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Update on Conforming Jumbo Mortgages Purchases

By Ronald Turner,2014-05-18 06:42
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12 Mar 2008Second home and investment property: 6 months verified. Maximum Cash-Out Amount. ? Per Guide requirements, including mortgage proceeds to

Update on Conforming Jumbo Mortgages Purchases

    March 12, 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 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 in the May/June timeframe, we expect to offer 90-day pricing and credit coverage for newly originated conforming jumbos using a Guarantor execution. 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 you’ll find more details on our

    eligibility requirements and pricing structure. We are providing requirements at this point to help you begin originating conforming jumbo mortgages based on these terms. We plan to provide final contract and delivery terms to eligible Guarantor customers in April. 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

    ? 15-, 20-, 30- and 40-year fixed-rate, fully amortizing mortgages (no Products

    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

    ? Purchase Purpose

    ? No cash-out refinance

    ? Cash-out refinances for primary residence only

    ? 1-unit primary residences, including condos and PUDs Occupancy

    ? 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 Product Type LTV/TLTV Minimum Indicator Score Primary Residence

    Purchase All eligible 90% LTV >75%: 700

    LTV <75%: 660 No cash-out refinanceAll eligible 90% LTV >75%: 700

    LTV <75%: 660 Cash-out refinance All eligible 75% 720 Second Home and Investment Property

    Purchase All eligible 60% 660 No cash-out refinance All eligible 60% 660 Cash-out refinance All eligible N/A N/A

Eligibility for New Originations

    Loan Requirement

    Characteristic

    ? Primary residence: 2 months verified Reserves

    ? Second home and investment property: 6 months verified

    ? Per Guide requirements, including mortgage proceeds to the Maximum Cash-

    borrower or any other payee may not exceed $100,000 Out Amount

    ? Maximum of 3% is permitted for primary residence and second Maximum Seller

    homes regardless of LTV Contributions

    ? Maximum of 2% is permitted for investment properties

    ? Loan Prospector? Accept Plus documentation class applies Required

    ? Full documentation requirements apply for all other mortgages Documentation

    ? No 30-day late housing payments within the last 12 months Housing

    Payment History

    ? Not permitted Nontraditional

    Credit

    ? 45% maximum Debt-to-Income

    Ratio

    ? Full URAR - interior and exterior inspection required Appraisals

    ? In addition, a field review (Form 1032) is required if the

    LTV/TLTV >= 75% and the value is $1,000,000 or greater

    ? 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. ? 120 days Age of

    Documents

    ? Standard mortgage insurance (check with your MI provider to Mortgage

    obtain its eligibility requirements) Insurance

    ? Financed MI not permitted

    ? For loan amounts less than $1 million Eligible

    o Loan Prospector Accept Plus and Accept Underwriting

    o In addition to the Loan Prospector assessment, you will Path

    need to ensure that the loan meets our credit

    requirements for conforming jumbos

Loan Requirement

    Characteristic

    o Manually underwritten mortgages

Ineligible Products and Features

    ? Balloons 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

    No Cash-Out > 75% 0.50% Fixed Rate

    Refinance

    Cash-Out Refinances All eligible 1.00%

    LTV/TLTVs

    All purpose types All eligible 0.25% Fixed-Rate 10-year Initial

    LTV/TLTVs Interest

Adjustable Rate Mortgage Standard Delivery Fee Rate

    Product Type Delivery Fee

    ARM < 80% 0.75%

    ARM > 80% 1.50%

    Adjustable Rate Mortgage Delivery Fee Rate Adjusters Product Type Purpose Type LTV/TLTV Delivery Fee

    No Cash-Out Refinance> 75% 0.50% ARM

    Cash-Out Refinances All eligible LTV/TLTVs 1.00%

Please contract 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 will purchase existing lender-held

    portfolios of qualifying loans with note dates on or after July 1, 2007 up to and including

    February 29, 2008, through our bulk transaction path. This will be a negotiated offering

    available to lenders experienced in selling through our bulk process with a spot bid price.

    A broader product set may be available for this option. We will begin reviewing and

    purchasing portfolios in late March. 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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