Freddie Mac Supplemental with Extended Early Rate-Lock Refinance

Borrowers with existing Freddie Mac loans that are approaching the end of their yield maintenance period may use the Supplemental with Extended Early Rate-Lock Refinance Execution to refinance their existing Freddie Mac loans.  Borrowers will receive additional proceeds up front in the form of a supplemental loan.  At the same time, they will lock in a fixed-rate on a refinance loan for the combined amount of the projected future outstanding principal balance of the first mortgage and supplemental mortgage.  We will process the refinance using our Extended Early Rate-Lock Execution. 

Delaying the origination of the refinance loan allows the existing first mortgage to reach the end or near the end of its yield maintenance period before the refinance pays it off, thereby eliminating or greatly reducing your borrowers’ prepayment premium.  The supplemental mortgage will mature when the refinance loan is scheduled to close so that it can be paid off without an exit fee.  The borrower will be committed to taking both the supplemental loan and the refinance loan, and cannot do one without the other under this execution. 

Parameters for Supplemental Loan

Eligible First Mortgages

• Freddie Mac conventional cash mortgages that are approaching maturity and the end of their yield maintenance period.  The target is an existing Freddie Mac loan with less than two years of yield maintenance remaining.
• The existing mortgages must be investment quality in good standing with satisfactory payment history.
• Other products eligible on a case-by-case basis

Combined LTV

80%

Combined DCR

1.25x

Term

Up to 2 years

Amortization

Interest-only for full term of supplemental loan

Prepayment Provisions

Locked to prepayment for full term

Interest Rate

• Floating-rate underwritten with 100 basis point stress
• Fixed-rate
• Spread of 250 basis points (gross) over the 1-month Freddie Mac Reference Bill® index or applicable U.S. Treasury security
• Actual/360 interest calculation
• Spread-locked at same time rate is locked on the refinance loan
• The supplemental loan will be originated following a normal Standard or Early Rate-Lock Delivery, while the refinance loan may be locked for up to 24 months prior to anticipated purchase by Freddie Mac.

Servicing Fee

Sliding scale based upon supplemental loan amount

Delivery

• Standard
• Early Rate-Lock

Good Faith Deposit

• For Early Rate Lock Delivery, 3% of the refinance loan amount (no separate deposit for the supplemental loan.) 
• The good faith deposit minus the application fee will be returned when Freddie Mac funds the supplemental loan, provided the seller has submitted (with the supplemental loan final delivery documents) a Delivery Assurance Note with a Delivery Assurance Mortgage recorded against the property equal to 5% of the refinance loan amount. 
• For Standard Delivery, the seller must submit (with the supplemental loan final delivery documents) a Delivery Assurance Note with the Delivery Assurance Mortgage recorded against the property equal to 5% of the refinance loan amount. 
• For either delivery, Freddie Mac will hold the Delivery Assurance Note as a deposit against our nondelivery costs until the refinance loan funds. 

Application Fee

Greater of $2,000 or 0.1% of the refinance loan amount.
Note:  There will be only one application fee based on the amount of the refinance loan and no separate fee for the supplemental loan.  However, this fee will be due up front with the supplemental loan.

Interest-Rate Cap

Not required

Transfers/Assumptions

Permitted with Freddie Mac’s approval and payment of 2% Assumption Fee

Documentation

Requirements of Supplemental Mortgage Product apply

Other Terms and Conditions

Other terms and conditions of applicable mortgage product apply
(For example, 70% combined LTV and 1.50x combined DCR if the refinance loan will be interest-only, or 75% combined LTV if the refinance loan will have less than a 7-year term.)

Parameters for Extended Early Rate-Lock Refinance Loan

LTV and DCR

• Maximum LTV:  80%; Minimum DCR: 1.25x
• Loan Amount Calculation:  The rate-lock will be based on the projected combined UPB of the first and supplemental mortgages at the end of the yield maintenance period of the first mortgage.  This refinance amount typically will be smaller than the combined first and supplemental loans at closing of the supplemental loan due to amortization reducing the first mortgage during the extended early rate-lock period. 

Term

Up to 30 years

Amortization

Amortizing, partial interest-only, or full-term interest-only

Prepayment Provisions

Prepayable in full, subject to applicable prepayment premium

Interest Rate

• Fixed-rate
• Pricing based on the yield on the applicable Treasury security
• Borrower can choose 30/360 or actual/360 interest calculations
• Rate-locked at same time spread is locked on supplemental loan. 
• The supplemental loan will be originated following a normal Standard or Early Rate-Lock Delivery, while the refinance loan may be locked for up to 24 months prior to anticipated purchase by Freddie Mac.

Good Faith Deposit and Application Fee

See above - Parameters for Supplemental Loan.

Transfers/Assumptions

Permitted with Freddie Mac’s approval

Refinance Loan Origination

• The existing loans must be in good standing.
• When the Supplemental with Extended Early Rate-Lock Refinance is committed, an occupancy test and income test will be set at 10 percentage points lower than the underwritten stabilized occupancy percentage and income amount.  At refinance, the property must be operating at or above these levels, as determined by Freddie Mac, or else a nondelivery will occur. 
• The seller must submit the results of the occupancy and income tests, a current borrower-certified rent roll, and property financial statement at least 30 days prior to the refinance loan origination.  Preliminary and full underwriting packages are not required.
• At expiration of the term of the supplemental loan, the seller will originate the refinance loan and advance funds to pay off Freddie Mac’s first and supplemental loans.
• The seller will submit the refinance loan’s final delivery package documents to the Freddie Mac Region, which will follow its normal process to review and purchase the new loan.
• No fee to Freddie Mac at the refinance loan closing.
• If the property outperforms the underwritten stabilized occupancy percentage and income amounts, the borrower may request additional proceeds at the time of refinance.  In this case, to size the additional proceeds, full re-underwriting will be required with full documentation according to the Supplemental Mortgage Product.  A supplemental loan application fee will be due.  The refinance loan will still be originated at the committed amount and rate-locked interest rate.  The additional proceeds will be in the form of a supplemental loan at then market interest rates for a first mortgage.

Other Terms and Conditions

Other terms and conditions of applicable mortgage product apply
(For example, 70% LTV and 1.50x DCR if the refinance loan will be interest-only, or 75% LTV if the refinance loan will have less than a 7-year term.)