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Mortgages with Secondary Financing
Create an edge in higher cost housing markets

Related Products

Reach more borrowers in markets with higher median home sale prices and lower borrowers' costs through secondary financing.

For borrowers with strong credit histories who want flexible home financing at the lowest possible cost, you can package a Freddie Mac first mortgage1 of up to $417,000 with a second lien home equity loan or line of credit to provide up to 95 percent financing. This option may save borrowers thousands of dollars over the life of a loan.

With this combination, you'll provide home financing for borrowers who want maximum financing, but may not qualify for one larger loan amount. Your borrowers may get a better overall rate with a first mortgage combined with a second than the rate for one loan for the entire amount-meaning lower monthly payments.

Use Loan Prospector® to assess these loans to streamline your underwriting process, and take advantage of both cash and guarantor execution options.

Product Features

FeatureRequirements

Property Type

  • 1- to 4-unit primary residences
  • Second homes

Eligible Mortgage Products

  • First mortgage of up to $417,000 (see Single-Family Seller/Servicer Guide (Guide) Section 23.3 for loan limits in Alaska, Guam, Hawaii and the Virgin Islands).
  • Fixed-rate mortgages
  • ARMs
  • Balloon/reset mortgages
  • Eligibility for secondary financing varies by mortgage product type.
  • Freddie Mac does not purchase the second mortgage.

Transaction Type

  • Purchase
  • No cash-out refinances

Maximum LTV Ratios

Eligibility/Underwriting

  • Loan Prospector Mortgages
  • Non-Loan Prospector Mortgages
  • A second lien home equity loan or HELOC up to 95 percent TLTV without mortgage insurance.
  • Terms of secondary financing may provide for a variable interest rate if the interest rate of the first lien mortgage is fixed and both of the following conditions are met:
    • The monthly payment must remain constant for each 12-month period over the term of the junior lien.
    • The change in monthly payment at the end of each 12-month period cannot represent more than a one percent increase in interest rates.

Execution Options

  • Servicing-released Cash*
  • Servicing-retained Cash
  • Fixed-rate Guarantor
  • WAC ARM Guarantor
  • MultiLender Swap

* See our selling system availability matrix [PDF 72K] for a list of specific fixed-rate mortgages eligible for sale best efforts or mandatory, servicing released.

Delivery Fees

  • A secondary financing postsettlement delivery fee applies, in addition to another delivery fees that may apply based on the individual characteristics of the mortgage. See Guide Exhibit 19
    [PDF 494K] for details on applicable fees.

Single-Family Seller/Servicer Guide

  • Refer to Guide Chapter 25.

Download a Mortgages with Secondary Financing fact sheet [PDF 182K] for more details.

Lender Benefits

Mortgages with secondary financing allow you to:

  • Price the loan using a blended rate (first and second rates combined) that may lower the single TLTV rate.
  • Take advantage of an improved execution over higher TLTV loans.
  • Reach more borrowers by providing flexibility with a first and second, up to 95 percent total financing.

Benefits for Your Borrowers

For your borrowers, mortgages with secondary financing help to:

  • Lower their monthly payments.
  • Benefit from possible tax relief gained from interest deductibility of the second trust payments after checking with their tax advisor.

For More Information

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.

1Note: This program may require that Sellers comply with various federal, state or local laws, and Sellers should seek the advice of their counsel prior to implementation.

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.


© 2008 Freddie Mac