Updated Mortgage and Appraisal Requirements in Guide Bulletin 2011-25
December 16, 2011
Single-Family Seller/Servicer Guide (Guide) Bulletin 2011-25 announces changes to our requirements that provide Seller/Servicers with more flexibility for certain cash-out refinance mortgages. In addition, requirements for mortgages used to pay off the balances under land contracts or contracts for deed have been updated.
The Bulletin also updates our requirements for appraisal-related forms and reconciling multiple opinions of market value.
Today's Guide Bulletin also incorporates the 2012 loan limits and revised Counterparty Authorization compliance forms into the Guide.
Review today's Guide Bulletin to get complete details on the Guide changes outlined below.
Originate & Underwrite
The following underwriting and eligibility requirements have been updated to help you originate and underwrite mortgages eligible for sale to Freddie Mac.
Effective immediately, the following revised requirements apply for:
- Land contracts or contracts for deed. We updated our requirements for mortgages used to pay off balances under land contracts or contracts for deed, including, but not limited to, establishing criteria for when the transaction is considered a purchase or a “no cash-out” refinance and providing requirements for calculation of loan to value ratios.
- Cash-out refinance mortgages. We revised our requirements to allow a cash-out refinance when the property was purchased free and clear of liens, and the borrower has not been on the title to the subject property for at least six months prior to the note date, provided the underlying purchase transaction and the cash-out refinance mortgage meet specific requirements.
Effective April 1, 2012, the following revised property eligibility and appraisal requirements will apply:
- Specific Guide forms are required for appraisal field review reports and appraisal updates. Sellers are required to use Guide Form 1032, One-Unit Residential Appraisal Field Review Report, or Form 1072, Two- to Four-Unit Residential Appraisal Field Review Report, when obtaining an appraisal field review report as a part of the mortgage file. We are also requiring Form 442, Appraisal Update and/or Completion Report, to be used when obtaining an appraisal update.
- Guidance on reconciling multiple opinions of market value. New Guide Section 44.16, Reviewing Appraisal Reports, Obtaining Subsequent Appraisal Reports and Appraisal Field Review Reports, and Reconciling Multiple Opinions of Market Value, has been added, outlining the requirements for reviewing the appraisal reports and determining which market value to use when several opinions of market value are obtained.
- Updated requirements for appraisers. To be consistent with the Uniform Standards of Professional Appraisal Practice (USPAP), we are specifying that Sellers must select appraisers with knowledge and experience in appraising the property type in the market area and access to applicable data sources.
Sell & Deliver
- Conforming loan limits for 2012. As announced in our November 22, 2011, Single Family Update email, the Freddie Mac base conforming and high-cost area loan limits will remain at the existing 2011 levels through December 31, 2012, with the exception of one county where the high-cost area loan limits will increase.
Sell & Deliver and Servicing
- Important reminder regarding mortgage insurance coverage. Seller/Servicers are being reminded that maintaining mortgage insurance coverage is both a selling and servicing obligation. This obligation includes providing the mortgage insurer (MI) with relevant information/documentation within the required time frames prior to an issuance by the MI of a rescission of coverage or denial of claim, or during an appeal of a previous MI rescission or claim denial decision.
Get More Information
- Review Guide Bulletin 2011-25.
- Contact your Freddie Mac representative or 800-FREDDIE.