Update on Purchases of Conforming Jumbo Mortgages
Updated 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%: 700
LTV <75%: 660 |
| No cash-out refinance |
90% |
LTV >75%: 700
LTV <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 |
|
| Debt-to-Income Ratio |
|
| 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 |
|
| 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.
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