Balloon/reset MortgagesOffer stable, lower payments to your financially savvy borrower

Our 5- and 7-year balloon/reset mortgages are a viable solution for the financially savvy borrower who wants the benefit of a stable, lower payment for an extended period of time with the option to reset their mortgage at the end of the fixed payment term. Offering your qualified borrowers balloon/reset mortgages also lets you expand your product options, allowing you to increase your market penetration and reach more borrowers.

Balloon/resets provide a variety of benefits, particularly for move-up borrowers, those interested in home financing investment options and those not planning to stay in their home longer than five or seven years. These customers get the benefit a lower rate and a lower, stable monthly payment. And, if their plans change or rates drop, they’ll have the option to reset at the end of the fixed-payment term.

Product Features

Feature	Requirements
Property Type	1- to 4-unit primary residences, including condos and PUDs. Second homes 1- to 4-unit investment properties
Eligible Mortgage Products	5-year balloon/reset mortgage 7-year balloon/reset mortgage Originate with A-minus Mortgage (7-year only)
Transaction Type	Purchase No cash-out refinance Cash-out refinance
Maximum LTV Ratios	Maximum LTV ratios must comply with Single-Family Seller/Servicer Guide (Guide) Section 23.4.
Eligibility/Underwriting	Loan Prospector® or manually underwritten Minimum Indicator Score of 620 unless otherwise specified in the Guide All mortgages must meet the risk class and/or minimum Indicator Score requirements in Exhibit 25A, where applicable. Maximum debt-to-income ratio of 45 percent for manually underwritten mortgages except Streamlined Refinance Mortgages. Secondary financing with additional requirements Temporary subsidy buydowns allowed
Execution Options	Servicing-released Cash* Servicing-retained Cash Fixed-rate Guarantor MultiLender Swap * See our selling system availability matrix for a list of specific Balloon/reset Mortgages eligible for sale best efforts or mandatory, servicing released.
Delivery Fees	Postsettlement delivery fees may apply based on the individual characteristics of the mortgage. See Guide Exhibit 19 for details on applicable fees.
Special Delivery Requirements	Freddie Mac only purchases balloon mortgages that have a reset provision. You must deliver all mortgage data required by Form 11.
Single-Family Seller/Servicer Guide	Refer to Guide Chapter 33.

Download a Balloon/reset Mortgage fact sheet for more details.

Lender Benefits

Balloon/reset mortgages help you:

Expand your market penetration to borrowers who do not plan to stay in their home longer than five or seven years, including move-up borrowers and investment-oriented customers.
Take advantage of a variety of cash and guarantor execution options, based on your individual business needs.
Expand your offerings for borrowers interested in exploring a variety of refinance options.

Benefits for Your Borrowers

Balloon/reset mortgages help your borrowers:

Leverage lower initial rates with stable monthly payments for the first five or seven years.
Get the security of a fixed-rate mortgage and the option to reset when the initial balloon mortgage matures.
Enhance their purchasing power, particularly for borrowers that do not plan to stay in their homes for the entire term.

For More Information

Call your Freddie Mac representative.
Print out a Balloon/reset Mortgage fact sheet.

Training Opportunities

Visit The Learning Center for live and recorded web conferences, access to classroom-style workshops and self-study tools – all designed to help you stay competitive, serve more borrowers and make it easier to do business with us.

The information in this document is not a replacement or substitute for information found in the Single-Family Seller/Servicer Guide and/or the terms of your Master Agreement and/or Master Commitment.