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).
Disclaimer
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
- Original mortgage must be a convertible ARM that has converted to a fully amortizing fixed-rate mortgage prior to sale to Freddie Mac.
- Seasoned mortgages are 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® (LPA®) mortgages. See Single-Family Seller/Servicer Guide (Guide) Exhibit 19 for details on applicable fees.
- Property Type/Eligible Properties
1- to 4-unit primary residences.
- Maximum LTV Ratios
LTV/TLTV/HTLV ratios did not exceed Guide limits in effect on the original note date; current LTV/TLTV/HTLV ratios do not exceed Guide limits in effect on the delivery date.
- Eligibility/Underwriting
- The mortgage must have a fixed-rate of interest with level monthly principal and interest payments.
- The mortgage must be manually underwritten and may not be submitted to LPA for assessment.
- The 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 original note date.
- The mortgage is a conventional, fully amortizing mortgage and the mortgage term may not extend beyond 30 years from the date that is one month before the first payment Due Date as described in Guide Section 4201.3.
- The mortgage must comply with the maximum original loan amounts stated in Guide Section 4203.1 in effect on the settlement date.
- The borrower must be qualified using the converted terms meeting all Freddie Mac’s eligibility, underwriting and documentation requirements. Required special 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.
- The Seller-Owned Converted Mortgage does not receive any representation and warranty relief relating to the assessment of the original mortgage through LPA if applicable.
- Underwriting documentation must be obtained no more than 120 days prior to the conversion date. A prepayment penalty may not be assessed in connection with the conversion of the mortgage.
- The mortgage may not be an ineligible mortgage listed in Guide Section 4402.1(a)(iii).
- The mortgage must meet minimum Indicator Score requirements in Guide Exhibit 25 for the 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 report meeting the requirements of Guide Topic 5600 with an effective date that is no more than 120 days prior to the conversion date.
- Execution Options
Fixed-rate Cash servicing-retained, fixed-rate Guarantor, and multiLender Swap
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