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Rural Housing Service Section 502 Leveraged Seconds

Reach More Low-Income Borrowers

Help more low-income rural borrowers achieve the dream of homeownership through Rural Housing Service (RHS) Leveraged Seconds. Freddie Mac purchases Home Possible® Mortgages with an RHS Leveraged Second.

The Department of Agriculture's Section 502 Single-Family Leveraged Seconds Loan program1 is designed to meet the needs of low-income rural borrowers who have the necessary credit history but may not have the income or down payment required for a conventional mortgage. Freddie Mac buys Home Possible Mortgages through the Single-Family Seller/Servicer Guide (Guide), while the RHS Leveraged Second Mortgage is held and serviced by RHS. Home Possible Mortgages must be sold under Freddie Mac's Fixed-rate Cash, Fixed-rate Guarantor or Multilender Swap program through the selling system.

FeatureRequirements
Property Type
  • 1-unit owner-occupied primary residences including single-family dwellings, rehabilitated units and planned unit developments (PUDs).
  • Manufactured Homes in accordance with the Guide and RHS guidelines.
  • Property location must meet the rural designation as defined by RHS.
Eligible Mortgage Products
  • 30-year fixed-rate Home Possible Mortgages
  • First lien
  • The Home Possible Mortgage, combined with the RHS Leveraged Second, may exceed the purchase price under certain circumstances as agreed to by Freddie Mac and in accordance with the RHS program.
  • HUD sets maximum total financing, but the Home Possible Mortgage may not exceed the Freddie Mac loan limits.
  • Adjusted annual income must meet the requirements as defined by RHS. Contact RHS program offices for specific information on income limits.
Transaction Type
  • Purchase transaction only
Maximum LTV Ratios
  • Maximum LTV ratio of the Home Possible Mortgage is 50 percent.
  • Maximum LTV ratio, including the RHS Leveraged Second and all other secondary financing, is the lesser of 95 percent or the maximum allowed under the second loan regulations.
  • As an exception, the LTV ratio may exceed 50 percent and the TLTV ratio may exceed 100 percent (if permitted by the second loan regulations). Refer to the Guide Section 35.3 for more details.
Eligibility/Underwriting
  • Home Possible Mortgages with RHS Leveraged Seconds available through Loan Prospector®
  • Mortgage insurance is not required on first mortgage.
  • Reserves not required
Execution Options
  • Fixed-rate Cash
  • 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.
Special Delivery Requirements
  • See Guide Section 17.18(b) for special delivery instructions for Home Possible Mortgages with RHS Leveraged Seconds. 
Single-Family Seller/Servicer Guide
  • Refer to Guide Chapter 35

Download an RHS Leveraged Seconds fact sheet for more details.

Lender Benefits

Use RHS Leveraged Seconds to:

  • Meet the needs of low-income rural borrowers.
  • Increase homeownership opportunities in underserved markets.
  • Generate additional Community Reinvestment Act (CRA)-eligible volume.

Benefits for Borrowers

RHS Leveraged Seconds help your borrowers:

  • Lower financing costs with no mortgage insurance required on the first mortgage. The interest rate for the second mortgage is based on the borrower's ability to pay as defined by RHS.
  • Reduce down payment and reserve requirements with Home Possible Mortgages.
  • Leverage various options for funding a down payment, closing costs and prepaids.

For 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.

1The Section 502 Leveraged Seconds Mortgage is subject to modifications by RHS.

 

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