Enhancements to Home Possible Mortgages[June 26, 2006]
We continue to enhance our flagship affordable lending mortgage products – Freddie Mac's Home Possible Mortgages – in Loan Prospector to take you deeper into new markets and expand opportunity where you need it with:
- More down payment and other flexibility. We're expanding Home Possible to permit Rural Housing Service Leveraged Seconds, the use of Mortgage Credit Certificates, reducing and eliminating borrower contribution requirements for certain mortgages, and allowing Affordable Seconds® to be entered in the Loan Prospector "Total Gift Fund" field instead of entering it in the "Subordinate Amount field" for assessment purposes, subject to certain conditions. Third-party originators, please check with your wholesale lender to determine how they plan to incorporate these new enhancements.
Loan Prospector feedback messages will be updated at a later date to support the elimination of the minimum borrower contribution for a 1-unit primary residences. Until Loan Prospector is updated, you may ignore the following Loan Prospector feedback message:
Message Code Message Text LPN JA Verify borrower(s) has minimum $500 from borrower's personal funds in the transaction toward downpayment, closing costs, financing costs or prepaids/escrows.
- Simplified affordable lending offerings. The transition of Affordable Gold® Mortgages, to Home Possible Mortgages simplifies our affordable lending offerings, while adding the key Affordable Gold features you've come to rely on into Home Possible. Look for more details on this transition soon.
We're also further streamlining your process by eliminating the homeownership education requirements for 1-unit purchase transactions. We continue to recommend this education for borrowers who have not previously participated in this education, while allowing Internet web-based homeownership education programs for all Home Possible Mortgages. Until Loan Prospector is enhanced to support this change, you may ignore the following feedback message in Loan Prospector:
Message Code Message Text DOC JX &
WEB KXHomeownership Education: Homeownership education is required unless the borrower previously owned a home, makes a 5% down payment, and has 2 months' reserves. Retain Homeownership Education Certificate or comparable document in the mortgage file.
In addition, effective September 1, for Home Possible 97 and Home Possible Neighborhood Solution 97 Mortgages, we will not assess the Home Possible postsettlement delivery fee when a borrower puts down 3 percent cash from personal borrower funds, or has 3 percent equity for a no cash-out refinance. For Freddie Mac Seller/Servicers, these new offerings mirror features previously available with Affordable Gold products. These new offerings will be available for assessment later this summer in Loan Prospector.
- More relief for borrowers impacted by Hurricanes Katrina and Rita. For all eligible Disaster Areas affected by Hurricanes Katrina and Rita, we're providing temporary requirements for these areas to eliminate the median income limits for Home Possible Mortgages with note dates of December 31, 2007 or earlier. Borrowers in these areas can now benefit from a Home Possible Mortgage, regardless of area median incomes. This enhancement is part of our continuing efforts to assist borrowers and communities to rebuild in the aftermath of these unprecedented disasters. Eligible Disaster Areas are identified by the Federal Emergency Management Agency (FEMA) on its website.
Based on these changes, for appropriate Loan Prospector submissions, you may ignore the following feedback message in Loan Prospector:
Message Code Message Text PUR 48 Borr(s) income does not meet Hm Poss income limits. PUR 49 Borr(s) income does not meet Hm Poss NH Sol income limits.
- Upcoming 40-year product options for low- and moderate-income borrowers. New 40-year fixed-rate Home Possible Mortgages are coming soon, so you'll have a new option to offer lower monthly payments to first-time homebuyers and other borrowers in high-cost areas who think homeownership is out of reach. Watch for more information coming soon.
With the introduction of the 40-year fixed-rate mortgage and the expansion of Home Possible Mortgages, it continues to be important that borrowers have sufficient information on the terms of a mortgage product and that the associated features, benefits, and risks of the selected mortgage product are clearly explained to the borrower prior to the borrower making a product or payment choice. For example, a borrower should understand that a 40-year mortgage may result in the borrower building equity more slowly. Similarly, choosing to make a lower downpayment will result in a borrower having less equity in the home.
If you're a third-party originator, in order to take advantage of Freddie Mac's Home Possible Mortgages, you'll need to check with your wholesale lender to determine if they are currently offering Home Possible Mortgages. You can find a list of wholesale lenders originating Home Possible Mortgages at www.FreddieMac.com/homepossible/lenders.html. Please keep in mind that these lenders may promote Freddie Mac's Home Possible Mortgages under a brand name of their own.
Look for full requirements and effective dates
Our June 26 Single-Family Seller/Servicer Guide (Guide) Bulletin contains all of the details and requirements you need, and the effective dates for each of the enhancements above. Plus, visit our newly revised Home Possible web center for all of the features and benefits available through Home Possible.
Learn more about: