Seller-owned Converted Mortgages
A streamlined process for selling ARMs that have converted
When you originate a convertible ARM to hold in your portfolio, know that we'll offer you a secondary market outlet once your customer converts the adjustable interest rate to a fixed rate of interest.
Our Seller-owned Converted Mortgage requirements provide a streamlined process for selling converted ARMs, so that when market conditions change or you look to restructure your balance sheet, your sale process is quick, easy and profitable.
- 1- to 4-unit primary residences
- Second homes
- 1- to 4-unit investment properties
|Eligible Mortgage Products
- Original mortgage must be a convertible ARM that has converted to a fully amortizing fixed-rate mortgage prior to sale to Freddie Mac. The term may not extend beyond 30 years from the note date or effective date of permanent financing for a mortgage originated as a Construction Conversion or Renovation Mortgage.
- Seasoned mortgages determined using the conversion date and not the original note date.
|Maximum LTV Ratios
- LTV/TLTV/HTLV ratios did not exceed Single-Family Seller/Servicer Guide (Guide) limits on the note date; current LTV/TLTV/HTLV ratios do not exceed Guide limits as of the delivery date.
- Mortgage must have a fixed-rate of interest with level monthly principal and interest payments.
- Mortgage must be manually underwritten and may not be submitted to Loan Prospector® for evaluation.
- Mortgage must meet all eligibility and underwriting requirements in effect on the delivery date.
- The mortgage eligibility and underwriting requirements must be based on the loan purpose as of the note date
- Mortgage is a conventional, full amortizing mortgage and the mortgage term may not extend beyond 30 years from the note date or from the effective date of permanent financing for a Construction Conversion or Renovation Mortgage.
- LTV/TLTV/HTLTV ratios may not exceed the limits in Guide Section 4203.4 as of the delivery date
- The mortgage must comply with the maximum original loan amounts stated in Guide Section 4203.3 in effect on the delivery date
- The borrower must be qualified using the converted terms meeting all Freddie Mac’s eligibility, underwriting and documentation requirements
- Required documentation includes, but is not limited to:
- New Uniform Residential Loan Application
- New credit report meeting the requirements of Guide Section 5203.1
- Verification of income and employment
- Seller-Owned Converted Mortgage does not receive any representation and warranty relief relating to the evaluation of the mortgage being converted through Loan Prospector.
- Underwriting documentation must be obtained no more than 120 days prior to the conversion date
- Prepayment penalty may not be assessed in connection with the conversion of the mortgage
- The converted mortgage may not be an Initial Interest Mortgage, restructured mortgage or super conforming mortgage or a mortgage with a temporary subsidy buydown.
- Mortgage must meet minimum Indicator Score requirements in Guide Exhibit 25 for an applicable mortgage product.
- If the borrower doesn’t have a usable credit score and as a result the mortgage does not have an Indicator Score, the mortgage is not eligible for purchase as a Seller-owned Converted Mortgage.
- Sellers must obtain a new appraisal with an effective date that is no more than 120 days prior to the conversion date and that meets Freddie Mac requirements.
- Fixed-rate Cash servicing-retained
- Fixed-rate Guarantor
- MultiLender Swap
- Postsettlement delivery fees may apply based on the individual characteristics of the mortgage, and include CS/LTV delivery fees for Non-Loan Prospector mortgages. See Guide Exhibit 19 for details on applicable fees.
|Special Delivery Requirements
- See Guide Section 6302.19 for special delivery instructions for all Seller-owned Converted Mortgages.
|Single-Family Seller/Servicer Guide
- Refer to Guide Chapter 4402
Seller-owned Converted Mortgages help you:
- Originate convertible ARMs for your portfolio with the assurance that you’ll have a secondary market outlet once they convert to a fixed rate of interest.
- Effectively manage your mortgage portfolio when market conditions change.
- Easily sell ARMs that have converted when adjusting your loan-to-deposit ratios.
- Leverage a cash execution to improve your liquidity or a guarantor execution to retain an asset on your books.
Benefits for Your Borrowers
Seller-owned Converted Mortgages help your borrowers:
- Convert to the security of a fixed-rate mortgage when interest rates rise – in one easy process.
- Take advantage of the convenience of no new credit documentation required in many instances.
For More Information
- Call your Freddie Mac representative.
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.