Freddie Mac Introduces Fast Track ERL Designed to Simplify and Expedite Rate-Lock Process
October 3, 2013
Freddie Mac is introducing a new option that offers qualified borrowers who have had a Capital Markets ExecutionSM loan purchased by Freddie Mac within the last two years, the opportunity to lock their interest rate, establish the mortgage amount, and set all key provisions of their proposed mortgage at rate-lock. The Fast Track Early Rate-Lock allows borrowers to lock the full coupon through a highly streamlined process, providing another innovative option for borrowers working with Freddie Mac Multifamily.
The primary benefits of this new Fast Track ERL process for eligible borrowers include:
- Elimination of coupon risk
- Lock of both the Treasury Index and spread
- No breakage fees
- Simple, streamlined legal agreement and process
- No changes to underwriting requirements or standards
- Borrower principal “certification” replaces previously required forms
- Transaction terms/structure/delivery set at rate-lock
This new option applies only to conventional cash (fixed- or floating-rate) refinance transactions (no acquisitions) capped at $50 million. The following additional parameters also apply:
- 2% good faith deposit /2% termination fee
- -5% /+0.5x inside policy-defined LTV and DSCR
- Must pass Refinance Test
- Tier 5 markets or better
- Policy-compliant interest only
- Loans of limited complexity
Fast Track ERL Process:
If a Seller wishes to execute a Fast Track ERL on behalf of their borrower, they must contact their producer about a possible transaction, and upload the appropriate Loan Submission Template (LST). After Freddie Mac confirms eligibility and issues a quote, Freddie Mac will issue a Rate-Lock Agreement, which the Seller then completes (including obtaining the executed Borrower Principal Certification), executes, and uploads to the Document Management System (DMS). The Seller is then able to rate lock, with the agreement valid for three days. After rate-lock, the Seller wires a 2% good faith deposit to Freddie Mac within one business day following rate-lock (along with an executed Exhibit A), and sends the full underwriting package to Freddie Mac consistent with the timeframe detailed in Exhibit A and with the standard timeline for early rate-lock delivery (90 or 120 days).
Term Sheet, Q&A and Additional Resources Now Available
To provide you with additional guidance on how, when and why to use this new Fast Track ERL, we have developed a Fast Track ERL Term Sheet, Fast Track ERL Process Flow Chart, Fast Track ERL Frequently Asked Questions (FAQs), and will be conducting web-based training sessions in the near future.
Our Fast Track ERL is the second new rate-lock option Freddie Mac Multifamily has introduced within the last month. Both options provide our Sellers and their eligible borrowers with options to help mitigate market risk and coupon volatility. For more information on the first option introduced back in early September, please see our Index Lock News Center Article.
For more information on executing either of these new rate-lock options on behalf of your borrowers, please contact your Freddie Mac production or underwriting representative.