Freddie Mac Updates Selling Guide, Introduces New Product

Freddie Mac will be consolidating two of its mortgage products into a single offering effective October 29, 2018.  The company announced this and other changes to its Selling Guide in a Bulletin on Wednesday.

The affected products are Freddie Mac's Home Possible and Home Possible Advantage Mortgages. The company said it is making the change in response to seller feedback and to provide those sellers with improved operational efficiencies and ease of use.  The new product will offer the same loan-to-value (LTV) and total LTV (TLTV) ratios as in the Home Possible Advantage program although certain requirements and loan attributes will continue to vary depending on those ratios.

The new product, to be called Home Possible Mortgages, will permit non-owner occupant borrowers on loans secured by one-unit properties as long as  the LTV/TLTV/HELOC ratio is less than or equal to 95 percent for Loan Product  Advisor mortgages and less than or equal to 90 percent for manually underwritten mortgages.  A TLTV ratio as high as 105 percent is permitted where there is an Affordable Second.  The debt-to-income (DTI) ratio cannot exceed 45 percent for manually underwritten mortgages.

The new loans will permit ownership of other property without restrictions and can be used as super conforming mortgages with some restrictions.  It also opens up the ARM versions of the product for three- and four-family properties.

The Bulletin also outlines underwriting changes to align requirements for student loans that are in repayment, deferment, or forbearance, eliminating previous variations among those classifications.  For each category the monthly payment can be taken from the credit report for required payments that are greater than zero. For those loans where no payment is required, underwriters should use 0.5 percent of the outstanding balance from the credit report. This change goes into effect on November 1, but sellers may begin employing it immediately.

Freddie Mac also announces that, as part of its appraisal modernization efforts, the Market Conditions Addendum (Form 71) to the Appraisal Report no longer need be included. The appraiser is still required to perform the analysis needed for the report, and sellers may determine whether or not they will continue to use it.  

There are numerous other, largely technical, changes announced in Bulletin 2018-13. These include changes to the cash back requirements for cash-out refinances and to requirements for condominium insurance.  The complete document can be reviewed here.