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Credit and Property Eligibility Changes Announced in Bulletin 2010-7

March 11, 2010

With Single-Family Seller/Servicer Guide (Guide) Bulletin 2010-7 we are announcing changes to our credit and property eligibility requirements that reinforce responsible lending standards and promote sustainable homeownership in today's market. If you're currently originating and selling interest-only mortgages to Freddie Mac, are manually underwriting multi-unit and other mortgages with low loan-to-value ratios or Home Possible® Mortgages, or originating mortgages under our Mortgages for Newly Constructed Homes offering, it is important that you review this Bulletin to prepare for upcoming changes.

Review today's Guide Bulletin to get complete details on the changes outlined below, and other changes included in the Bulletin.

Originate & Underwrite

Effective for mortgages with application dates on or after June 13, 2010, and for mortgages with Freddie Mac settlements on or after September 1, 2010 we are:

• Retiring our Initial Interest^SM Mortgage offering. Beginning June 13, Initial Interest Mortgages will not be eligible for submission or resubmission to Loan Prospector®.
• Increasing the minimum Indicator Score requirements for certain manually underwritten purchase and no cash-out refinance transactions secured by 2- to 4-unit primary residences and 1- to 4-unit investment properties. We are also increasing the minimum Indicator Score for manually underwritten 1-unit, fixed-rate Home Possible® Mortgages.
• Requiring a minimum Indicator Score of 620 for non-assumable Rural Housing Service Section 502 Guaranteed Rural Housing Mortgages.

For our Mortgages for Newly Constructed Homes offering, effective for mortgages with application dates on or after June 13, 2010, and for mortgages with Freddie Mac settlements on and after January 1, 2011, we are:

• Requiring that the borrower credit and capacity documentation be dated no more than 120 days prior to the effective date of the permanent financing. This change will help ensure that information used to qualify the borrower is based on current documentation, and aligns our documentation requirements with our other Guide products.

  With our revised requirements for our Mortgages for Newly Constructed Homes offering, we continue to maintain Newly Built Home, Construction Conversion and Renovation Mortgages as viable mortgage offerings for lenders and borrowers:

  • Mortgages for Newly Constructed Homes may now be originated as super conforming mortgages, offering additional financing options for borrowers in high-cost areas.
  • We have added flexibility to our requirements for eligible borrowers on Construction Conversion and Renovation Mortgages by allowing lenders to remove a co-borrower, or add a Related Person to the permanent financing under specific circumstances. This added flexibility is effective immediately.

Also review today's Guide Bulletin for information on other Originate & Underwrite changes, including revised seasoning requirements for Mortgages for Newly Constructed Homes, updates for documenting incomplete improvements, appraising leasehold estates, and required Fair Isaac & Company (FICO) Score versions.

Loan Prospector® will be updated on June 13 to support the origination and underwriting requirements above. It is important that you review the information in the Bulletin about submissions and resubmissions. We will notify all Loan Prospector users in the coming weeks about other specific Loan Prospector changes.

Sell & Deliver

Effective for mortgages with application dates on or after June 13, 2010, and for mortgages with Freddie Mac settlements on and after September 1, 2010:

• We will no longer purchase mortgages with an interest-only feature, including our Initial Interest fixed-rate and adjustable-rate mortgages, through flow or bulk purchase paths due to the continuing poor performance of these mortgages in aggregate.

• Mortgages for Newly Constructed Homes with application dates prior to June 13, 2010, originated under the previous 18-month age of documentation requirement must be delivered no later than December 31, 2010.

The Freddie Mac selling system will be updated in a future release to correspond with the changes in today's Bulletin. We will notify all selling system users in the coming weeks about specific selling system changes.

Get More Information

• Review Guide Bulletin 2010-7
• Contact your Freddie Mac representative or 800-FREDDIE