Affordable Merit Rate Mortgage
An incentive rate reduction for on-time payments
For borrowers with weak credit reputations or past credit challenges, our Affordable Merit Rate® Mortgage provides more options for homebuyers who are traditionally consigned to a limited choice of higher-cost financing alternatives.
By taking advantage of efficiencies with Loan Prospector® automated underwriting technology, you can qualify borrowers for Affordable Merit Rate at an initial interest rate that may be closer to conventional rates – delivering more homeownership opportunities to borrowers in the communities you serve. And, borrowers benefit from an additional one percentage point interest rate reduction for making their mortgage payments on time for 24 consecutive months.1
With Affordable Merit Rate Mortgages, borrowers will have a four-year period to make 24 consecutive on-time mortgage payments in order to qualify for a one-time, one percent interest rate reduction. If a late mortgage payment occurs in the first 24 months, borrowers will be re-evaluated on the 36- or 48-month anniversaries of the payment due date. Borrowers who meet the eligibility requirements will automatically receive the one-time rate reduction effective the month following the eligible anniversary date.
|Eligible Mortgage Products||
|Maximum LTV Ratios (without secondary financing)||
*See our selling system availability matrix for a list of specific mortgages eligible for sale best efforts or mandatory, servicing released.
|Special Delivery Requirements||
|Single-Family Seller/Servicer Guide||
Freddie Mac's Affordable Merit Rate Mortgage helps you:
- Qualify more borrowers with a less-than-perfect credit history.
- Retain more customers in your servicing portfolio with the rate reduction incentive.
- Use Loan Prospector to reduce costs, streamline your origination process, standardize your product line and obtain creditworthiness representation and warranty relief.
- Further expand your A-minus marketing efforts to an additional borrower base.
Benefits for Your Borrowers
For your borrowers, an Affordable Merit Rate Mortgage:
- Delivers home financing at a rate that may be lower than other higher-cost financing options.
- Provides an additional rate reduction incentive for on-time payments that reduces the need to refinance and incur associated costs.
- Helps establish a record of good credit management.
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.
1Freddie Mac defines on-time payment as any payment that does not go beyond 30 days past due.
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.