Advanced Search

Home Works!

Freddie Mac's HOME WORKS!SMflexible purchase-rehabilitation mortgage product offers you – Freddie Mac Seller/Servicers and local affordable housing providers – an effective tool for enhancing neighborhood revitalization efforts. In addition, availability of the HOME WORKS! rehabilitation reserve provided by a state or local governmental agency eliminates the risks typically associated with property rehabilitation.

HOME WORKS! provides financing for the purchase and rehabilitation of a single-family property in one transaction. Financing purchase-and-rehabilitation with HOME WORKS! is easier, more productive and efficient for all involved – lenders, local government agencies and nonprofit organizations as well.

Low down payments, flexible underwriting guidelines and high after-rehabilitation loan-to-values (LTVs), make HOME WORKS! an attractive option for purchase-and-rehabilitation financing. With the rehabilitation reserve, lenders can sell these purchase-and-rehabilitation loans to Freddie Mac upon origination – even before the rehabilitation is begun with the costs of any rehabilitation-related repurchase covered by the rehabilitation reserve.

HOME WORKS! – rehabilitating properties, building stronger communities and reaching more borrowers.

Advantages

Serve more borrowers and strengthen neighborhood revitalization efforts with

  • Low down-payment requirements for borrowers
  • Flexible LTVs and total loan-to-values (TLTVs)
  • Local government agency oversight of rehabilitation
  • No borrower income limits for targeted areas
  • Sale of purchase-and-rehabilitation mortgages upon origination

Features

Eligible mortgages

  • Purchase-and-rehabilitation
  • Refinance-and-rehabilitation
  • Cash-out refinances with all cash for rehabilitation
  • Value is based on the lower of
    • Purchase price or refinancing costs plus the cost of the rehabilitation, or
    • The after completion appraised value
  • Up to 97 percent LTV of the value
  • Up to 120 percent TLTV of value with eligible secondary financing
  • 15-, 20- or 30-year fixed-rate mortgages
  • Fully amortizing, conventional first-lien mortgages

Eligible properties

  • Located in areas targeted by participating housing agencies
  • Owner-occupied 1-unit primary residences
  • Must be at least one-year old before the origination of the HOME WORKS! loan

Rehabilitation

  • Freddie Mac will purchase the loan before the rehabilitation is complete
  • Rehabilitation must be completed within 12 months of origination
  • Up to 6-months' principal, interest, taxes and insurance (PITI) may be financed if the property cannot be occupied during rehabilitation
  • Participating housing agency
    • Monitors the rehabilitation
    • Establishes a reserve fund to ensure completion of rehabilitation
    • Provides subsidized rehabilitation secondary financing as needed
    • Administers the escrow fund

Borrower income

  • No income limits for areas targeted for revitalization by participating housing agency
  • Participating housing agencies may establish income limits in accordance with subsidy program guidelines

Reserves

  • No reserves required on loans with LTVs up to and including 95 percent
  • One month's PITI required on 97 percent LTV loans

Affordable Seconds

  • Eligible secondary financing provided by the participating housing agency will generally
    • Be interest-free
    • Defer payment of principal unless sale or transfer of the property
    • Permit equity sharing within certain limits

Down payment

  • Minimum down payment required is 3 percent of value
  • Borrower contribution from personal funds must at a minimum be calculated as 3 percent of the after-rehabilitation property value less the amount of the subsidized rehabilitation secondary financing
  • Affordable Seconds may be used to reduce the amount of the remaining down payment

Closing costs and prepaids

  • May come from one or more of the following sources of funds
    • Borrower's personal cash, including Individual Development Accounts (IDAs) where applicable
      • An IDA is a savings account into which the borrower regularly deposits funds which are matched by a municipality authorized by the federal, state, local or municipal government, a nonprofit community or religious organization, the borrower's employer or a regional Federal Home Loan Bank (FHLB) as part of its affordable lending programs
      • IDA contributions can be made according to the specific IDA program and within Freddie Mac's limit of a 4- to 1-match if there is no repayment or recapture required
    • Grant from a nonprofit community organization, a government agency, an employer-assisted housing program or regional Federal Home Loan Bank affordable housing program where repayment is not required
    • Gift from a relative where repayment is not required
    • Affordable Seconds
    • Unsecured loan from a nonprofit or government agency, an employer-assisted housing program, a regional FHLB program, or the originating lender, if
      • Total of all unsecured loans doesn't exceed 2 percent of value
      • Note rate doesn't exceed the rate of the first-lien mortgage
      • Note term doesn't exceed the term of the first-lien mortgage
    • Lender contribution from premium pricing up to 2 percent of value
    • Property seller contribution up to 3 percent of value

Ratios

  • No maximum housing expense-to-income ratio
  • 38 to 40 percent debt payment-to-income ratio guideline, up to 42 percent with compensating factors and comprehensive homeownership education and counseling

Mortgage insurance (MI)

  • 35 percent for terms greater than 15 years on loans with
    • 97 percent LTVs
    • 95 percent LTVs with less than 5 percent of down payment from borrowers personal funds
  • 25 percent for terms up to and including 15 years with
    • 97 percent LTVs
    • 95 percent LTVs with less than 5 percent of down payment from borrowers personal funds
  • For mortgages with LTVs less than 80 percent, no mortgage insurance is required

Underwriting

  • Gold Measure® required
    • Gold Measure scores up to 26 risk units (RUs)
    • Additional Gold Measure score flexibilities allowed for nontraditional credit payment references with comprehensive homeownership education

Homeownership education

  • Basic homeownership education is required
  • Comprehensive homeownership education and counseling by a Freddie Mac-certified provider is required if nontraditional payment references are used or the debt payment to income ratio is over 40 percent

Available Executions

  • Gold Cash®
  • Guarantor Swap
  • MultiLender Swap

This product is described here in part; full details are available in a purchase agreement with Freddie Mac. For more information, please contact your account manager.

Return to Expanding Markets Tools


© 2009 Freddie Mac