Guaranteed Rural Housing
Reach more borrowers in rural communities
Reach underserved markets more easily with loans guaranteed by RHS under its Section 502 Guaranteed Rural Housing (GRH) Loan Program.
Through the GRH program you can meet the needs of rural borrowers who have the necessary income and credit history, but not the down payment required to qualify for a conventional mortgage.
Freddie Mac purchases assumable and non-assumable GRH loans through our Fixed-rate Cash, Fixed-rate Guarantor and MultiLender Swap executions. Sellers must obtain prior approval to sell Section 502 GRH mortgages to Freddie Mac and they must be sold with recourse. The terms under which Freddie Mac purchases GRH loans are included in Chapter 35 of the Single-Family Seller/Servicer Guide (Guide).
Full and complete information about the GRH loan program is available from RHS offices.
| Feature |
Requirements |
| Property Type |
- Primary residences, including single-family dwellings, condominiums, planned unit developments (PUDs) and eligible manufactured homes.
- Non-farm
- Leasehold and rehabilitated properties
- Property must meet the rural designation as defined by RHS
|
| Eligible Mortgage Products |
- 30-year fixed-rate mortgages
- Assumable and Non-assumable
|
| Borrower Eligibility |
- Determined by RHS requirements
|
| Transaction Type |
- Purchase transactions and No cash-out refinances, subject to Section 502 GRH Loan Program guidelines
- 30-year fixed-rate mortgages
- Non Loan Prospector mortgages only
|
| Eligibility/Underwriting |
- Assumable mortgages must be sold to Freddie Mac with recourse within the meaning of Guide Section 11.10(a)
- The LTV/TLTV ratios must comply with the Guaranteed Regulations for LTV/TLTV ratios.
- The LTV/TLTV ratio cannot exceed 115% using the Freddie Mac calculation of LTV based on the lower of purchase price or appraised value and other requirements in Guide Section 23.2.
- A non-assumable Rural Housing Service Section 502 GRH Mortgage must have a minimum Indicator Score of 620 or if no borrower has a usable credit score, the mortgage is eligible without meeting the minimum Indicator Score requirement when underwritten using nontraditional credit.
- Secondary financing is generally not permitted.
- The mortgage must have a guarantee provided by Rural Housing Services. Private mortgage insurance is not required.
- The mortgaged premises securing FHA and VA mortgages and assumable Section 502 GRH Mortgages may be transferred in accordance with applicable FHA, RHS or VA regulations.
- Original loan amount may not exceed Freddie Mac loan limits or any RHS loans limits for this program, whichever is less.
- Underwriting requirements are based on RHS program requirements and take into consideration the unique needs of borrowers in rural locations. See the GRH program requirements for more information.
|
| Execution Options |
- Fixed-rate Cash, servicing-retained
- Fixed-rate Guarantor
- MultiLender Swap
|
| Delivery Fees |
- Postsettlement delivery fees may apply based on the individual characteristics of the mortgage. See Guide Exhibit 19 for details on applicable fees.
- No unique postsettlement delivery fee for assumable Section 502 GRH mortgages.
- Non-assumable GRH mortgages secured by manufactured homes will be assessed an additional manufactured home postsettlement delivery fee, unless they are sold to Freddie Mac with full recourse or indemnification
|
| Special Delivery Requirements |
- Cash Delivery requirements
- When selling Section 502 GRH mortgages for cash in the selling system, use the drop-down menu and select the applicable contract product and loan product:
- Contract Product: 30-year Fixed-rate FHA/VA; Loan Product: 30-year assumable 502 Guaranteed Rural Housing (GRH)
- Contract Product: 30-year non-assumable 502 Guaranteed Rural Housing (GRH); Loan Product: 30-year non-assumable 502 Guaranteed Rural Housing (GRH)
- Offer Product Numbers are not required for mortgages sold through the selling system
- On the "Take Out a Cash Contract" screen in the selling system, select the LTV ratio as calculated under Freddie Mac's requirements rather than the LTV ratio calculated under the Guaranteed Regulations.
- Pooling requirements
- Non-assumable Section 502 GRH mortgages with LTV ratios greater than 105% must be pooled in PC pools comprised entirely of mortgages with LTV ratios greater than 105%.
- Assumable Section 502 GRH mortgages must be pooled in an FHA/VA Gold PC pool.
|
| Guidelines |
- Refer to Section 35.2 of your Single-Family Seller/Servicer Guide
|
Download a Guaranteed Rural Housing fact sheet for more details.
Lender Benefits
The Section 502 GRH Loan Program allows you to:
- Broaden your market reach with a competitive affordable housing product designed specifically for rural areas
- Expand Community Reinvestment Act (CRA)-eligible origination volume
- Leverage Freddie Mac as your secondary market outlet for GRH loans
Benefits for Your Borrowers
The Section 502 GRH Loan Program helps your borrowers by:
- Eliminating down payment and reserve requirements
- Allowing certain closing costs, including the two percent guarantee fee, to be included in the loan amount under certain circumstances, and offering various options for funding, subject to GRH Section 502 program restrictions
- Allowing additional flexibility with no cash-out refinancing as permitted under the GRH Section 502 program
Get More Information
The information in this document is not a replacement or substitute for information found in the Single-Family Seller/Servicer Guide and/or the terms of your Master Agreement and/or Master Commitment.
