Seller-owned Converted Mortgages
Our Seller-owned Converted Mortgage requirements provide a streamlined process for selling converted ARMs, so that when market conditions change or you look to restructure your balance sheet, the sale process is quick, easy and profitable. These types of mortgages mean borrowers can convert to the security of a fixed-rate mortgage when interest rates rise – in one easy process.
Seller-owned Converted Mortgages help you originate convertible ARMs for your portfolio with the assurance that you’ll have a secondary market outlet once they convert to a fixed rate of interest. They also help you to effectively manage your mortgage portfolio when market conditions change, easily sell ARMs that have converted when adjusting your loan-to-deposit ratios, and leverage a cash execution to improve your liquidity or a guarantor execution to retain an asset on your books.
Who are Seller-owned Converted Mortgages for?
- Homeowners who want to convert to a fixed-rate mortgage.
- Borrowers attracted to lack of new credit documentation requirements (in many instances).
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.
- Eligible Mortgage Products
Original mortgage must be a convertible ARM that has converted to a fully amortizing fixed-rate mortgage prior to sale to Freddie Mac. The term may not extend beyond 30 years from the note date or effective date of permanent financing for a mortgage originated as a Construction Conversion or Renovation Mortgage.
Seasoned mortgages determined using the conversion date and not the original note date.
- Special Requirements
See Guide Section 6302.19 for special delivery instructions for all Seller-owned Converted Mortgages.
- Credit Fees
Post settlement Credit Fees in Price may apply based on the individual characteristics of the mortgage, and include CS/LTV Credit Fees in Price for Non-Loan Product Advisor mortgages. See Guide Exhibit 19 for details on applicable fees.
- Property Type/Eligible Properties
1- to 4-unit primary residences, second homes, and 1- to 4-unit investment properties.
- Maximum LTV Ratios
LTV/TLTV/HTLV ratios did not exceed Single-Family Seller/Servicer Guide (Guide) limits on the note date; current LTV/TLTV/HTLV ratios do not exceed Guide limits as of the delivery date.
Mortgage must have a fixed-rate of interest with level monthly principal and interest payments.
Mortgage must be manually underwritten and may not be submitted to Loan Product Advisor℠ for evaluation.
Mortgage must meet all eligibility and underwriting requirements in effect on the delivery date. The mortgage eligibility and underwriting requirements must be based on the loan purpose as of the note date.
Mortgage is a conventional, full amortizing mortgage and the mortgage term may not extend beyond 30 years from the note date or from the effective date of permanent financing for a Construction Conversion or Renovation Mortgage.
LTV/TLTV/HTLTV ratios may not exceed the limits in Guide Section 4203.4 as of the delivery date. The mortgage must comply with the maximum original loan amounts stated in Guide Section 4203.3 in effect on the delivery date
The borrower must be qualified using the converted terms meeting all Freddie Mac’s eligibility, underwriting and documentation requirements. Required documentation includes, but is not limited to: new Uniform Residential Loan Application, new credit report meeting the requirements of Guide Section 5203.1, and verification of income and employment.
Seller-Owned Converted Mortgage does not receive any representation and warranty relief relating to the evaluation of the mortgage being converted through Loan Product Advisor.
Underwriting documentation must be obtained no more than 120 days prior to the conversion date. Prepayment penalty may not be assessed in connection with the conversion of the mortgage
The converted mortgage may not be an Initial Interest Mortgage, restructured mortgage or super conforming mortgage or a mortgage with a temporary subsidy buydown.
Mortgage must meet minimum Indicator Score requirements in Guide Exhibit 25 for an applicable mortgage product. If the borrower doesn’t have a usable credit score and as a result the mortgage does not have an Indicator Score, the mortgage is not eligible for purchase as a Seller-owned Converted Mortgage.
Sellers must obtain a new appraisal with an effective date that is no more than 120 days prior to the conversion date and that meets Freddie Mac requirements.
- Execution Options
Fixed-rate Cash servicing-retained, fixed-rate Guarantor, and multiLender Swap
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