Freddie Mac delivery fee rate modifications

In a market where home value appreciation has slowed or values have declined, delinquency rates are rising, and credit standards are tightening, Freddie Mac continues to evaluate the mortgages we purchase to ensure that our requirements and pricing are reflective of current mortgage market risks. As a result, with our August 1 Single-Family Seller/Servicer Guide (Guide)Bulletin, we announced several changes to delivery fee rates for certain higher-risk mortgage products, effective for mortgages with Freddie Mac settlement dates on or after November 1, 2007.

These changes to delivery fee rates and requirements for certain higher-risk mortgages maintain prudent risk management standards reflective of these market conditions, while allowing us to continue to purchase products with flexibility for borrowers with diverse needs. We believe this approach meets the dual needs of managing market risks while preserving vital opportunities for first-time homebuyers, low- and moderate-income borrowers, and borrowers purchasing properties located in eligible disaster relief areas.

Our special Guide Bulletin issued on August 1 [PDF 90K] revises delivery fee rates for settlements on and after November 1, 2007 as follows:

Increasing delivery fee rates by 100 basis points for purchase transaction and “no cash-out” refinance Home Possible® Mortgages. This delivery fee rate increase will not apply to purchase transaction Home Possible Mortgages when the income used to qualify the borrower, converted to an annual basis, does not exceed 80 percent of the applicable area median income (AMI). Therefore, many Home Possible Mortgages will not be impacted by this change, enabling you to continue serving low- and moderate-income homebuyers with Home Possible Mortgages. The fee rate increase will also not apply to Home Possible Mortgages secured by properties located in eligible disaster areas affected by Hurricanes Katrina and Rita with a note date on or before December 31, 2007, provided the mortgage is delivered to us on or before March 31, 2008.
Revising the Exhibit 19 fee grid titled Secondary Financing for Home Possible Mortgages to increase the secondary financing delivery fee rate by 25 basis points for all Home Possible Mortgages with an Indicator Score less than 700.
Revising the Exhibit 19 fee grids titled Secondary Financing for Mortgages other than Home Possible and Initial Interest Mortgages and Secondary Financing for Initial Interest Mortgages to increase the delivery fee rate by 25 basis points for such mortgages with an 80-10-10 secondary financing structure and an Indicator Score less than 700.

It is important that you thoroughly review the August 1 Guide Bulletin [PDF 90K] for complete details, including Exhibit A [PDF 245K], which is a revised version of Exhibit 19, Postsettlement Delivery Fee Rates that will be in effect for settlements on or after November 1, 2007. The Exhibit 19 changes will apply to our Guide offerings. We will be increasing the delivery fee rate for Sellers with certain negotiated terms and have notified impacted Sellers of the changes to their contracts in a separate letter dated August 1, 2007. We will work with you individually to implement changes to your terms, where appropriate, by November 1, 2007.

Please note that secondary financing delivery fee rates for mortgages other than Home Possible Mortgages with an 80-10-10 secondary financing structure and an Indicator Score that is equal to or greater than 700 remain unchanged. The secondary financing delivery fee rates for mortgages other than Home Possible Mortgages with 75-20-5, 80-15-5 and 90-5-5 financing structures also remain unchanged.

A secondary financing delivery fee is not assessed on a mortgage with an Affordable Second meeting the requirements of Section 25.1(g).

Special delivery requirements and important notes

As of November 1, 2007, you must deliver a new SCC 140, for all purchase transaction Home Possible Mortgages where the borrower's income is at or below 80 percent of AMI, and for purchase transaction Home Possible Mortgages secured by properties located in eligible disaster areas affected by Hurricanes Katrina and Rita that are originated on or before December 31, 2007. The accurate delivery of this SCC is necessary to ensure that fees are assessed appropriately.
There will be no changes to Loan Prospector® at this time. While Loan Prospector will continue to provide you with a feedback message notifying you if a submission is eligible for a Home Possible Mortgage based on AMI, it will not notify you if the borrower's income is equal to or less than 80 percent of the AMI. In order to determine this, you will need to calculate 80 percent of the AMI outside of Loan Prospector.
Please refer to the Affordable Income & Property Eligibility tool on FreddieMac.com to find out more about the area median income limits.
Remember, delivery fees are cumulative and more than one fee may apply to a mortgage based on the individual characteristics of the mortgage.