More Financing Opportunities for Rural Housing and to Preserve Affordable Housing
September 27, 2018
We’ve got exciting news for you regarding how we treat sweat equity and shared equity homeownership.
- We’ve changed our Home Possible® sweat equity parameters so borrowers will now be able to apply sweat equity to cover all their down payment and closing costs.
- We will now purchase eligible community land trust (CLT) mortgages, which supports the CLT homeownership model.
- We’ve revised our requirements for mortgages secured by properties subject to resale restrictions including resale restrictions imposed to limit occupancy and resale of the property to individuals or households of very low-, low- or moderate- income.
Make a Down Payment with Your Skills Instead of Cash
You told us that insufficient funds for a down payment is a significant barrier for borrowers, especially in rural markets. Based on this feedback, we enhanced our Home Possible® sweat equity parameters so that creditworthy families with low to moderate incomes can use sweat equity as a down payment source.
With these new parameters, our sweat equity offering:
- Addresses the renovation needs of aging housing stock.
- Provides an additional source of a down payment.
- Allows homebuyers to make their down payment with their construction skills instead of cash.
Plus, lenders can increase their pool of mortgage-ready customers by offering sweat equity as a source of funds for down payments and closing costs.
A Freddie Mac Secondary Market Outlet for CLT Mortgages
We’re relatively new to the shared equity homeownership field, but we’ve listened to market feedback, looked at existing mortgage products and conducted in depth research. As a result, we’ve updated Freddie Mac’s Single-Family Seller/Servicer Guide (the “Guide”) to allow lenders to sell CLT mortgages to us. In response to industry feedback and existing market practices, we’ve also revised our requirements for mortgages secured by properties subject to resale restrictions.
We believe we’ve found the right balance among the interests of lenders, borrowers and shared equity homeownership providers. Our updates provide:
- Simpler underwriting requirements for lenders.
- More opportunities to preserve affordable housing units over time.
- Sustainable homeownership for borrowers and access to pre- and post-home purchase counseling and support.
Sellers will need a negotiated term of business to sell Community Land Trust Mortgages to Freddie Mac, but do not need special approvals or a negotiated term of business to take advantage of the updated requirements for mortgages secured by properties subject to resale restrictions.
For More Information
- Read Guide Bulletin 2018-16
- View our sweat equity and shared equity Guide update videos
- Complete our training on Community Land Trust Mortgages
- Review related resources available on our new Single-Family Duty to Serve web page and click on Affordable Housing Preservation or Rural Housing
- Contact your Freddie Mac representative or the Customer Support Contact Center