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CHOICERenovation® FAQ

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  1. What are the current renovation offerings from Freddie Mac?

    Freddie Mac currently offers construction conversion and renovation mortgages that provide permanent financing that replaces interim financing in either a single close or two-closing transaction. The construction or renovation must be completed prior to delivery of the mortgage to Freddie Mac. Construction conversion and renovation mortgages may be purchased, no cash-out, or cash out refinance mortgages. You can find complete requirements for construction conversion and renovation mortgages in Guide Chapter 4602.

    Freddie Mac also introduced CHOICEReno eXPressSM, a streamlined renovation mortgage option intended for borrowers looking to finance relatively small-scale renovations. CHOICEReno eXPress is part of our CHOICE suite of mortgage solutions and is an expansion of the CHOICERenovation® offering that provides more financing flexibilities for lenders and borrowers. This mortgage solution enables Sellers to deliver CHOICEReno eXPress mortgages to Freddie Mac prior to completion of the renovations without recourse, provided certain requirements are met.
  2. Why did Freddie Mac introduce CHOICERenovation?

    During the development of our Duty to Serve plan, we determined that a vital part of providing housing options for homebuyers is related to the need for a renovation offering to help address the large number of older homes and shifting demographics in today’s market. Our CHOICERenovation offering allows homebuyers to include renovation costs in the mortgage financing to assist in addressing the aging housing supply, the need for affordable housing and the increasing demand for aging-in-place housing solutions. CHOICERenovation also addresses a gap in the market for lenders looking for a robust, conventional offering to support renovation financing and provide cost-effective solutions for borrowers. 

  3. How does CHOICERenovation differ from the construction conversion and renovation mortgages offering?

    CHOICERenovation differs from what is currently available in several ways. Primarily, it allows for a single-close transaction, where the mortgage includes the renovation costs in the financing. This allows lenders to sell loans to Freddie Mac where the homebuyer uses the loan proceeds to pay for the renovations. There is also another path available for approved lenders that allows them to sell us the loans before renovations are complete. Construction conversion and renovation mortgages do not finance the improvements made to the subject property; homebuyers may need mortgage financing to pay off any interim financing that was used to make the improvements. The mortgage loan sold to Freddie Mac is the permanent financing, which is used to pay off the interim financing. Also, mortgages secured by manufactured homes are not eligible under the renovation mortgage offering.

  4. What requirements does the lender have to meet to obtain approval from Freddie Mac for a Term of Business (TOB) to sell CHOICERenovation loans prior to completion of the renovation work?

    Lenders will be required to provide information on their past two years of experience originating and servicing renovation loans. Lenders must also be eligible to sell loans with recourse to Freddie Mac. For those lenders with less than two years of experience who are interested in delivering loans prior to renovation completion, they may be considered under acceptable exceptions, including supplying us with a vendor that meets those requirements.

    Lenders with Freddie Mac account executives can contact them for additional information. Lenders without account executives should call 800-FREDDIE for specific information on how to apply for eligibility.
  5. What mortgage products will be permitted with a CHOICERenovation mortgage?

    CHOICERenovation is eligible for use with fixed-rate and adjustable-rate mortgage products. CHOICERenovation mortgages may be Home Possible®, HFA Advantage®, super conforming, or HomeOneSM mortgages. CHOICERenovation may also be used with mortgages not specifically tied to Duty to Serve or other affordable lending products, programs, or objectives.

  6. Are mortgages secured by manufactured homes eligible for CHOICERenovation?

    Yes. This is another important feature of this offering. See Guide Section 4607.8 (c) for the maximum financed renovation costs secured by Manufactured Homes.

  7. Can CHOICERenovation loans be originated in conjunction with the GreenCHOICE® Mortgages offering?

    Yes, CHOICERenovation  Mortgages and GreenCHOICE® Mortgages can be originated in conjunction with each other. In such cases, Sellers will be eligible for the $500 credit for credit fees as outline in Guide Exhibit 19  Credit Fees.  Additionally, as it relates to energy and/or water efficiency improvements, under Guide Section 4606.4, an energy report may need to be obtained and retained in the mortgage file for GreenCHOICE Mortgages.

  8. Can CHOICERenovation loans be originated in conjunction with the CHOICEHome® offering?

    Yes, provided that, if there is a conflict between any of the requirements, the more restrictive requirements will apply. A Seller must ensure it has obtained any necessary approvals from Freddie Mac in order for CHOICERenovation loans to be originated in conjunction with the CHOICEHome offering.

  9. What are the maximum loan-to-value ratios for CHOICERenovation?

    The following includes maximum LTV ratios. Please note, the maximum LTV ratios depend on the specific product or offering; there may be additional possible LTV ratios, i.e. condominiums when the project reviews are streamlined; these numbers are subject to change. TLTV to 105% with eligible Affordable Seconds (only with Home Possible, HFA Advantage and HomeOne).

    • 1-unit Primary Residence - 95% FRM/ARM / First-time homebuyer if > 95% (applies to HomeOne). (Can go up to 97% for Home Possible, HFA Advantage or HomeOne only)
    • 2-unit Primary Residence - 85% FRM/ARM
    • 3- and 4-unit Primary Residences - 80% FRM/ARM
    • Second Homes - 90% FRM/ARM
    • 1-unit Investment Property - 85% FRM / 7/1 and 10/1 ARM
    • Manufactured Homes - 95% FRM/ARM
  10. Do CHOICERenovation mortgages with LTV ratios greater than 80% need to have mortgage insurance (MI) coverage to be eligible for delivery to Freddie Mac?

    Yes. All mortgages with LTV ratios greater than 80% must have MI coverage in order to be eligible for sale to Freddie Mac. Please contact your mortgage insurer(s) directly to receive more information on any MI-related questions on CHOICERenovation mortgages delivered prior to renovations being complete and/or after renovations are completed.

  11. What underwriting paths are allowable for the CHOICERenovation mortgage?

    Mortgages delivered under the CHOICERenovation offering must be submitted to Loan Product Advisor and receive a Loan Product Advisor “Accept” risk classification. Manual underwriting will not be accepted.

  12. What are the maximum allowable renovation costs?

    For refinances, the maximum permitted renovation costs are up to 75% of the “as-completed” appraised value. For purchases, the maximum permitted renovation costs are up to 75% of the lesser of 1.) the sum of the purchase price and renovation costs or 2.) the “as-completed” appraised value. If the mortgaged premises is a manufactured home, the maximum permitted renovation costs are the lesser of $50,000 or 50% of the “as-completed” appraised value.

  13. Does the loan amount ‘up to 75% of the “as-completed” appraised value’ include the land value?

    Yes. The “as-completed” appraised value does include land value. We allow up to 75% of the “as-completed” value to be used to finance renovations.

  14. What steps should a lender take if/when a borrower becomes unresponsive and communication methods become challenging?

    The lender should reach out to their account executive for further discussion. Lenders without an account executive should call 800- FREDDIE.

  15. What is the process to submit an extension request if a renovation project appears at risk of going or does go beyond the initial timeline and what information is required?

    The Seller must notify Freddie Mac at [email protected] if there are any concerns that the renovations will not be completed by the required completion date in accordance with Section 4607.4(a), or if there are any changes that impact the “as completed” value of the property as determined by the appraiser pursuant to Section 4607.9.

  16. Are properties with a C5 and C6 condition rating eligible for delivery as CHOICERenovation Mortgages?

    Yes, if all issues that cause the property to be rated with a C5 or C6 condition rating are cured as part of the renovation. The appraisal report must be completed “subject to completion, repairs or alterations” and the reported condition rating must reflect the hypothetical condition that the repairs or alterations have been completed. See Guide Section 5605.8 for additional information related to appraisals completed “subject to” completion, repairs or alterations, or an inspection.

  17. Does Freddie Mac provide CHOICERenovation sample form templates to assist lenders with origination of the loan?

    Yes, please see the link below to the templates for Maximum Mortgage Worksheet, Renovation Loan Agreement and Renovation Contract.

  18. Can I sell CHOICERenovation loans thru Freddie Mac’s Correspondent XChange℠ program?

    No, Freddie Mac’s Correspondent XChange℠ program is not permitted for CHOICERenovation loans.

  19. Does Freddie Mac allow ADUs to be included in a renovation project?

    Yes, Freddie Mac does allow for the addition or renovation of ADUs.

  20. Does Freddie Mac provide a list of lenders that originate CHOICERenovation Mortgages?

    Yes, please see the list of CHOICERenovation Mortgage Lenders that elected to be added to Freddie Mac’s published list of Lenders. Lenders who offer CHOICERenovation Mortgages and who are interested in being included in this list may complete and submit the CHOICERenovation Seller Consent Form.

  21. Does Freddie Mac permit Concurrent Transfers of Servicing involving CHOICERenovation Mortgages with settlement dates prior to completion of the renovations?

    Yes, provided the Seller has obtained prior written approval from Freddie Mac pursuant to Section 4607.18. Sellers may request approval by contacting their Freddie Mac representative or the Customer Support Contact Center at 800-FREDDIE.

  22. Are Subsequent Transfers of Servicing involving CHOICERenovation Mortgages with settlement dates prior to completion of the renovations still prohibited?

    They are prohibited until all renovations have been completed, the Seller has obtained a completion report and Freddie Mac has approved removal of recourse.

  23. For Concurrent Transfers of Servicing for CHOICERenovation Mortgages with settlement dates prior to completion of the renovations, can any bifurcation of the selling representation and warranty obligations be considered?

    Concurrent Transfers of Servicing involving CHOICERenovation Mortgages with Settlement Dates prior to completion of the renovations are only permitted if the Seller has obtained prior written approval from Freddie Mac pursuant to Section 4607.18. When seeking Freddie Mac’s approval, the seller should discuss with their Freddie Mac account representative whether Freddie Mac can accommodate any bifurcation of the selling representation and warranty obligations.

  24. For Concurrent Transfers of Servicing for CHOICERenovation Mortgages with settlement dates prior to completion of the renovations, can the Transferee Servicer use a third party to perform the activities listed in Section 4607.10(c)?

    A Transferee Servicer may engage an Outsourced Vendor or Servicing Agent, which may be the Seller, and it must ensure that it has established appropriate processes and communication protocols with any Outsourced Vendor or Servicing Agent it engages. See Section 4607.18(a) for more information regarding these special requirements.

  25. If CHOICERenovation mortgage proceeds are used to add a new manufactured home ADU to an existing site-built property, does the maximum financed renovation cost for manufactured homes described in Section 4607.8 apply?

    No. When a manufactured home ADU is added to an existing site-built property, the total cost of the financed renovations must not exceed:

    • For purchase transaction mortgages, 75% of the lesser of the sum of the purchase price of the property plus the estimated cost of the renovations or the “as completed” value of the property as determined by the appraiser pursuant to Guide Section 4607.9
    • For “no cash-out” refinance mortgages, 75% of the “as completed” value of the property as determined by the appraiser pursuant to Guide Section 4607.9