Loans with Secondary Financing
For conforming and super conforming mortgages, it's possible to originate a first mortgage with an original loan amountup to the maximum eligible loan limit concurrently with a second lien home equity loan or line of credit*.
Freddie Mac will purchase eligible first lien mortgages with secondary financing that meet the criteria.
*There may be federal, state or local laws applicable to originators of this type, and Sellers should seek the advice of their legal counsel prior to implementation.
Who are Loans with Secondary Financing for?
- Purchasers or homeowners looking to refinance.
- Borrowers financing primary residences, secondary residences or 1-to 4-unit investment properties.
- Homeowners with eligible fixed-rate, adjustable-rate or Home Possible® mortgages.
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
- Eligible Mortgage Products
- First mortgage with the original loan amount up to the maximum eligible loan limit.
- Fixed-rate mortgages
- ARMs
- Eligibility for secondary financing varies by mortgage product type.
- Home Possible® mortgage
- Credit Fees
- A special Credit Fee in Price will be assessed and billed in conjunction with the sale of certain mortgages with secondary financing.
- The secondary financing Credit Fee in Price will not be assessed on a mortgage with an Affordable Second.
- See Guide Exhibit 19 for details on applicable fees
- Delivery Requirements
See Guide Section 6302.34 for delivery instruction for mortgages with secondary financing.
- Property Type/Eligible Properties
- 1- to 4-unit primary residences
- Second homes
- 1- to 4-unit investment properties
- Maximum LTV Ratios
Mortgages with secondary financing must comply with the loan-to-value (LTV) ratio, total loan-to-value (TLTV) ratio, and Home Equity Line of Credit (HELOC) total loan-to-value (HTLTV) ratio limits specified in Guide Section 4203.4 or as specified for a particular product.
- Eligibility/Underwriting
- Loan Product Advisor℠ mortgages and non-Loan Product Advisor mortgages.
- The terms of the secondary financing must:
- Provide for regular monthly payments sufficient to meet the interest due; interest may not accrue
- Be disclosed to the appraiser and mortgage insurer
- Payment of the secondary financing must be included in the borrower's monthly housing.
- Affordable Seconds® must meet the requirements in Guide Section 4204.2.
- Refinance mortgages with junior liens must meet the requirements in Guide Section 4204.1.
- Maturing date requirement: The maturity date or amortization basis of the junior lien must not be less than five years after the note date of the first lien mortgage delivered to Freddie Mac, unless the junior lien is fully amortizing or a Home Equity Line of Credit (HELOC). Review Guide Section 4204.1(b) for more details.
- Transaction Type
Purchase and refinances
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