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:
- Increases the pool of mortgage-ready customers for lenders.
- Supports the renovation needs of aging housing stock in rural markets.
- Provides an additional source of down payment.
- Allows homebuyers who work with their hands to make their down payment with their construction skills instead of cash.
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 CLTs, borrowers and lenders. Our updates will help you:
- Preserve affordability over time and keep affordable homes in your inventory.
- Diversify the mortgage products your homebuyers and homeowners can access for purchase and refinance.
- 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.