Freddie Mac Expands LTVs for Super Conforming Mortgages
February 17, 2016 Freddie Mac published Seller/Servicer Bulletin 2016-3 entitled: LTV/TLTV/HLTV ratio and Indicator Score requirements – March 28, 2016. Key sections of the bulletin are provided below.
LTV/TLTV/HLTV ratio and Indicator Score requirements – March 28, 2016:
- Updates to our requirements for loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratios for
- Super conforming Mortgages and
- 1-unit Investment Property Mortgages
Condominium and PUD Insurance – August 1, 2016
- Updates to our requirements for Condominium Project and Planned Unit Development (PUD) insurance
In addition to the changes listed above, we are making further updates and revisions as described in the “Additional Guide Updates and Reminders” section of this Bulletin.
EFFECTIVE DATE
All of the changes announced in this Bulletin are effective immediately unless otherwise noted.
Effective for Mortgages with Settlement Dates on or after March 28, 2016
Super conforming Mortgages
In response to changes in the market and in an effort to provide greater access to credit, we reviewed our super conforming Mortgage requirements and are making the following changes:
- Expanding the eligible LTV/TLTV/HTLTV ratios for super conforming Mortgages to align with the eligible LTV/TLTV/HTLTV ratios for Mortgages subject to base conforming loan limits
- Aligning the required minimum Indicator Scores for Manually Underwritten super conforming Mortgages with the required minimum Indicator Scores for Manually Underwritten Mortgages subject to base conforming loan limits
As a result of these changes, we are removing the separate maximum LTV/TLTV/HTLTV ratio requirements for super conforming Mortgages from Guide Section L33.3. The maximum LTV/TLTV/HTLTV ratio requirements in Section 23.4 now apply. The separate minimum Indicator Score requirements for super conforming Manually Underwritten Mortgages referenced in Section L33.5 and Guide Exhibit 25 are also being removed since the minimum Indicator Score requirements for Manually Underwritten Mortgages in Exhibit 25 now apply.
1-unit Investment Property Mortgages
For Mortgages secured by a 1-unit Investment Property, we are aligning the eligible LTV/TLTV/HTLTV ratios for no cash-out refinance transactions and purchase transactions. The expanded ratios will provide Borrowers greater ability to refinance and improve the rate and/or terms of their Mortgage without needing to establish additional equity.
System and Guide updates
Loan Prospector®, the Selling System and Loan Quality Advisor will be updated by March 28, 2016 to reflect these changes. Guide impacts: Sections 23.4, 24.5, L33.3 and L33.5 and Exhibits 19 and 25
CONDOMINIUM PROJECT AND PUD INSURANCE
Effective August 1, 2016, but Sellers are encouraged to implement immediately
In response to Seller feedback we have evaluated our Condominium Project and PUD insurance requirements and are making the following changes:
- Prohibiting the sale of Mortgages secured by a Condominium Unit in a Condominium Project or a property in a PUD with a master or blanket insurance policy that combines insurance coverage for multiple unaffiliated Condominium Projects or PUDs
- Providing additional guidance for Condominium Project or PUD insurance when a coinsurance clause, an agreed amount endorsement or the agreed value option is included in the policy
- Updating our fidelity or employee dishonesty insurance requirements as follows:
- If the calculated amount of funds that triggers the requirement for fidelity or employee dishonesty insurance coverage is less than or equal to $5,000 then fidelity or employee dishonesty insurance is not required
- Allowing a professional management firm to be insured either a) under its own fidelity or employee dishonesty insurance coverage policy provided the management firm submits evidence of coverage to the condominium homeowners association or b) under the condominium homeowners association’s insurance policy
Guide impacts: Sections 58.2 and 58.5
Please refer to the Bulletin for additional information and resources.
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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