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London Interbank Offered Rate Indexed ARMs

Greater variety and flexibility with Freddie Mac LIBOR-indexed ARMs

Important Notice

Effective January 1, 2015, we will no longer purchase ARMs with lookback periods of less than 45 days. Review Single-Family Seller/Servicer Guide Bulletin 2014-12 for more information, including the October 20, 2014, cutoff date in the selling system.

As you seek new adjustable rate mortgage (ARM) products to increase your origination volume, Freddie Mac's LIBOR-indexed ARMs deliver an attractive alternative for your borrowers looking for lower initial rates and mortgage payments. Freddie Mac LIBOR-indexed ARM product variations, including nonconvertible options, are geared to meet your needs and enhance your competitive position in any market environment.

We purchase a full variety of LIBOR-indexed ARMs, including 6-month, 1-year, 7/6-month, 10/6-month, 3/1, 5/1, 7/1 and 10/1 LIBOR-indexed ARMs.

FeatureRequirements
Property Type
  • 1- to 4-unit primary residences, including condos, PUDs and manufactured homes.
  • Second homes
  • 1- to 4-unit investment properties
Eligible Mortgage Products
  • 6-month and 1-year LIBOR-indexed ARMs
  • 7/6-month and 10/6-month ARMs
  • 3/1, 5/1, 7/1 and 10/1 LIBOR-indexed ARMs
  • Originate with Home Possible Mortgages (5/1, 7/1 and 10/1 ARMs only), Financed Permanent Buydown (5/6-month, 7/6-month, 10/6-month, 5/1, 7/1 and 10/1 ARMs only), A-minus Mortgages, Construction Conversion Mortgages, Renovation Mortgages and mortgages secured by manufactured homes (7/1 and 10/1 ARMs only).
  • ARMs secured by investment properties are eligible for sale if the borrower owns only one financed investment property. If the borrower owns more than one financed investment property, the investment property mortgage sold to Freddie Mac must be a 7/6-month, 10/6-month, 7/1 or 10/1 ARM.
  • 6-month, 1-year, 3/1, and 3-year ARMs with margins of 400 basis points or more are not eligible for sale under flow purchase paths.
  • Super conforming mortgages. See Single-Family Seller/Servicer Guide (Guide) Chapter L33 for requirements.
Transaction Type
  • Purchase
  • No cash-out refinance
  • Cash-out refinance
Maximum LTV Ratios (without secondary financing)
  • Maximum LTV ratios must comply with Guide Section 23.4.1
  • See Guide Section L.33.3 for LTV/TLTV/HTLTV ratio requirements for super conforming mortgages
Down Payment or Closing Costs
  • Secondary financing
  • Shared equity plans
  • Temporary subsidy buydowns
Execution Options
  • WAC ARM Cash
  • WAC ARM Guarantor
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 17.10(b) for special delivery instructions for LIBOR-indexed ARMs.
Single-Family Seller/Servicer Guide
  • Refer to GuideChapter 30.

Download a LIBOR-indexed ARMs fact sheet for more details.

Lender Benefits

LIBOR-indexed ARMs help you:

  • Increase your origination volume and meet the needs of more homebuyers.
  • Take advantage of the benefits of a cash or securities execution, based on your individual balance sheet and risk-based capital needs.
  • Enhance your ARM product line with a competitive option to CMT-indexed ARMs.
  • Commingle ARMs with different assumability periods to increase your competitive execution.

Benefits for Your Borrowers

LIBOR-indexed ARMs help you:

  • Obtain flexible options for your financially savvy borrowers who plan to move before the initial period ends.
  • Leverage financial savings for your first time homebuyers looking for lower initial rates and monthly payments, and who understand that their rate will increase.
  • Choose from more financing alternatives for your refinance or move-up borrowers.

For More Information

Training Opportunities

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.

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