Freddie Mac updated its guidelines for refinances, cashout transactions and investment properties.
Among changes to streamlined refinances closed on or after Feb. 1, 2010, are that affiliates of the seller will be permitted to service the refinanced transaction, according to Bulletin Number 2009-4. Also to be allowed is the simultaneous refinancing of existing junior liens. Streamlines will additionally require manual underwriting of the new refinance mortgage and at least three months seasoning on the loan being paid off.
Freddie said it will not purchase streamlined refinances unless it already owns the loan.
Cashout refinance loan-to-values and total LTVs were cut by 5 percent.
On refinance loans, at least one of the borrowers must have been on the loan being paid off, or at least one of the borrowers held title to, and resided in, the subject property. Other acceptable situations include homes inherited or obtained through a divorce or dissolution of a domestic partnership.
On loans closed on or after Feb. 1, 2010, on non-government modifications, “seller-owned modified and seller-owned converted mortgage requirements are being revised to require that the borrower be qualified using the converted or modified terms. In addition, seller-owned modified and seller-owned converted mortgages must meet all of Freddie Mac’s eligibility, underwriting and documentation requirements.”
Freddie noted that appraisals for new construction now expire 12 months after the appraisal date.
Other changes include the elimination of the requirement that seller-servicers notify Freddie each time that they file a Suspicious Activity Report on a loan owned by the government-controlled company. SARs are reports to the FBI about suspected mortgage fraud.
On investment property transactions closed on or after April 1, 2010, the borrower must demonstrate a two-year history of managing one- to four-unit rentals if rental income is used in qualifying.
Loan Prospector will be updated in December with the announced changes.
