Freddie Mac Announces New and Revised Underwriting Guidelines in Support of Affordable Housing Preservation and Rural Housing

Freddie Mac issued Bulletin 2018-16 (Bulletin), announcing new and revised underwriting guidelines to facilitate a secondary market for mortgages in support of affordable housing preservation and rural housing. Per the Bulletin, Community Land Trust Mortgages are now eligible for sale to Freddie Mac. Community Land Trusts seek to preserve affordability of homes by retaining ownership of land and leasing it under a long-term ground lease to a homebuyer who purchases the improvements on the land at a below market rate. Freddie Mac developed several requirements to facilitate the origination and servicing of Community Land Trust Mortgages. Freddie Mac also updated requirements for mortgages secured by properties subject to resale restrictions, including resale restrictions imposed to limit the occupancy and resale of the property to individuals or households of very-low, low- or moderate-incomes. In addition, Freddie Mac revised sweat equity requirements in connection with Home Possible Mortgages to permit sweat equity as a source of funds to cover the entire amount of cash to close (borrowers were previously required to contribute 5% of their own funds in the transaction to use sweat equity as a source of down payment). The requirements with respect to Community Land Trust Mortgages are effective November 5, 2018. The updated requirements for mortgages secured by properties subject to resale restrictions are also effective November 5, 2018. All other updates are effective immediately.

Click Here to View the Freddie Mac Bulletin 2018-16