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FAQs: Home Possible® Mortgages Consolidation and New Credit Flexibilities

In Single-Family Seller/Servicer Guide (Guide) Bulletin 2018-13, we announced new flexibilities added to Home Possible mortgages to responsibly meet the needs of our clients and their borrowers today and in the future. Additionally, we announced the consolidation of the Home Possible and Home Possible Advantage® mortgages into a single Home Possible offering, combining the features of each individual product into one offering.

Why We've Made These Changes

Freddie Mac has listened to our clients' feedback and added several credit flexibilities that will provide access to credit for more creditworthy borrowers in a greater variety of situations. By creating the single offering, we're also providing clients with more certainty, ease of use, and operational efficiency compared to maintaining two separate mortgage offerings.

The enhanced Home Possible mortgage helps more low- and moderate-income borrowers overcome the most common obstacle to achieving the dream of homeownership – securing funds for a down payment. It continues to offer a low (3 percent) down payment option with maximum 97 percent loan-to-value (LTV) and total LTV (TLTV) ratio flexibilities. Additionally, borrowers now have the option to use sweat equity for the entire amount of their down payment and closing costs.

FAQs

  1. With the combination of the two offerings, were any of the previous flexibilities removed?
  2. When may we begin delivering the enhanced Home Possible mortgage?
  3. What should my organization do to prepare for these new credit flexibilities?
  4. Can I manually underwrite a loan prior to October 29, 2018 using the new requirements?
  5. Will a loan that was submitted to Loan Product Advisor prior to the effective date of these changes and resubmitted after October 29, 2018 be assessed against the new requirements?
  6. Did any of the requirements related to the Area Medium Income (AMI) change?
  7. Regarding ownership of other property, will debt for a currently owned property count in the DTI calculation if the borrower’s current residence is pending sale and the sale will be delayed until after closing on the Home Possible mortgage?
  8. How do I determine whether the mortgage meets the Home Possible income limits and qualifying ratios if a non-occupant borrower is included on the mortgage?
  9. Are there any new credit fees in price related to the changes?
  10. Will the Home Possible Mortgage Cap stay the same?
  11. Are there any new delivery requirements due to the combination of these offerings?
  12. Will the Mortgage Insurance (MI) requirements for this offering stay the same?
  13. When will the Loan Advisor Suite be updated to remove Home Possible Advantage?
  14. Now that you’ve combined Home Possible and Home Possible Advantage, will there be a new name for the offering?

FAQs

  1. With the combination of the two offerings, were any of the previous flexibilities removed?

    No. We maintained the previous requirements and expanded upon them to provide greater flexibility for low- and moderate-income borrowers. As a result, the revised Home Possible offering will continue to offer a 3 percent down payment and allow for options such as the use of down payment assistance programs and even using sweat equity for the entirety of the down payment and closing costs. Our requirements for an Affordable Second® have not changed.
  2. When may we begin delivering the enhanced Home Possible mortgage?

    You will be able to deliver mortgages under the updated Home Possible offering on or after October 29, 2018.
  3. What should my organization do to prepare for these new credit flexibilities?

    You should determine if any system and operational changes need to be made to take advantage of the new credit flexibilities. Loan Selling AdvisorSM and Loan Product Advisor® will be updated on October 29, 2018.

  4. Can I manually underwrite a loan prior to October 29, 2018 using the new requirements?

    Yes, however you must wait until on or after October 29, 2018 to deliver the loan.

    Note that because the Loan Advisor Suite will not reflect the updated data until that date, the loan must meet manual underwriting requirements and must not have characteristics that are allowed only if assessing it through Loan Product Advisor. For example, super conforming mortgages cannot be manually underwritten but are now permitted for Home Possible only through Loan Product Advisor, so they would not be allowed in this situation.
  5. Will a loan that was submitted to Loan Product Advisor prior to the effective date of these changes and resubmitted after October 29, 2018 be assessed against the new requirements?
    Yes. Since we are adding credit flexibilities, it is possible that loans assessed by Loan Product Advisor as ineligible for Home Possible prior to October 29, 2018 could be assessed as eligible on or after this date, depending on whether the loan benefits from one of these added flexibilities.
  6. Did any of the requirements related to the Area Medium Income (AMI) change?
    No. As a reminder, the borrower's qualifying income converted to an annual basis cannot exceed 100 percent of the AMI for the location of the mortgaged premises. There is no income limit if the mortgaged premises is located in a low-income census tract (median tract income is at or below 80 percent of the AMI). To determine whether the borrower's income exceeds the income limits, you must rely on the income used to qualify the borrower. If the loan is submitted to Loan Product Advisor, the feedback certificate will indicate eligibility based on the income used to qualify the borrower.
  7. Regarding ownership of other property, will debt for a currently owned property count in the DTI calculation if the borrower’s current residence is pending sale and the sale will be delayed until after closing on the Home Possible mortgage?
    If the borrower's current primary residence is pending sale and the sale will not close before the note date of the Home Possible mortgage, the monthly payment amount must be included in the monthly debt payment-to-income (DTI) ratio. If there is documentation of an executed sales contract and evidence that any financing contingency has been cleared for the property pending sale, then the monthly payment amount on the property pending sale may be excluded from the monthly debt payment-to-income ratio.
  8. How do I determine whether the mortgage meets the Home Possible income limits and qualifying ratios if a non-occupant borrower is included on the mortgage?
    When income from a non-occupant borrower is being used to qualify for the loan, the total qualifying income (i.e., total income from all occupying and non-occupying borrowers) must not exceed the Home Possible income limits. Additionally, the liabilities for the non-occupant must be included in the debt-to-income (DTI) ratio.
  9. Are there any new credit fees in price related to the changes?
    No new credit fees in price were added, however, with the new Home Possible flexibilities that allow additional loan characteristics, certain Exhibit 19 credit fees in price may now apply. You'll need to include them, as appropriate, in your calculation for the Home Possible Mortgage Cap. For example, if you are delivering a super conforming Home Possible mortgage (which was previously not permitted), you will need to include the super conforming credit fee in price in your calculation.
  10. Will the Home Possible Mortgage Cap stay the same?

    Yes, the rate cap that applied for Home Possible mortgages before this product consolidation remains the same for the enhanced offering.
  11. Are there any new delivery requirements due to the combination of these offerings?

    No, there are no new delivery data elements, however data elements might now apply because a loan underwritten with the new flexibilities would be subject to associated requirements.
  12. Will the Mortgage Insurance (MI) requirements for this offering stay the same?

    Yes.
  13. When will the Loan Advisor Suite be updated to remove Home Possible Advantage?

    You will have a long lead time to make any operational and training modifications that might be needed for these changes. Home Possible Advantage will still be recognized in Loan Product Advisor and accepted in Loan Selling Advisor as either Home Possible or Home Possible Advantage until it is retired, no earlier than September 30, 2019.

    Communication updates detailing specific dates for final Home Possible Advantage retirement will be distributed at a future date.
  14. Now that you've combined Home Possible and Home Possible Advantage, will there be a new name for the offering?

    No. It will be called the Home Possible mortgage.

Get More Information

  • For a snapshot of origination and underwriting requirements, see the updated Home Possible product fact sheet.
  • To view the changes made August 29, 2018, see Guide Bulletin 2019-13.
  • For detailed requirements for the Home Possible mortgage, refer to Guide Section 4501.

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