Freddie Mac (FHLMC) has announced several upcoming changes to their seller guide, specifically in relation to Assets and Income. With these changes, you will find there are some enhancements for qualifying, as well as some new restrictions/requirements. One of the changes is that FHLMC will be requiring analysis of the business to support that the business has sufficient liquidity and is financially capable of producing stable monthly income for the borrower, similar to Fannie Mae.
Initially, Freddie Mac announced the change was going to be in effect for settlement dates on or after March 6, 2017. However, they are allowing for a delay of implementation, which PRMG is following for loans already underwritten and approved, to be for settlement dates on or after July 6, 2017. Please note, they have indicated that if a company chooses to delay use of the new guidance to July 6, 2017, then all of the new guidance must be delayed. It is important to recognize that Freddie Mac’s effective date is settlement date, not application date and according to Freddie Mac’s glossary, “the settlement date is the funding date” and funding date is the “date when Freddie Mac disburses payment to the Seller for a Mortgage Freddie Mac purchased”. Therefore, as we get closer to the July 6, 2017 effective date, it may impact loans in process and will need to be considered in the underwriting/closing process.
Freddie Mac’s Loan Product Advisor (LPA) was updated on March 6, 2017 to reflect their new requirements for income and assets. Due to the confusion with new LPA findings reflecting the new requirements, PRMG is implementing the following policy:
- Loans that have already been underwritten and credit approved as of March 9, 2017 can follow the prior guidance, subject to any overlays provided in our Product Profiles. If using the prior guidance, document the loan transmittal to reference FHLMC Bulletin 2016-23 for the July implementation date, along with the section of the guidelines you are following (that is not in alignment with the LPA findings). Remember that you cannot follow any of the new requirements. It’s either all, or nothing, if you are following the new requirements.
- Loans that have not been underwritten and credit approved as of March 9, 2017 must follow the new guidance in regards to the income and asset requirements, subject to any overlays provided in our Product Profiles.
For files where the LPA was run prior to 3/6/17 but not yet underwritten and credit approved, on a case-by-case basis, the underwriter can consider following the old guidance, until a hard cut-off date is announced. If following the prior guidance, remember to include the LPA results from prior to 3/6/17 to show it was run prior to the change, document the loan transmittal to reference FHLMC Bulletin 2016-23 for July implementation date, along with the section of the guidelines you are following (that is not in alignment with the LPA findings). Remember that you cannot follow any of the new requirements.
It is likely there will be a cut off-date 30-45 days prior to the July 6, 2017 date which will require all loans, regardless of approval status, to use the new guidance. This cut-off will be set at a later date.
You can find information on the announced Freddie Mac selling guide changes on their website at http://www.freddiemac.com/singlefamily/guide/.
TheSummary of Upcoming Requirement Changes that Freddie Mac has published can be found at the following link:
PRMG will be providing additional information on their requirements, and posting their updated FHLMC Form 91 will be published closer to the July 6, 2017 release. Also, as we near the effective date, PRMG University will be providing training via the monthly training calendar and it will be hosted by one of our MI partners.
Freddie Mac does provide some training on these changes as well. However, it is important to note that PRMG’s Product Profiles should always be reviewed to ensure any overlays are met. Information on their training opportunities can be found at the following link: