Mortgages Secured by Income-Based Resale Restricted Properties
Fundamental to our mission, Freddie Mac has long been active in affordable housing preservation. To build on our commitment, we have added new and revised underwriting flexibilities for mortgages secured by income-based resale restricted properties sold under affordable housing programs that aim to preserve affordability over time. These flexibilities include:
- The use of the Affordable Seconds® financing option to subsidize the purchase price
- The ability for Subsidy providers of Affordable Seconds options to participate in appreciation under certain scenarios
- Simple guidelines to appraise properties with resale restrictions
- The ability for subsidy providers to receive excess proceeds if resale restrictions survive foreclosure or deed-in-lieu of foreclosure in certain instances
Our new and revised flexibilities support programs with resale restrictions that terminate or survive foreclosure. We require the restrictions to be included in a separate easement, restriction, covenant or condition in a deed or other instrument. Additionally, we require that Nonprofits, state and local governments or municipalities impose the resale restrictions.
Read Seller/Servicer Guide (Guide) Chapter 4406.
For additional financing solutions to support shared equity homeownership, please see our Community Land Trust Mortgages
Who are the income-based deed restriction program for?
- Borrowers looking to purchase properties under income-based resale restricted programs.
- Low- to moderate-income 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.
Offerings that support shared equity homeownership
Product Features
- Eligible Mortgage Products
The Mortgage must be a First Lien conventional Mortgage. Read chapter 4406.1 for more information.
- Delivery Requirements
Chapter 6302.37 contains all of the additional special delivery instructions for Mortgages secured by properties subject to resale restrictions. This chapter includes special instructions for Mortgages secured by properties subject to resale restrictions that terminate upon foreclosure (or expiration of any applicable redemption period) or recordation of a deed-in-lieu of foreclosure, where the property value must be determined in accordance with chapter 4406.1(g)(ii)
In addition to the requirements of chapter 4406.1, the requirements associated with mortgages secured by income-based resale restricted properties are located in 4406.2. - Property Type/Eligible Properties
The Mortgage must be secured by a 1-unit Primary Residence (not a Manufactured Home unless the property meets the requirements of a CHOICEHomeSM). The property must be an attached or detached dwelling unit located on an individual lot or in a Condominium Project or Planned Unit Development (PUD).
- Maximum LTV Ratios
In the instance where the resale restriction survives foreclosure (or expiration of any applicable redemption period) or recordation of a deed-in-lieu of foreclosure, the "value" of a purchase transaction is the lesser of the appraised value of the Mortgaged Premises on the Note Date or the purchase price of the Mortgaged Premises and for a refinance transaction, "value" is the appraised value.
View chapter 4203.1(a) for more details on the LTV ratios.
- Eligibility/Underwriting
Mortgages subject to resale restrictions may be manually underwritten or submitted to Loan Product Advisor.
While submitting a loan through Loan Product advisor, lenders should use the product identifier of the mortgage product being used, in combination with these requirements.
- Special Requirements
MORTGAGE PURPOSE – The Mortgage may be either a purchase transaction, a “no-cash out” refinance Mortgage or a cash out refinance Mortgage. Cash out refinance Mortgages are only permitted subject to the approval by the subsidy provider.
Benefits for Borrowers
- Borrowers can purchase homes at below market prices
- Borrowers have the opportunity to build equity while being able to purchase an affordable property
- Borrowers have opportunities to sustain homeownership by working with the resale restriction program provider
Benefits for Lenders
- Experience standardization for underwriting guidelines
- Experience a more streamlined evaluation of subsidy providers and the appraisal process
- Presents more options in the marketplace to reach families with very low-, low- and moderate-incomes