Mortgages with Secondary Financing
For conforming and super conforming mortgages, you can originate a first mortgage with an original loan amount up to the maximum eligible loan limit concurrently with a second lien home equity loan or line of credit*. Freddie Mac will purchase eligible first lien mortgages with secondary financing that meet our criteria.
- 1- to 4-unit primary residences
- Second homes
- 1- to 4-unit investment properties
|Eligible Mortgage Products
- First mortgage with the original loan amount up to the maximum eligible loan limit.
- Fixed-rate mortgages
- Eligibility for secondary financing varies by mortgage product type.
- Home Possible Mortgages®
|Maximum LTV Ratios
- Mortgages with secondary financing must comply with the loan-to-value (LTV) ratio, total loan-to-value (TLTV) ratio, and Home Equity Line of Credit (HELOC) total loan-to-value (HTLTV) ratio limits specified in Guide Section 4203.4 or as specified for a particular product.
- Loan Product Advisor® mortgages and non-Loan Product Advisor mortgages.
- The terms of the secondary financing must:
- Provide for regular monthly payments sufficient to meet the interest due; interest may not accrue
- Be disclosed to the appraiser and mortgage insurer
- Payment of the secondary financing must be included in the borrower's monthly housing.
- Affordable Seconds® must meet the requirements in Guide Section 4204.2.
- Refinance mortgages with junior liens must meet the requirements in Guide Section 4204.1.
- Maturing date requirement: The maturity date or amortization basis of the junior lien must not be less than five years after the note date of the first lien mortgage delivered to Freddie Mac, unless the junior lien is fully amortizing or a Home Equity Line of Credit (HELOC). Review Guide Section 4204.1(b) for more details.
- See Guide Section 4204.1(b) for special requirements for new secondary financing related to maturity date, scheduled payments and documentation requirements.
- See Guide Section 4204.1(c) for special requirements for existing secondary financing.
- See Guide Section 4204.2 for special requirements for Affordable Seconds®
- See Guide Section 6302.34 for delivery instruction for mortgages with secondary financing.
|Credit Fees in Price
- A special credit fee in price will be assessed and billed in conjunction with the sale of certain mortgages with secondary financing.
- The secondary financing credit fee in price will not be assessed on a mortgage with an Affordable Second.
- See Guide Exhibit 19 for details on applicable fees.
|Single-Family Seller/Servicer Guide
- Refer to Guide Chapter 4204.
*There may be federal, state or local laws applicable to originators of this type, and Sellers should seek the advice of their legal counsel prior to implementation.
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.