Poor performance on high loan-to-value mortgages prompted Freddie Mac to reduce the LTV limit on most of its offerings.
The maximum LTV has been reduced to 95 percent, Bulletin No. 2011-4 indicated. The limit also applies to the total LTV.
In addition to all conventional loans acquired by the McLean, Va.-based company, home-equity lines of credit are also impacted.
While the restriction does not apply to Relief Refinance Mortgages, it does affect some negotiated terms and Home Possible Mortgages. The name Home Possible 97 is changing to Home Possible, and Home Possible 97 Neighborhood Solution is being changed to Home Possible Neighborhood Solution.
“Freddie Mac purchases of conventional mortgages with LTV/TLTV/HTLTV ratios greater than 95 percent have been minimal in recent years,” Freddie said. “However, the performance of these mortgages has been unacceptable.”
The update takes effect on mortgages with settlement dates on or after June 1.
The secondary lender also removed a requirement for interested party contributions that, in some cases, sellers deduct financing costs and sales concessions from the appraised value.
Freddie updated Form 11, Mortgage Submission Schedule, and Form 13SF, Mortgage Submission Voucher, with additional instructions about completing the appraiser’s state license number field.
A reminder was given about originator registration.
“Mortgage originators employed by federally regulated institutions who are required to be registered under the Secure and Fair Enforcement for Mortgages Licensing Act will be required to register with the NMLS during the initial registration period, which began on Jan. 31 and will continue through July 29,” the bulletin stated. “In accordance with Bulletin 2010-13, federally regulated institutions must start delivering the loan originator identifier and loan originator company identifier to Freddie Mac for mortgages with application dates on or after July 29.”
