Freddie Mac Announces Cut Off Date for Interest Only Loan Apps
As reported on February 26, Freddie Mac has decided to stop purchasing and securitizating loans utilizing the interest only payment option. Freddie's deadline for PURCHASING these loans was set as September 2010, however no application/LP approval date cut-off was provided in the bulletin. This deadline was announced yesterday in Bulletin 2010-7
Here is the verbiage from the release:
Effective for mortgages with application dates on or after June 13, 2010, and for mortgages with Freddie Mac settlements on or after September 1, 2010 we are:
Retiring our Initial InterestSM Mortgage offering. Beginning June 13, Initial Interest Mortgages will not be eligible for submission or resubmission to Loan Prospector®.
Plain and Simple: if you want to sell Freddie Mac an interest only loan, the application must be dated prior to June 13, 2010 and you better get LP approval before then too! This is just Freddie Mac's requirement, pass-through lenders are expected to overlay their own, stricter timelines in the near future (some already have actually).
The reasoning provided behind this decision is “a continuing effort to improve the quality of mortgages we (Freddie) purchase”. READ MORE
Several other changes were announced in the bulletin.These updates include an increase in minimum credit score requirements for manually underwritten purchase and rate/term refis on 2-4 unit owner occupied properties and 1-4 unit investment properties, a 620 minimum score on Section 502 Rural Housing Mortgages (USDA has funding?), several changes to property and borrower regs on mortgages for NEWLY CONSTRUCTED HOMES.
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