Changes to ARMs Requirements; Update on AMI Announced in Guide Bulletin 2012-21
October 16, 2012
If you currently deliver adjustable rate mortgages (ARMs) to Freddie Mac it is important that you review the upcoming changes to rate caps and qualification requirements for ARMs announced in today’s Single-Family Seller/Servicer Guide (Guide) Bulletin 2012-21. In addition, today’s Bulletin provides details on 2012 area median income (AMI) estimates and updates to the definition of “Underserved Area.”
Originate & Underwrite
Revised Rate Caps and Qualification Requirements
Effective for mortgages with settlement dates on or after July 1, 2013, you’ll need to be familiar with the revised maximum Initial and Periodic Cap requirements for ARMs with initial periods less than or equal to five years.
These changes are intended to minimize the risk associated with potential large ARM rate increases and to help ensure borrowers are able to afford their monthly payments should interest rates increase.
Loan Prospector® will be updated at a later date to reflect these changes.
If you service ARMs for Freddie Mac, there are no changes in the way you service those ARMs.
2012 Updates to AMI
Effective November 18, 2012.
The Federal Housing Finance Agency (FHFA) has issued the AMI estimates for 2012. Sellers are encouraged to begin using the 2012 AMI estimates as soon as they are available, but they must use these estimates for Home Possible® Mortgages with an Application Received Date on or after November 18, 2012.
Both Loan Prospector and the Affordable Income & Property Eligibility tool on FreddieMac.com will be updated on November 18, 2012, to reflect FHFA’s 2012 AMI estimates. The 2012 area median income estimates will apply to mortgages submitted or resubmitted through Loan Prospector on or after that date.
Third-party originators should check with their wholesale lender to determine how they plan to address these requirements.
Additionally, we are revising our definition of “Underserved Area” in conjunction with the new AMI estimates.
Get More Information
- Read Guide Bulletin 2012-21
- Contact your Freddie Mac representative