Community Land Trust (CLT) Mortgages

Product Features

From valuable training and networking events to advanced tools and applications that help you work smarter, Freddie Mac has the resources you need to expand into new markets and grow your revenues.

• Property Type/Eligible Properties

  • 1- or 2-unit primary residence that is not a manufactured home except when secured by a 1-unit primary residence CHOICEHome^®.
  • The leasehold estate created by the Community Land Trust Ground Lease must constitute real property under applicable law
• Eligible Mortgage Products

  • First-lien, conventional fixed-rate mortgages only
  • Purchase
  • "No cash-out" refinance (NCOR)
  • Cash-out refinance

  The CLT or its authorized representative must permit the Borrower to enter into a refinance transaction.

• Special Requirements

  APPRAISAL REQUIREMENTS

  • The opinion of value for the leasehold interest must be developed based on the hypothetical condition that the property rights being appraised are the leasehold interest without the resale and other restrictions included in the ground lease.
  • For purchase and refinance transactions, “value” is the appraised value of the mortgaged premises on the Note Date determined in accordance with requirements of the Freddie Mac Single-Family Seller/Servicer Guide (Guide) section 4502.5.
  • For complete information on our appraisal requirements for CLT Mortgages, please review Guide section 4502.6.

  Note: CLTs typically subsidize the sale price of the property. As a result, the price paid may be significantly less than the market value of the property rights being appraised. The resale restrictions include a resale formula that limits the homeowner's proceeds at resale.  

• Special Requirements

  CLT GROUND LEASE REQUIREMENTS

  The Seller must review the community land trust's (CLT’s) ground lease and determine whether it is based on either the National Community Land Trust Network (NCLTN) 2011 Community Land Trust Network Model Ground Lease or the Institute for Community Economics (ICE) Model Ground Lease (collectively, the “model ground leases”). For CLT programs included in Fannie Mae’s Certified Shared Equity Program list, the following apply:

  • If the CLT’s ground lease is based on one of the model ground leases, the Seller is not required to comply with the additional ground lease requirements listed below.
  • If the CLT’s ground lease is not based on either model ground lease, the Seller must confirm that it complies with the additional ground lease requirements listed below.
     

  The Seller must confirm that the CLT’s ground lease:

  • Has a term of at least 30 years.
  • Includes a resale formula that limits the homeowner's proceeds at resale. The restrictions must be binding on current and subsequent property owners and remain in effect (i.e., survive) until they are formally removed or modified, or terminate automatically in accordance with their terms, such as at a foreclosure sale or upon recordation of a deed-in-lieu of foreclosure.
  • Provides the CLT or its assignee the right to a preemptive option to purchase the home from the homeowner at resale ("the right of first refusal").
  • Requires the CLT to review and approve any refinances and secondary financing, including Home Equity Lines of Credit (HELOCs).
  • Requires that the homeowner use the leased land and the improvements primarily for residential uses.

  For each community land trust mortgage sold to Freddie Mac, the Seller represents and warrants that the CLT ground lease is valid, enforceable and in full force and effect.

  If the CLT’s ground lease is not based on a model ground lease or the CLT program is not included on Fannie Mae’s Shared Equity Program list, Freddie Mac prior written approval is required.

• Special Requirements

  CLT GROUND LEASE RIDER REQUIREMENTS

  Freddie Mac Form 490, Community Land Trust Ground Lease Rider, must be completed, executed and recorded in the land records, together with the Community Land Trust Ground Lease. Fannie Mae Form 2100 may be used in lieu of Form 490. Requirements in the Guide that apply to Form 490 also apply to Fannie Mae Form 2100, when applicable.

• Special Requirements

  SPECIAL DELIVERY REQUREMENTS

  • CLT Mortgages may be delivered under the fixed-rate Cash Program or Guarantor Execution.
  • Sellers must enter the valid value of “Leasehold” for ULDD Data Point Property Estate Type (Sort ID 63).
  • Delivery requirements: See Guide Section 6302.42.
  • Mortgage file requirements:  See Guide Section 3401.5(b) and Guide Section 4502.7(d).
  • When delivering loans through Loan Product Advisor^®, select the Community Land Trust loan program identifier. With this loan program identifier, the loan-to-value (LTV)/ total LTV (TLTV)/home equity line of credit (HELOC) TLTV ratios will be calculated automatically without having to enter the appraised value in the purchase price field.
• Special Requirements

  TRACKING REQUIREMENTS

  • Servicers of Community Land Trust Mortgages must implement policies, procedures and systems to identify and track Community Land Trust Mortgages in order to ensure such mortgages are serviced in accordance with the Guide’s servicing requirements, including Chapter 8701.