A funding option for low- and moderate-income borrowers
This page reflects the requirement changes effective on May 11, 2015, as announced in Single-Family Seller/Servicer Guide Bulletin 2015-4.
Freddie Mac Affordable Seconds® is designed to help you meet the needs of borrowers who require flexible secondary financing options and sell affordable lending mortgage products that are supplemented by subsidized secondary financing. Affordable Seconds must come from one of the following sources: any duly authorized authority or agency of the federal, state, local or municipal government, a nonprofit community or religious organization other than a credit union, the borrower's employer, or a regional Federal Home Loan Bank under one of its affordable housing programs.
Freddie Mac does not purchase the Affordable Second. Freddie Mac purchases eligible first lien mortgages with Affordable Seconds that meet our criteria.
|Eligible First Lien Mortgages
- A fixed-rate mortgage or an ARM with an initial fixed-rate period of five years or greater.
- Purchase or "no cash-out" refinance transactions.
- Secured by a 1- to 4-unit primary residence.
|Maximum TLTV Ratios
- Multiple Affordable Seconds may be used, but within TLTV limits.
- The maximum TLTV for a Home Possible Mortgage is 105 percent.
|Special Requirements for Affordable Seconds
- The Affordable Second must be provided by an agency under an established, ongoing, documented secondary financing or financial assistance program. Click here for affordable secondary financing sources.
- The property seller or another interested party to the transaction may not be the source of the Affordable Second.
- The Affordable Second cannot be a HELOC.
- The terms of the Affordable Seconds must not require a balloon payment due before the maturity or payment in full of the first lien mortgage.
- Interest rate on the Affordable Second must not be more than 2 percent higher than the rate of the first mortgage.
- Interest accruals added to the principal may not increase the TLTV ratio beyond the maximum TLTV allowed for the first lien mortgage.
- Scheduled payments on the Affordable Second
- If monthly payments on the Affordable Second begin before the 61st monthly payment under the first lien mortgage, such monthly payments must be included in the borrower's monthly housing expense-to-income ratio and monthly debt payment-to-income ratio.
- If monthly payments on the Affordable Second begin on or after the 61st monthly payment under the first lien mortgage or if repayment of the entire Affordable Second amount is due only upon sale or default, the amount of the Affordable Second monthly payment may be excluded from both ratios.
- See Guide Section 4204.2 for additional requirement for mortgages with Affordable Seconds, related to:
- Loan Product Advisor submissions
- Participation in appreciation (equity sharing)
- Land use restrictions
- Document requirements
- Mortgages with Affordable Seconds may be sold through most cash and guarantor executions based on eligibility for the particular mortgage.
- Freddie Mac purchases the first mortgage, but not the Affordable Second.
|Credit Fees in Price
- Postsettlement credit fees in price may apply based on the individual characteristics of the mortgage. See Single-Family Seller/Servicer Guide (Guide) Guide Exhibit 19 for details on applicable fees.
- A secondary financing credit fee in price will not be assessed on a mortgage with an Affordable Second meeting the requirements of Guide Section 4204.2.
- See Guide Section 6302.14 for special delivery instructions for Home Possible Mortgages with Affordable Seconds.
|Single-Family Seller/Servicer Guide
- Refer to Guide Section 4204.2
Originating with Affordable Seconds helps you:
- Strengthen your community investment by leveraging public funds to originate more loans.
- Increase your originations for low- and moderate-income borrowers.
- Reduce your processing costs for secondary financing programs.
- Support collaborations with public agencies and nonprofit organizations.
Benefits for Your Borrowers
Affordable Seconds helps your borrowers:
- Increase their homeownership opportunities with a flexible secondary financing option.
- Use various sources for a down payment, closing and financing costs and prepaid costs.
Visit The Learning Center for live and recorded web conferences, access to classroom-style workshops and self-study tools – all designed to help you stay competitive, serve more borrowers and make it easier to do business with us.
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.