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Seller-Owned Modified Mortgages

Quickly and easily meet your borrowers’ needs without another closing

Seller-owned Modified Mortgages give you the flexibility you need to build long-term borrower loyalty, with requirements to help you easily sell mortgages you have held in your portfolio and modified before delivery to Freddie Mac.

Modifying loans in your portfolio, where the new mortgage is a fixed-rate mortgage or an ARM, expands your ability to meet your existing refinance borrowers' needs without another closing – reducing loan runoff from your servicing portfolio. Less documentation, underwriting and title requirements, and easier verifications, offer you the process efficiencies you need during times of high volume.  

Use Seller-owned Modified Mortgages to augment customer relationships you’ve already built, while providing an exceptional enhancement to your borrower-retention product line and a Freddie Mac secondary market sale for the modified mortgage.

Product Features

FeatureRequirements
Property Type
  • 1- to 4-unit primary residences
  • Second homes
Eligible Mortgage Products
  • Must be fixed-rate mortgage or ARM that has been modified prior to the delivery date.
  • The term may not extend beyond 30 years from the note date or the effective date of permanent financing for a mortgage originated as a Construction Conversion or Renovation Mortgage.
  • Seasoned mortgages determined using the modification 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.
Eligibility/Underwriting
  • Mortgage must only be modified for the purpose of a reduction in interest rate of the first lien mortgage.
  • 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.
  • Mortgage must comply with the maximum original loan amounts stated in Guide Section 23.3 in effect on the delivery date
  • The borrower must be qualified using the converted or modified 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 37.10
    • Verification of income and employment
  • The mortgage must meet the minimum Indicator Scores in Guide Exhibit 25 for the applicable mortgage product.
  • Seller-owned Modified Mortgage does not receive Loan Prospector representation and warranty relief.
  • Underwriting documentation must be obtained no more than 120 days prior to the modification date.
  • 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.
Execution Options
  • Fixed-rate Cash, servicing-retained
  • WAC ARM Cash
  • Fixed-rate Guarantor
  • WAC ARM Guarantor
  • MultiLender Swap
Delivery Fees
  • 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 17.34 for special delivery instructions for all Seller-owned Modified Mortgages.
Single-Family Seller/Servicer Guide
  • Refer to Guide Chapter 32

Lender Benefits

With Seller-owned Modified Mortgages, you will be able to:

  • Expand your product line with a borrower-retention alternative to refinances.
  • Reduce loan runoff from your servicing portfolio with a competitive option for your current borrowers.
  • Leverage the secondary market through Freddie Mac to effectively manage your portfolio with an outlet for your modified loans.
  • Take advantage of flexibility for your Seller-owned Modified Mortgage and seasoned mortgage sales with seasoning based on the modification date, not the original note date.
  • Enhance your relationship with your existing borrowers and benefit from cross-sell opportunities. 

Benefits for Your Borrowers

For your borrowers, Seller-Owned Modified Mortgages provide:

  • Cost savings with a mortgage modification that doesn't require a new closing.
  • Time savings and convenience with fewer documentation and verification requirements.

For More Information

  • Call your Freddie Mac representative.

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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