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Updates to ARMs, MERS, Fraud Prevention, and more in Guide Bulletin 2014-12

June 19, 2014

Today we issued Single-Family Seller/Servicer Guide (Guide) Bulletin 2014-12 announcing selling and servicing updates that may impact the way you do business with Freddie Mac. Key changes are summarized in this email. To help you prepare for all changing requirements, please read the Bulletin for the detailed information.

Originate & Underwrite, Sell & Deliver and Servicing

  • ARMs with lookback periods less than 45 days. In response to the Consumer Financial Protection Bureau’s final rules on providing borrowers with payment adjustment notices, we will no longer purchase ARMs with lookback periods less than 45 days.  
  • MERS®-registered mortgages. The term "MERS Governing Documents" has been added to the Guide Glossary. If there are conflicts between the MERS Governing Documents and Guide, the requirements in the Guide will prevail. The Bulletin provides additional guidance and clarifies certain requirements for MERS-registered mortgages.
  • Fraud prevention. The Bulletin updates and clarifies our requirements for fraud training and reporting.

Originate & Underwrite

  • Freddie Mac Relief Refinance MortgagesSM. To provide you with more flexibility, we’ve updated certain requirements for Relief Refinance Mortgages.  
  • Determining debt payment-to-income (DTI) ratios. We've updated our requirements regarding student loans, open-end accounts, and paying off or paying down borrowers' existing debts.
  • Verifying large deposits. When evaluating deposits on a borrower’s account statements, you must document the source of a deposit that exceeds 50 percent of the total monthly qualifying income for the mortgage. This threshold is increased from 25 percent and applies only to certain transactions. Other requirements and guidance for evaluation of deposits have also been included. 

Loan Prospector® will be updated with feedback messages that align with the changes for Relief Refinance Mortgages and DTI ratios. Review the revised feedback messages.

Important Reminder

In our August 20, 2013, Guide Bulletin 2013-16, we announced that we would no longer purchase the following mortgages with Application Received Dates on or after January 10, 2014:

  • Home Possible® Mortgages with an original maturity in excess of 30 years.
  • Pre-payment penalty mortgages.

You have until July 31, 2014, as announced in Bulletin 2013-16, to deliver these mortgages if they have Application Received Dates before January 10, 2014.

For More Information

  • Review Guide Bulletin 2014-12.
  • Review the applicable Guide chapters for complete information on the revised requirements.
  • Contact your Freddie Mac representative.

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