New Initial InterestSM Mortgages for Second Homes Capitalize on
Market Trends
[October 27, 2005]
Throughout this year, we've continually expanded and enhanced the products
available through Loan Prospector®, and now we're answering
your requests again with the addition of Initial Interest Mortgages secured
by second homes.
Second home purchases were at roughly 8 percent of the total conventional conforming
market this year1, while interest-only type ARM options are running at just
under 50 percent of the total ARM origination market2. At the same
time, interest-only type fixed-rate mortgages continue to climb in popularity.
Our variation on interest-only type mortgages, Initial Interest ARMs and fixed-rate
mortgages, for second home originations is your way to capitalize on these market
trends.
Initial Interest Mortgages secured by second homes will be available for assessment
in Loan Prospector beginning November 6 and available for sale through all executions
in Freddie Mac's selling system, beginning November 7. With Initial Interest
Mortgages for second homes, you'll
- Leverage all Initial Interest product options. You can
originate Initial Interest Mortgages secured by second homes using our Initial
Interest 3/1, 5/1, 7/1 and 10/1 ARMs, including Initial Interest ARMs with
a 10-year initial interest-only payment period. Or, use Initial Interest 15/15
or 10/20 fixed-rate mortgages for second home originations.
- Quickly integrate this enhancement into your current procedures.
The requirements for originating, selling, delivering and servicing
Initial Interest Mortgages in Freddie Mac's Single-Family Seller/Servicer
Guide (Guide) Chapter J33 now apply to Initial Interest Mortgages secured
by second homes. With the exception to the maximum LTV/TLTV/HTLTV ratio limits,
when an Initial Interest Mortgage is secured by a second home it must also
meet the requirements of Guide Section 22.22, Second Home Mortgages. The maximum
LTV/TLTV/HTLTV ratio limits for Initial Interest Mortgages secured by second
homes can be found in Guide Section J33.10. You'll need to use the Multistate
Second Home Rider (Form 3890) in addition to the current applicable Initial
Interest Uniform Instruments.
- Meet the needs of certain borrowers. Initial Interest Mortgages
are an excellent option for certain borrowers who fully understand that their
payments will adjust, and that their monthly payment will increase significantly
after the initial interest-only payment period if they do not make principal
payments. Remember, Initial Interest Mortgages are simply not for everyone,
and you should clearly explain the features, benefits and potential challenges
to your borrowers.
Offering Initial Interest Mortgages secured by second homes is one more way
we can demonstrate a comprehensive, competitive Freddie Mac end-to-end opportunity
that integrates your origination strategies and Loan Prospector use with your
secondary market needs.
Selling Initial Interest Mortgages Secured by Second Homes to Freddie Mac
Starting November 7, this option will available through the selling system
to all Freddie Mac Seller/Servicers. On November 1, we will send an email to
all selling system users granting express permission to sell Initial Interest
Mortgages secured by second homes to Freddie Mac. We will follow up with revisions
to our Single-Family Seller/Servicer Guide in a future Guide Bulletin
More Information
You'll find more information about our full line of Initial Interest
Mortgages:
1. Source: LoanPerformance (1Q2005); percent of number of loan originations
during quarter
2. Source: CSFB based on LoanPerformance data
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