CMT-Indexed ARMs
In Bulletin 2020-1, Freddie Mac announced that it would cease purchasing CMT-indexed ARMs in 2021. In Bulletin 2021-4, we announced that Freddie Mac will not purchase any CMT-indexed ARM with an Application Received Date on and after July 1, 2021. In addition, Freddie Mac will no longer purchase CMT-indexed ARMs on and after October 1, 2021, regardless of the Application Received Date or Note Date.
At this time, the CMT index will continue to be published. Servicers will continue to adjust the interest rate for legacy CMT-indexed ARMs based on CMT indices for so long as they are available.
Who are CMT-indexed ARMs for?
- Savvy borrowers who want lower initial rates and monthly payments but understand rates will increase.
- People who don't plan to stay in the home for long.
- Refinance or move-up borrowers.
The information on this page is not part of, and is not a replacement or substitute for, the requirements found in the Freddie Mac Single-Family Seller/Servicer Guide and your other Purchase Documents.
Product Features
- Credit Fees
Credit Fees in Price may apply based on the individual characteristics of the mortgage. See Guide Exhibit 19 for details on applicable fees.
- Delivery Requirements
See Guide Section 6302.7(b) for special delivery instructions for CMT-indexed ARMs.
- Down Payment or Closing Costs
Secondary financing, shared equity plans, and temporary subsidy buydowns
- Eligibility/Underwriting
- Loan Product Advisor Mortgages
- Non-Loan Product Advisor Mortgages
- Loan Product Advisor Caution Mortgages and non-Loan Product Advisor Mortgages must be manually underwritten per Guide Chapters 5100 through 5500.
- Minimum Indicator Score of 620 unless otherwise specified in the Guide.
- Maximum debt-to-income ratio of 45 percent for manually underwritten mortgages.
- All mortgages must meet the risk class and/or minimum Indicator Score requirements in Guide Exhibit 25A, where applicable.
- See Guide Section 4401.8 for additional underwriting requirements.
- Eligible Mortgage Products
- 1-, 3- and5-year CMT-indexed ARMs
- 3/1, 5/1, 7/1 and 10/1 CMT-indexed ARMs
- Originate with Financed Permanent Buydown (5/1, 7/1 and 10/1 ARMs only), Home Possible Mortgages® (5/1, 7/1 and 10/1 ARMs only), Construction Conversion Mortgages and Renovation Mortgages.
- 7/1 and 10/1 ARMs only for mortgages secured by manufactured homes.
- 7/1 and 10/1 CMT-indexed ARMs only for investment property mortgages where the borrower owns more than one financed investment property.
- 1-year, 3/1, and 3-year ARMs with margins of 400 basis points or more are not eligible for sale under flow purchase paths.
- See Single-Family Seller/Servicer Guide (Guide) Chapter 4603 for super conforming ARM requirements.
- Execution Options
ARM Cash and WAC ARM Guarantor
- Maximum LTV Ratios
Maximum LTV ratios must comply with Guide Section 4203.4
*See Guide Chapter 4203.4 for LTV/TLTV/HTLTV ratio requirements for super conforming mortgages
- Property Type/Eligible Properties
1- to 4-unit primary residences, including condos, PUDs and manufactured homes, second homes, and 1- to 4-unit investment properties (with additional requirements)
- Transaction Type
Purchase, no cash-out refinance, and cash-out refinance
Additional Resources
Reaching and educating borrowers – and helping them find the right mortgage – is essential for your business. Freddie Mac provides an array of materials you can share with your clients and business prospects.