or derogatory information for a Manually Underwritten Mortgage must be met · Short Sales 1 within the last 7 years requires 48 months seasoning from the completion date and is limited to: · Purchase Transaction secured by Primary Residence limited to 90% LTV/TLTV/HTLV or maximum LTV/TLTV/HTLTV for transactions OR · Rate/Term (No Cash Out) · Short Sale 1 seasoned 7 years are eligible for all transactions · SuperConforming Loan Amounts: · For LP Accept Mortgages, the following seasoning requirements apply to SuperConforming loan amounts: · For Loans caused by financial Mismanagement · Foreclosures 1 within the last 7 years requires 84 months from the completion date as reported on the credit report or other documentation contained in the loan file. · DeedinLieu 1 within the last 7 years requires 48 months seasoning from the completion date and is limited to: · Purchase Transaction secured by Primary Residence limited to the lesser of 90% LTV/TLTV/HTLV or maximum LTV/TLTV/HTLTV for transactions, or · Rate/Term (No Cash Out) · Short Sales 1 within the last 7 years requires 48 months seasoning from the completion date and is limited to: · Purchase Transaction secured by Primary Residence limited to the lesser of 90% LTV/TLTV/HTLV or maximum LTV/TLTV/HTLTV for transactions OR · Rate/Term (No Cash Out) · Foreclosure 1 , DeedinLieu 1 or Short Sale 1 seasoned 7 years are eligible for all transactions · Bankruptcy 2 (other than a Chapter 13) – 48 months from the discharge or dismissal date · Chapter 13 Bankruptcy 2 – 24 months after the discharge date or 48 months from the dismissal date · Multiple bankruptcy 2 filings in the past 7 years – 60 months from the most recent discharge or dismissal date · Other Significant adverse or derogatory credit – 48 months from the most recent significant adverse or derogatory credit information · For All Loans (Conforming & Superconforming) with Extenuating Circumstances: FHLMC considers an extenuating circumstance to be a nonrecurring or isolated circumstance, or set of circumstances, that was beyond the Borrower's control and that significantly reduced income and/or increased expenses and rendered the Borrower unable to repay obligations as agreed, resulting in significant adverse or derogatory credit information. · In addition, if the Borrower's credit history includes significant adverse or derogatory credit within the most recent 2 years, even if it was caused by extenuating circumstances, the Borrower's credit reputation cannot be considered acceptable. · When using extenuating circumstances to justify that the Borrower's credit reputation is acceptable
30 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM despite significant adverse or derogatory information, the file must contain thirdparty documentation confirming the extenuating circumstances and reestablishment of credit. · The Mortgage file must contain all of the following documentation: · A written statement from the Borrower attributing the cause of the financial difficulties to outside factors beyond the Borrower's control that are not ongoing and are unlikely to recur · Thirdparty documentation confirming that the events related by the Borrower in the explanation were an isolated occurrence and significantly reduced the Borrower's income and/or increased expenses and rendered the Borrower unable to repay as agreed · An underwriting analysis on Form 1077, Uniform Underwriting and Transmittal Summary, or on a separate document in the Mortgage file, relating the Borrower's explanation to the Mortgage file documentation and leading to a reasonable conclusion that:The events causing the financial difficulties were beyond the Borrower's control, are not ongoing and are unlikely to recur; and · The Borrower has reestablished an acceptable credit reputation · Evidence on the credit report and other documentation in the Mortgage file of the length of time since completion of the significant derogatory event to the date of application and of completion of the recovery time period requirements below. In addition to the recovery time period requirements, the following additional requirements below must also be met: · Foreclosures 1 within the last 7 years requires 36 months from the completion date as reported on the credit report or other documentation contained in the loan file and is limited to: · Purchase Transaction secured by Primary Residence limited to the lesser of 90% LTV/TLTV/HTLV or maximum LTV/TLTV/HTLTV for transactions OR · Rate/Term (No Cash Out) · DeedinLieu 1 within the last 7 years requires 24 months seasoning from the completion date and is limited to: · Purchase Transaction secured by Primary Residence limited to the lesser of 90% LTV/TLTV/HTLV or maximum LTV/TLTV/HTLTV for transactions, or · Rate/Term (No Cash Out) · Short Sales 1 within the last 7 years requires 48 months seasoning from the completion date and is limited to: · Purchase Transaction secured by Primary Residence limited to the lesser of 90% LTV/TLTV/HTLV or maximum LTV/TLTV/HTLTV for transactions OR · Rate/Term (No Cash Out) · Foreclosure 1 , DeedinLieu 1 or Short Sale 1 seasoned 7 years are eligible for all transactions · Bankruptcy 2 (other than a Chapter 13) – 24 months from the discharge or dismissal date · Chapter 13 Bankruptcy 2 – 24 months after the discharge date or from the dismissal date · Multiple bankruptcy 2 filings in the past 7 years – 60 months from the most recent discharge or dismissal date · Other Significant adverse or derogatory credit – 48 months from the most recent significant adverse or derogatory credit information
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Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
Footnotes: 1 Mortgage Files must contain evidence of the completion of the foreclosure, deedinlieu, or short sale 2 Whenever a Borrower has had a bankruptcy within the last 7 years, the Mortgage file must also contain (1) Copies of the bankruptcy petition, schedule of debts & discharge or dismissal (2) Evidence to indicate that all debts not satisfied by the bankruptcy have been paid or are being paid, and (3) Any other evidence necessary to support the determination that the Borrower has reestablished & maintained an acceptable credit reputation.
EXCLUSIONARY LIST
· All Parties to the transaction must be checked against FHLMC Exclusionary List – · If any party is on the Exclusionary List, the loan is not eligible for sale to FHLMC
ELIGIBLE PROPERTY TYPES
· · · · · · ·
Single Family Detached Unit Single Family Attached Unit Modular Homes 24 Unit Attached/Detached PUD’s Lowrise & Highrise Condominiums (must be FHMLC eligible projects) Rural Properties (that meet FHLMC requirement AND residential in nature)
Eligible Terms & Product Codes
· · · · · · · · ·
T301FR 15 year Fixed T304FR 20 year Fixed T300FR 30 Year Fixed A341FR 5/1 ARM A342FR 7/1 ARM T301JFR 15 year Fixed T300JFR 30 year Fixed A341JFR 5/1 ARM A342JFR 7/1 ARM
FLIPPING
Purchase transactions for properties that are owned by the Seller and resold 80%, Borrower must contribute 5% own funds to transaction · Gifts of Equity – for LTV > 80%, Borrower must contribute 5% own funds into transaction · Gifts or gifts of equity are not eligible sources of Borrower Funds for Second Homes or Investment Property Mortgages · A related person is defined as any of the following: · The Borrower’s spouse, child or dependent · An individual related to the4 Borrower by blood, marriage or adoption · A guardian of the borrower · A person for whom the Borrower is a guardian · The Borrower’s fiancée · The borrower’s domestic partner
· Not available at this time · Stable Monthly Income: Stable monthly income (qualifying income) is the borrower’s gross monthly income from all acceptable & verifiable sources that can reasonably be expected to continue for at least the next 3 years. In most instances, in order to consider the income stable, the borrower must have a 2 year history of receipt. · Employment Gaps: Gaps in employment > 60 days require written explanation · Newly Employed: For a Borrower who has less than a twoyear employment and income history, the Borrower's income may be qualifying income if the Mortgage file contains documentation to support that the Borrower was either attending school or in a training program immediately prior to their current employment history. (Copy transcripts of other documentation verify dates covering 2 full years) · ReEntering the Workforce: For a Borrower who is reentering the workforce and has less than a 2year employment and income history,(Defined as >30 day gap in the preceding 24 months) the Borrower's income may be qualifying income if the Borrower has been at the current employer for a minimum of six months at the time of initial application and there is evidence of a previous employment history. · Significant increases or decreases in income level: · When the borrower has experienced a significant decrease in income, the income cannot be averaged using a previous higher level unless there is documentation of a onetime occurrence the prevented the borrower from working or earning full income and evidence that the Borrower is back to the income amount they previously earned. · Auto Allowance: The borrower must have a two year consecutive history of receiving an automobile allowance, and must be likely to continue for the next 3 years. Add the full amount of the allowance to
35 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM the Borrower’s qualifying income, and add the full amount of the auto loan/lease (as applicable) to the liabilities for calculation of debt ratios. Cannot subtract the auto payment from the auto allowance · Capital Gains – 2 year history as evidence on the most recent 2 year 1040’s, and documentation of sufficient assets remaining after closing to support a 3 year continuance · Commission, Bonus, Overtime, and 2nd Jobs: The borrower must have a two year consecutive history of receiving the income from commission, bonus, overtime, or a second job for the income and employment to be considered stable, and the income must be reasonably expected to continue for the next 3 years. · Employed by Relative or Transaction Participants: · Borrower signed and complete personal 1040’s for the most recent 2 years · Verification of Employment form (Written VOE) · W2’s for the most recent years. · Documentation to support borrower has no ownership. · Computer generated paystub (handwritten paystubs require a manual UW which is not available). · Foreign Income: Acceptable only if income can be verified on US personal tax returns. · Long Term Disability Income – LongTerm Disability (included SS Disability, VA Disability, Worker’s comp, Private Disability Insurance). Unless there is a predetermined insurance and/or benefit expiration date that is less than 3 years, the income may be considered as qualifying income that has a reasonable expectation of continuance for 3 years. Evidence of the source, amount, insurance and/or benefit type, and consistent receipt for the most recent 2 months must be obtained · Notes Receivable, Installment Sales & Land Contracts: · Evidence of receipt for the last 12 months Terms four 14 unit financed residential properties, including the subject property.
43 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · Ownership of commercial or Multifamily (5 or more units) is not included in this limitation · Additional requirements for Borrowers owning more than 1 financed Investment property: Freddie Mac will purchase Investment Property Mortgages made to Borrowers who own more than one financed Investment Property, provided that the following additional requirements are met: · Each Borrower individually and all Borrowers collectively must not own and/or be obligated on more than four 1 to 4unit financed properties, including the subject property. Ownership of commercial or multifamily (five or more units) real estate is not included in this limitation. · The Investment Property Mortgage being sold to Freddie Mac is: · An eligible fixedrate, levelpayment Mortgage or · A 7/1 or 10/1 ARM, · 5/1 ARM is ineligible · Not an Aminus Mortgage
Effective with Loan Applications dated January 10, 2014 (Retail Business Channel) or files accepted January 10, 2014 (Wholesale Business Channel), the following will be the only options for Mortgage Insurance:
M.I. REQUIREMENTS
· · · · · ·
· ·
Borrower Paid Monthly Insurance (“BPMI”) Lender Paid Single Premium (“LPMI”) Mortgage Insurance must be refundable Renewals are constant, not declining Reduced MI coverage is ineligible In addition to SPM policy, please refer to the Individual Mortgage Insurer guidelines for their specific requirements, as due to the variances between the companies, the Mortgage Insurer guidelines cannot be captured in the matrices Standard Mortgage Insurance coverage requirements as per below chart Only Nondelegated M.I. is allowed. M.I. contract UW must underwrite and issue certificate
Mortgage Term/Type Fixed Rate – Term 20 years; 12% 25% 30%
MIN. DOWN PAYMENT REQUIREMENT
ARMS · Loan transactions with LTV/CLTV >80% up to 95% require minimum 5% minimum contribution of own funds. M.I. companies may have additional requirements/restrictions. LTV ≤ 80% may use all gift funds.
MODIFICATION / · Not eligible for FHLMC if it is the subject property & currently owned by borrower RESTRUCTURED · On other REO by borrower, if there has been a loan modification/restructured loan minimum of 24 LOANS months paid as agreed accordingly to the terms of the Modification/Restructured Loan required. Ø Ø Ø Ø
NON OCCUPPANT COBORROWER
Ø Ø Ø Ø Ø Ø Ø
Planned Unit Development
Owner Occupied Primary Residence Only Second Homes are not eligible Cash Out Refinances are not eligible to add NonOccupying CoBorrower Eligible property types include: Ø 14 Units Ø PUD’s Ø Condo’s – (Project must be warrantable per FHLMC Matrix guidelines) 24 Units require Occupant Borrower(s) must be a previous homeowner within last 3 years, verify previous Mortgage paid as agreed (0x30 days ) LTV >80% require minimum 5% Occupant Borrower own funds Maximum LTV 95% Maximum TOTAL DTI 50% LP Accept/Eligible – no manual underwriting allowed Non Occupying CoBorrower(s) must have a verifiable primary housing expense Those NonOccupying CoBorrower(s) without a primary housing expense are ineligible.
· A PUD is a project subdivision that consists of common property and improvements that are owned and maintained by an HOA for the benefit and use of the individual PUD units. FHLMC has reciprocal project reviews for Planned Unit Developments; therefore the acceptable project approval will come from FNMA. · Project Type E – Established project where the developer has turned over voting control of the HOA to the unit purchasers. · Project Type F – New project where the developer has not turned over voting control of the HOA to the unit purchasers. · Detached PUD projects do not require any review of a PUD project
45 | P a g e FHLMC Direct Rev 09/05/2014
Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
PROPERTY ELIGIBILITY
PRIVATE TRANSFER FEE COVENANTS
RECENTLY LISTED PROPERTY
REFINANCE GENERAL ELIGIBILITY Section 24.2
· Residential Requirements: FHLMC will purchase eligible Mortgages secured by residential properties in urban, suburban, and rural market areas as long as the Mortgage Premises is adequate collateral for the Mortgage transaction base on the value, condition, and marketability of the property. Mortgages secured by vacant or undeveloped land, land development properties or properties used primarily for agriculture, farming or commercial enterprise. The subject property must be residential based on the property characteristics, zoning & land use. · The subject property must: · Be safe, sound, & habitable · Be complete · Meet all conditions of the appraisal if an appraisal was performed and made subject to conditions · Represent the highest and best use of the property as improved · Have a legal or legal nonconforming use · Have legal access · Have year round access · Have utilities that meet community standards · Have Property insurance coverage that meets FHLMC requirements & coverage for hazards specific to the location of the property · Not be subject to a pending legal proceeding for condemnation · Mortgages on properties encumbered by private transfer fee covenants prohibited by 12 CFR Part 1228 are ineligible for purchase by FHLMC if those covenants were created on or after February 8, 2011 · NoCash Out Transaction the subject property must not be currently listed for sale. It must be taken off the market off a minimum of 31 days prior to the application date; Borrowers must confirm their intent to occupy the subject property (for primary residence.) · Cash Out Transaction –Properties listed for sale in the six months preceding the application date for new financing are limited to 70% LTV/CLTV. Properties that were listed for sale must be taken off the market a minimum of 31 days prior to the application date. · A Refinance Mortgage is either: · A Mortgage the proceeds of which are used to pay off an existing Mortgage(s) on the subject property, or · A Mortgage secured by the subject property previously owned free & clear · For all Refinance Mortgages: · Must meet all LTV/TLTV/HTLTV as per the Matrix · Must meet Continuity of Obligation Requirements · The existing lien to be refinanced cannot have been modified or restructured
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Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · At least one borrower must have been on title (& Note) for at least 6 months (Note date to Note date is what is used to calculate the 6 months) · If none of the Borrowers have been on title to the subject property for a least 6 months prior to the Note Date of the cashout refinance, the following requirements must be met: · The executed HUD1 Settlement Statement from the purchase transaction must reflect that no financing secured by the subject property was used to purchase the subject property · The Prelim title report for the refinance transaction must reflect the Borrower as the owner of the subject property & must reflect that there are no liens on the property · The source of funds used to purchase the subject property must be fully documented · If funds were borrower to purchase the subject property, those funds must be repaid & reflecting on REFINANCE the HUD 1 Settlement Statement for the refinance transaction CASHOUT · The amount of the cashout refinance must not exceed the sum of the original purchase price & Section 24.6 related closing costs, financing costs and prepaids/escrow as documented by the HUD 1 Settlement Statement for the purchase transaction · There must have been no affiliation or relationship between the buyer & seller of the purchase transaction · The cashout refinance Mortgage must comply with the applicable LTV/TLTV/HTLTV retail limits & all other FHLMC requirements. · A Mortgage placed on a property previously owned free & clear by the borrower is always considered a cash out · A cashout refinance Mortgage is a Mortgage in which the use of the loan amount is not limited to specific purposes REFINANCE SPECIAL · Not available at this time PURPOSE CASH OUT Section 24.7 · Borrower tax returns must reflect a 2 year history of rental income, managing 14 unit investment properties RENTAL · Form 998 required INCOME · Reserve requirements of 6 mths PITI PLUS 2 mths PITI for each other property owned Section 37.14 · Rent Loss insurance for minimum 6 months if rents used to qualify
RESERVES REQUIREMENTS Section 37.14
· Primary Residence pending sale or convert to investment · Equity > 30%, 2 mths PITI for both current primary residence & subject property · Equity 5 years after Note Date of first lien Mortgage, unless the junior lien is fully amortizing. · For financing of a HELOC, the terms of the HELOC may provide for a balloon or call option within the 1 st 5 years after the Note Date of the 1 st Lien Mortgage · Scheduled payments: · Regular monthly payments to minimally cover interest due · No negative or accrued interest · General Requirements; · Terms of any secondary financing must be disclosed to the appraiser. · The terms of the secondary financing that must be disclosed include, but are not limited to the Note Rate and the institution or individual providing the financing. · Payments on the secondary financing must be included in the Borrower’s monthly housing expense. · Copy of Note & Trust Deed evidencing the subordinate lien terms must be included in the file documentation · Copy of the HUD 1 Settlement must be included in the file documentation · For HELOC’s, the HELOC agreement indicating all fees and costs paid by the Borrower at closing, and the maximum permitted credit advance much be included in the file documentation · Community Second or Affordable Second only allowed in conjunction with a Home Possible 1 st Mortgage see below
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Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM SECONDARY FINANCING AFFORDABLE SECONDS · Not available at this time 25.1 (g) (Limited to Home Possible Mortgage Only) · Maximum Loan amounts for Super Conforming:
Units 1 2 3 4
SUPER CONFORMING LOANS Section L33
1
Minimum/Maximum Original Loan Amount Maximum Loan Minimum Loan Amt Amt 1,2 > $417,000 $625,500 >$533,850 $800,775 >$645,300 $967,950 >$801,950 $1,202,925 1
Properties in Alaska & Hawaii Minimum Loan Amt >$625,500 >$800,775 >$967,950 >$1,202,925 1
Maximum Loan Amt 1 $938,250 $1,201,150 1 $1,451,952 ! $1,804,375 1
Maximum loan amount is limited to $1,000,000 – regardless if the county loan limit is higher.
2
These are the maximum potential loan limits for designated highcost areas. Actual loan limits are established for each county and the loan limits for specific highcost areas may be lower. For specific loan limits for each high cost area, as released by the Federal Housing Finance Agency, visits: http://www.fhfa.gov/Default.aspx?Page=185 · Special Appraisal & Collateral requirements: · Full Appraisal with interior & exterior inspection · Field Review required if LTV/TLTV/HTLTV > 75% and value is > $1,000,000 · When the appraisal field review report results in a different opinion of market value, the lower of the opinion of market value from the appraisal field review report or sale price must be used to calculate the LTV/TLTV/HTLTV · When the subject property is an attached condominium, the appraiser must provide at least 2 comparables sales from outside the subject property and outside the influence of the developer,
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Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM · Tax transcript(s) are required for each borrower whose income is utilized as a source of repayment, both personal & business returns as applicable. The most recent available tax transcript(s) are required TAX to support the income used to qualify the borrower. The number of years of transcripts is determined TRANSCRIPTS by the LP findings 1 or 2 “4506t” If tax transcripts are not available, (due to recent filing), a copy of the IRS notice showing “No record of return filed” is required along with documented acknowledgement. TEMPORARY BUY Not available. DOWNS · Texas Equity Section 50(a)(6) Mortgages must have the following characteristics: •15, 20 or 30year terms •First Lien •Fixed interest rate, fully amortizing, with a level payment •Conventional whole Mortgages · Texas Equity Section 50(a) (6) Mortgages may not be ARMs. · A Texas Equity Section 50(a)(6) Mortgage must be one of the following, depending on the applicable facts: •A cashout refinance Mortgage, as described in Section 24.6, or •A "no cashout" refinance Mortgage as described in Section 24.5 · A Texas Equity Section 50(a) (6) Mortgage may not be a special purpose cashout refinance Mortgage. TEXAS(a)(6)
· Each Mortgage must be secured by a Mortgaged Premises that is: •A 1unit Primary Residence, and the Borrower’s homestead, •Located in the State of Texas, · NO POA allowed •3% cap includes Discount Points (only true interest can be excluded), and •A residential property, not a farm, ranch or used for any agricultural purposes · Full Appraisal Report required · The Seller and the owner of the homestead must execute a written acknowledgment of the "fair market value" of the homestead property as of the date the extension of credit is made. The appraisal report must be attached to the acknowledgment · If a POA is utilized, it must follow Texas Law restrictions · The maximum LTV and TLTV ratios for Texas Equity Section 50(a)(6) Mortgages must not exceed 80% and must be lower if necessary to comply with the provisions of Sections 23.4 and 24.5 for "no cash out" and cash out refinances, as applicable REFER TO SECTION 24.8 OF THE FHLMC SELLER/SERVICER GUIDE VOLUME I FOR FULL DETAILS
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Correspondent Business Channel Freddie Direct Conventional Conforming T300FR – 30 yr. Fixed; T304FR – 20 yr. Fixed; T301FR – 15 yr. Fixed; A341FR – 5/1 ARM; A342FR 7/1 ARM; Super Conforming T300JFR – 30 yr. Fixed; T301JFR – 15 yr. Fixed; A34JFR – 5/1 ARM; A342JFR 7/1 ARM
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