Update on Purchases of Conforming Jumbo MortgagesUpdated April 17, 2008
On February 13, the President signed into law the Economic Stimulus Act of 2008 that includes a temporary increase in Freddie Mac's conforming loan limits in high cost areas, as defined by the U.S. Department of Housing and Urban Development (HUD).
Freddie Mac believes the temporary increase in conforming loan limits will allow us to provide much-needed liquidity and stability to the jumbo portion of the residential mortgage market, and is in the best interest of the economy and consumers.
We are using the descriptive term “conforming jumbo” mortgages to distinguish Freddie Mac-eligible jumbo mortgages from other jumbo mortgages that are ineligible for purchase by Freddie Mac and from eligible conventional, conforming mortgages.
New Loan Limits
The new loan limits are applicable to high cost areas only and are the higher of the 2008 conforming loan limit ($417,000) or 125% of the area median house price, not to exceed $729,750 for a 1-unit property. The law also allows the purchase of eligible loans originated with note dates between July 1, 2007 and December 31, 2008.
HUD has published the list of high cost Metropolitan Statistical Areas (MSAs) and applicable loan limits per number of units. This information is available on:
HUD's website. HUD offers a user-friendly, look-up tool that provides loan limits for all MSAs and counties.
OFHEO's website [PDF]. This list provides only the high cost counties and MSAs affected by the new loan limits.
New Originations of Conforming Jumbo Mortgages
For deliveries beginning June 1, we will offer Guarantor contracts for newly originated conforming jumbos for delivery through our selling system. We consider newly originated mortgages to be originations with note dates on or after March 1, 2008 up to and including December 31, 2008. Below are our requirements for originating conforming jumbo mortgages.
The ability to sell conforming jumbo mortgages to Freddie Mac is available on a limited, negotiated basis. We are offering the ability to sell these mortgages in a phased approach to eligible Guarantor customers. Freddie Mac Account Managers will contact eligible Guarantor customers to begin contracting discussions.
For all other customers, we recommend you contact a lender that you have a wholesale relationship with and who is offering conforming jumbo loans. If you don't currently have a relationship with a wholesaler, or if you are unsure if your wholesaler is currently selling conforming jumbo mortgages to us, please contact your Freddie Mac Account Manager or representative. We will assist you whenever possible to determine a wholesale relationship.
Requirements for New Originations
We've defined specific credit and pricing requirements for conforming jumbo mortgages that will be different from our current conforming mortgages requirements. At this time, our credit and underwriting requirements for originations with note dates on or after March 1, 2008 up to and including December 31, 2008, include the following:
General Eligibility
Please note, where the requirements below are silent, conforming jumbos mortgages must comply with all other requirements in the Single-Family Seller/Servicer Guide.
Eligible Products, Purpose and Occupancy Requirements
Products
15-, 20-, 30- and 40-year fixed-rate, fully amortizing mortgages (no balloons)
30-year fixed-rate mortgages with 10-year interest-only periods
Fully amortizing 5/1 adjustable-rate mortgages (ARMs)
5/1 ARMs with 10-year interest-only periods
Purpose
Purchase
No cash-out refinance
Cash-out refinances for primary residence only
Occupancy
1-unit primary residences, including condos and PUDs
1-unit second homes
1-unit investment properties
Maximum Loan-to-Value (LTV) and Total Loan-to-Value (TLTV) Ratios
The following chart outlines the maximum LTV and TLTV ratio requirements for conforming jumbo mortgages:
Loan Purpose
LTV/TLTV
Minimum Indicator Score
Primary Residence
Purchase
90%
LTV >75%: 700LTV <75%: 660
No cash-out refinance
90%
LTV >75%: 700LTV <75%: 660
Cash-out refinance
75%
720
Second Home and Investment Property
Purchase
60%
660
No cash-out refinance
60%
660
Cash-out refinance
N/A
N/A
Eligibility for New Originations
Loan Characteristic
Requirement
Reserves
Primary residence: 2 months verified
Second home and investment property: 6 months verified
Maximum Cash-Out Amount
Per Guide requirements, including mortgage proceeds to the borrower or any other payee may not exceed $100,000
Maximum Seller Contributions
Maximum of 3% is permitted for primary residence and second homes regardless of LTV
Maximum of 2% is permitted for investment properties
Required Documentation
All Loan Prospector® documentation classes apply, including Accept Plus
Full documentation requirements apply for all other mortgages
Housing Payment History
No 30-day late housing payments within the last 12 months
Nontraditional Credit
Not permitted
Debt-to-Income Ratio
45% maximum
Appraisals
Full URAR - interior and exterior inspection required
In addition, a field review (Form 1032) is required if the LTV/TLTV > 75% and the value is > $1,000,000
The person performing the appraisal must be qualified to perform appraisals without oversight or supervision by a "supervisory" or "review" appraiser
Freddie Mac's Declining Markets requirements apply. If the appraiser or Seller has determined that a property is located in a declining market, maximum financing must be reduced. Section 23.5 of the Guide provides that a lender must not offer financing to the maximum LTV/TLTV ratio in any instance in which property values are declining.
Age of Documents
120 days
Mortgage Insurance
Standard mortgage insurance (check with your MI provider to obtain its eligibility requirements)
Financed MI not permitted
Eligible Underwriting Path
For loan amounts less than $1 million
Loan Prospector Accept Plus and Accept
In addition to the Loan Prospector assessment, you will need to ensure that the loan meets our credit requirements for conforming jumbos
Manually underwritten mortgages
Settlement Cycle
5-day minimum settlement cycle
Ineligible Products and Features
Balloon Mortgages
FHA Mortgages
Financed MI
Streamlined refinances
Special purpose cash-out refinances
Second liens
Manufactured homes
Cooperative units
Temporary subsidy buydowns
Home Possible® Mortgages or other lender-branded affordable programs
2- to 4-unit properties
Servicing
There are no special servicing requirements related to the servicing of conforming jumbo mortgages. The minimum servicing spread will be 25 basis points.
Securitization
The Securities Industry and Financial Markets Association (SIFMA) indicated that conforming jumbos will be traded as non-TBA securities:
30-year fixed-rate mortgages will be pooled in a separate prefix and trade non-TBA.
ARMs will be pooled in specific conforming jumbo pools using existing non-TBA prefixes. Co-mingling will not be allowed.
Pricing
Our pricing for conforming jumbos will be as follows:
Your standard guarantee-fee
Plus, current Single-Family Seller/Servicer Guide Exhibit 19 delivery fees
Plus, unique conforming jumbo mortgage postsettlement delivery fees. To determine the delivery fee, take the standard delivery fee rate and apply all applicable delivery fee rate adjustors, as defined in the tables below.
Fixed Rate Mortgage Standard Delivery Fee Rate
Product Type
Delivery Fee
Fixed Rate
0.25%
Fixed Rate Mortgage Delivery Fee Rate Adjusters
Product Type
Purpose Type
LTV/TLTV
Delivery Fee
Fixed Rate
No Cash-Out Refinance
> 75%
0.50%
Cash-Out Refinances
All eligible LTV/TLTVs
1.00%
Fixed-Rate 10-year Initial Interest
All purpose types
All eligible LTV/TLTVs
0.25%
Adjustable Rate Mortgage Standard Delivery Fee Rate
Product Type
Delivery Fee
ARM < 80% LTV/TLTV
0.75%
ARM > 80% LTV/TLTV
1.50%
Adjustable Rate Mortgage Delivery Fee Rate Adjusters
Product Type
Purpose Type
LTV/TLTV
Delivery Fee
ARM
No Cash-Out Refinance
> 75%
0.50%
Cash-Out Refinances
All eligible LTV/TLTVs
1.00%
Please contact your Freddie Mac Account Manager or representative if you have any questions regarding our offering for new originations.
Existing Portfolios of Eligible Mortgages
In addition to purchasing new originations, we are purchasing existing lender-held portfolios of qualifying loans with note dates on or after July 1, 2007, and up to and including February 29, 2008, through our bulk transaction path. This is a negotiated offering available to lenders experienced in selling through our bulk process. A broader product set may be available for this option. If you are interested in selling a qualifying portfolio to Freddie Mac, please contact your Freddie Mac Account Manager or representative.
© 2008 Freddie Mac
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