Freddie Mac has modified some of its long-standing underwriting policies that should help reduce the paperwork burden for lenders in qualifying prospective borrowers, in their Guide Bulletin 2015-20, dated December 2, 2015.
Outlined below is a summary of each of these changes:
Borrower Funds/Reserves – if a borrower’s combined value of assets derived from stocks, bonds, mutual funds, US Government securities is at least 20% greater than the amount from these assets needed for closing – Freddie Mac will no longer require evidence of liquidation of these assets.
Also, the requirement that no more than 70% of the value of a retirement account can be used as reserves in qualifying a borrower has been removed. In addition, if a lender can properly document that a borrower has earned vested stock options – they may now be counted towards borrower funds and reserves.
Occupant Borrower Contribution – Freddie Mac has removed its requirement for a minimum 5% down payment from occupant borrower funds when the loan-to-value (LTV) ratio is greater than 80% and a non-occupying borrower is present.
Also, Section 22.16 of Freddie Mac’s Single Family Seller/Servicer Guide has been updated to state that borrower funds (including the down payment) and reserves may come from the occupant and/or the non-occupant borrower.
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The policy changes outlined above are effective for mortgages with settlement dates on or after December 14, 2015. Loan Prospector feedback messages will be updated by this date to reflect these new policies.