NEW FREDDIE MAC REQUIREMENTS WILL ADD FLEXIBILITY TO FINANCING FOR HOMEBUILDING AND RENOVATIONS

Guide Changes Give Lenders 18 Months To Originate, Sell Mortgages On New Homes

Chicago, IL – Freddie Mac is changing its Seller/Servicer Guide to help lenders accommodate the uncertainties of new construction and renovation work schedules when they finance permanent mortgages on single-family new construction and the renovation of existing site-built homes, company officials told attendees at the Mortgage Bankers Association's 93rd Annual Convention.

The pending Guide changes planned for next month are intended to give Freddie Mac lender customers the built-in flexibility to help two substantial market segments: families in the market for new construction and borrowers undertaking substantial rehabilitation of existing homes, including homes damaged by Hurricanes Katrina, Rita or Wilma.

"Extending the period between the earliest credit documentation and sale of the permanent mortgage to 18 months will be enormously helpful to lenders who want to give their borrowers the greatest available flexibility in sound home financing," said Paul Mullings, senior vice president of Single Family Sourcing at Freddie Mac. "By helping lenders adapt to changing housing markets and shifting borrower needs Freddie Mac is fulfilling its mission to expand homeownership opportunities for more America's families."

Freddie Mac's mortgages for newly constructed homes will upgrade and expand the company's existing construction-to-permanent mortgage product.

For example, it will stretch the period lenders have to originate, document and sell mortgages financing renovations or newly constructed homes from six to 18 months.  The 18-month period – which removes separate time lines for origination, construction or renovation and sale – is expected to allow for a more streamlined process for lenders and their borrowers.

It is also expected to give lenders and borrowers substantially more time and flexibility to accommodate unexpected construction schedule changes without worrying about whether the permanent mortgage will be eligible for sale to Freddie Mac when the construction or renovation is completed.

It should also help the thousands of Gulf Coast borrowers waiting for grants or insurance proceeds to commence storm repairs and takes in account the lengthy construction process in this region.

The Guide changes also make clear that Freddie Mac is financing only the permanent takeout mortgage and not the loans for land acquisition, development or construction.

Related Guide changes scheduled for this fall will update the requirements for financing renovations with Freddie Mac loans and streamline the current process for documenting the conversion of the interim construction financing to a Freddie Mac mortgage.

Lenders can sell Mortgages for Newly Constructed Homes to Freddie Mac through the company's Internet-based Selling System under any of the company's sales options, such as Fixed Rate or WAC ARM Guarantor, MultiLender Swap (non-seasoned), servicing released or servicing retained.

For more information mortgage originators should contact their Freddie Mac sales representative or call 1-800-FREDDIE.

Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. Freddie Mac fulfills its mission by purchasing residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than four million renters in America.

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