Freddie Mac Out With Another Round of Guideline Updates

by devteam September 17th, 2015 | Share

FreddiernMae has unveiled another round of changes to its Single-FamilyrnSeller/Servicer Guide.  There are morernthan a half dozen changes effecting mortgages for refinancing, condominiums andrnrelocation.  Effective dates refer tornmortgages that settle on or after that date.</p

EffectivernOctober 1 Freddie Mac will no longer require a 5 percent contribution fromrnborrowers’ personal funds for mortgages that have loan-to-value (LTV) ratiosrngreater than 80% and are secured by Primary Residences and for which a gift orrngift of equity from a related person is used as a source of funds. The samernapplies to mortgages meeting that LTV requirement for which an unsecured loanrnthat is an Employer Assisted Homeownership (EAH) Benefit is used as a source ofrnfunds.  </p

Effectivernimmediately the company is making changes to the 120-day seasoning requirement</bfor a no-cash-out refinance mortgage when the mortgage being refinanced is arnpurchase money transaction.  Currently for cash-out refinance mortgages the company requires atrnleast one borrower to have been on the property title for at least six months priorrnto the note date of the Mortgage, with certain exceptions.  The six month requirements will now be removedrnif at least one borrower on the refinance either inherited or was legallyrnawarded the subject property, and where a Settlement/Closing Disclosure Statementrnis required a trustee's deed is an acceptable substitute.  </p

Inrnaddition, when none of the borrowers have been on the subject property titlernfor at least six months the maximum cash out must not exceed the sum of thernoriginal purchase price and related closing costs, financing costs and prepaids/escrowsrnbut that calculation will, effective for December 16, require that any giftrnfunds used to purchase the subject property be deducted from the total purchasernprice calculation. </p

Effectivernimmediately sellers to Freddie Mac must manually apply the requirements for ManuallyrnUnderwritten Mortgages with significant or derogatory credit information tornLoan Prospector Accept and A-minus Mortgages with evidence of a short sale on arncredit report or elsewhere in the Mortgage file.</p

EffectivernOctober 26, 2016 the company is updating the requirements for using credit cards,rncash advances and unsecured lines of credit to pay mortgage application relatedrnfees to permit the option of either rather than both (1) verifying that thernBorrower has sufficient funds to pay the charges or advances, or (2) includingrnthe payment for the amount charged or advanced in the monthly debt payment-to-incomernratio. </p

Alsorneffective on the October date, for mortgages on primary residences that arernpending a sale that will not close prior to the closing of the new mortgage, orrnbeing converted to a second mortgage or investment property Freddie Mac is eliminatingrnthe additional reserves and rental income requirements for these Mortgages so thatrnonly the standard reserves and rental income requirements apply.  There are additional changes affecting howrnthe existing monthly mortgage payment is to be treated in the debt-to-incomerncalculation which should be reviewed by the lender in the Bulletin. </p

Freddie Mac saidrnrecent market and industry trends as well as inquiries from its sellers haverncaused them to evaluate and revise some requirements for mortgages inrncondominium projects.  First, thernGlossary term “Hotel/Resort Project,” is being deleted and the definition for “CondominiumrnHotel” updated to help sellers better determine what is an ineligible project.  This may allow condominium projects in resortrnlocations to meet requirements they previously did not. </p

Otherrnchanges to condominium eligibility will affect projects with shared amenities,rnwithout a certain level of replacement reserves and those with certain owner-occupancyrnrequirements.</p

Therernare also changes to condominium projects containing commercial or non-residentialrnspace as to how to determine that space. rnThose requirements will not become effective until next March. </p

Changesrnto fixed-rate mortgages used for relocation include removing the requirementrnfor “significant employer contribution to Mortgage financing.”</p

FreddiernMac also produced a detailed list of administrative and record-keeping changesrnthat will be implemented when the new TILA-RESPA Integrated Mortgage Disclosurern(TRID) Rule and related forms go into effect on October 3. There are also updatesrnto the Uniform Loan Delivery Dataset Lenders and other technical changes.  Lenders/sellers are advised to review thernentire Single-FamilyrnSeller/Servicer Guide (“Guide”) Bulletin.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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