conforming product suite guide/conforming product suite.pdf · 2020-06-25 · conforming product...
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Conforming Product Suite
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Table of Contents
Table of Contents ..................................................................................................... 1
Product Description and Product Codes ....................................................................... 6
Overview ............................................................................................................. 6
Rights of FSM ....................................................................................................... 6
FRM Product Description ......................................................................................... 6
FRM Product Codes ................................................................................................ 7
Product Limitations – Investment and Second Homes ................................................. 9
ARM Product Description ........................................................................................ 9
ARM Product Codes – TEMPORARILY SUSPENDED (5/7/20) ......................................... 9
Loan Details .......................................................................................................... 10
Overview ........................................................................................................... 10
Assumable ......................................................................................................... 10
Borrowers .......................................................................................................... 10
Eligible States ..................................................................................................... 10
Escrow / Impound waiver ..................................................................................... 10
Energy Efficient Mortgages ................................................................................... 11
Price Adjustments ............................................................................................... 11
Loan Limits ........................................................................................................ 11
Minimum Loan Amount ........................................................................................ 11
Mortgage Credit Certificate ................................................................................... 11
Negative Amortization .......................................................................................... 11
Occupancy ......................................................................................................... 12
Prepayment Penalty ............................................................................................. 12
Property Types ................................................................................................... 13
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Table of Contents, Continued
Documentation Requirements .................................................................................. 14
FSM Requirements .............................................................................................. 14
General Underwriting Guidelines .............................................................................. 15
Overview ........................................................................................................... 15
Underwriting Method ........................................................................................... 15
Presentation ....................................................................................................... 15
Acceptable AUS Decisions ..................................................................................... 16
AUS .................................................................................................................. 16
Bankruptcy / Foreclosure ...................................................................................... 17
Condos .............................................................................................................. 17
Construction to Perm ........................................................................................... 17
Conversion of a Principal Residence ....................................................................... 18
Credit Score ....................................................................................................... 18
Down Payment Assistance / Grants ........................................................................ 18
Financial Reform – ATR/QM .................................................................................. 19
Gifts – 100% ...................................................................................................... 19
Homebuyer Education .......................................................................................... 19
Mortgage / Rental History ..................................................................................... 20
Mortgage Insurance ............................................................................................. 20
Mortgage Insurance – Lender Paid ......................................................................... 20
Multiple Mortgages to the Same Borrower ............................................................... 20
Public Assistance and/or Section 8 ......................................................................... 20
Purchase Contracts – Re-Negotiated ...................................................................... 21
Qualifying Ratios ................................................................................................. 21
Refinance Transactions ........................................................................................ 21
Reserve Requirements ......................................................................................... 21
Short Sales ........................................................................................................ 21
Subordinate (Secondary) Financing ........................................................................ 21
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Table of Contents, Continued
Restrictions ........................................................................................................... 22
High Cost and Responsible Lending Restrictions ....................................................... 22
State Restrictions ................................................................................................ 22
Conforming Fixed Rate Mortgage (FRM) .................................................................... 23
Summary ........................................................................................................... 23
Loan Parameters – Agency FRM 30 Year ................................................................. 23
Fannie Mae 97% Standard .................................................................................... 25
FSM-LPMI – Conforming FRM ................................................................................... 26
Summary ........................................................................................................... 26
Mortgage Insurance ............................................................................................. 26
Restrictions ........................................................................................................ 26
Split Mortgage Insurance ........................................................................................ 27
Summary ........................................................................................................... 27
Mortgage Insurance ............................................................................................. 27
Restrictions ........................................................................................................ 28
Subordinate Financing ......................................................................................... 28
Financed Mortgage Insurance .................................................................................. 29
Summary ........................................................................................................... 29
Mortgage Insurance ............................................................................................. 29
Restrictions ........................................................................................................ 30
Conforming Adjustable Rate Mortgages – TEMPORARILY SUSPENDED (5/7/20) ............... 31
ARM Summary .................................................................................................... 31
Presentation ....................................................................................................... 31
Guidelines .......................................................................................................... 31
HPML ................................................................................................................. 32
Product Disclosures ............................................................................................. 32
Qualifying Rate ................................................................................................... 32
Loan Parameters – Agency 30-Year........................................................................ 33
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Table of Contents, Continued
Fannie Mae HomeReady Mortgage® ......................................................................... 34
Summary ........................................................................................................... 34
Maximum Loan Limits .......................................................................................... 34
Loan Parameters – Standard HomeReady FRM 30 Year ............................................. 34
Product Guidelines ............................................................................................... 35
Freddie Mac Home Possible Mortgages® ................................................................... 39
Summary ........................................................................................................... 39
Maximum Loan Limits .......................................................................................... 39
Loan Parameters Standard Home Possible FRM 30 Year ............................................ 39
Product Guidelines ............................................................................................... 40
FSM Fannie Mae High Balance/Freddie Mac Super Conforming Mortgages ....................... 46
Summary ........................................................................................................... 46
FSM Loan Limits .................................................................................................. 47
High Balance and Super Conforming Requirements .................................................. 48
Multiple Financed Properties (5-10 Properties)............................................................ 50
Product Codes .................................................................................................... 50
Primary Residence ............................................................................................... 50
Second Home and Investment .............................................................................. 50
Delayed Financing .................................................................................................. 51
DU Loan Case Files: At least one Borrower has no credit score and another Borrower has a
credit score ........................................................................................................... 53
1 FICO Score ...................................................................................................... 53
LO & Pricing Requirements ................................................................................... 53
Opportunity for Elderly Parent(s) and Disabled Child ................................................... 54
Elderly Parent requirements .................................................................................. 54
Disabled Adult Child requirements ......................................................................... 54
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Table of Contents, Continued
Retail Specific Programs .......................................................................................... 55
Freddie Mac Direct ................................................................................................. 55
FSB Servicing Retained ........................................................................................... 56
Summary ........................................................................................................... 56
Loan Parameters ................................................................................................. 56
Piggyback Buster Program ....................................................................................... 57
Loan Parameters ................................................................................................. 57
Down Payment Assistance Programs ......................................................................... 59
IHDA ................................................................................................................. 59
Assist ................................................................................................................ 59
FHLB ................................................................................................................. 59
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Product Description and Product Codes
Overview This product suite provides specific product-related criteria which are in addition to those guidelines provided in the Underwriting chapter of this FSM Guide.
✓ The product suite pertains to Retail, Wholesale and Modified
Correspondent channels Requirements that are specific to an individual channel will be
noted ✓ Should there be a conflict between the requirements contained in this
product suite versus the guidelines contained in the Underwriting Chapter, FSM will follow the criteria set forth in this product suite.
✓ FSM should reference the Underwriting chapter for guidelines not specifically addressed in this product suite.
✓ Additionally, First State Mortgage Services, LLC (FSM) underwriting guidelines are based on Fannie Mae/Freddie Mac guidelines, unless
specifically addressed in this product suite or the Underwriting chapter.
Rights of FSM FSM reserves the right to change or eliminate any product without advance notice
based on the current market conditions.
✓ If a product is not priced, it is not available.
FRM Product
Description Conforming Fixed Rate Mortgage
✓ The Conforming fixed rate mortgage (FRM) product has the option of a
10-, 15-, 20, 25, or 30-year amortization term.
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Product Description and Product Codes, Continued
FRM Product Codes
The following matrix outlines the applicable product codes for the Conforming FRM product suite:
Note:
✓ All product codes may not be listed herein
✓ Verify the product code on the daily rate sheet ✓ If a published product is not priced, it may not be available, contact
Pricing.
Product Product Code Loan Term
Conforming Fixed Rate Mortgage – Fully Amortizing
30-Year FRM 300000 30-Years
30-Year FRM – DU High Balance 300017 30-Years
20-Year FRM 200000 20-Years
25-Year FRM 250000 25-Years
15-Year FRM 150000 15-Years
15-Year FRM – DU High Balance 150017 15-Years
10-Year FRM 100000 10-Years
100% Gift 300009 30-Years
FSM Lender Paid Mortgage Insurance Option (LPMI) - FRM
30-Year LPMI-FRM 300001 30-Years
30-Year Piggyback Buster 300052 30-Years
25-Year LPMI-FRM 250001 25-Years
25-Year Piggyback Buster 250052 25-Years
20-Year LPMI-FRM 200001 20-Years
15-Year LPMI-FRM 150001 15-Years
10-Year LPMI-FRM 100001 10-Years
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Product Description and Product Codes, Continued
FRM Product Codes, continued
Product Product Code Loan Term
Split Mortgage Insurance Option (MI) - FRM
30-Year Split MI 300002 30-Years
25-Year Split MI 250002 25-Years
20-Year Split MI 200002 20-Years
15-Year Split MI 150002 15-Years
10-Year Split MI 100002 10-Years
✓ See the Rate Sheet for Upfront and Monthly MI factors
Freddie Mac HomePossible®/Home Advantage®
30-Year HomePossible 300036 30-Years
Fannie Mae HomeReady®
30-Year HomeReady 300053 30-Years
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Product Description and Product Codes, Continued
Product Limitations –
Investment and Second Homes
When Borrowers are purchasing a Second Home or Investment Property:
✓ If the Borrower(s) own more than one financed 1-4-unit investment property, the product is limited to 15-year, 20-year, 30-year FRM or 7/1
or 10/1 ARM only.
ARM Product Description
Conforming Adjustable Rate Mortgage
The Conforming Adjustable Rate Mortgage (ARM) product has only a 30-Year
amortization, but offers the following options:
✓ 5/1, 7/1 and 10/1
ARM Product
Codes – TEMPORARILY SUSPENDED (5/7/20)
The following matrix outlines the applicable product codes for the Conforming ARM
product suite:
Note:
✓ Verify the product code on the current daily rate sheet;
✓ If a published product is not priced, it may not be available, contact
Pricing
Product DU Product
Code
LPA Product
Code Loan Term
Conforming Adjustable Rate Mortgage (ARM)
5/1 LIBOR 510011 510012
30-Year
Amortization 7/1 LIBOR 710011 710012
10/1 LIBOR 910011 910012
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Loan Details
Overview The following “loan details” are presented in alphabetical order. Unless otherwise
noted in a specific product sub-section, the loan details noted herein apply to all
loans in this product suite.
See the specific product sub-sections for full details regarding loan parameters.
Assumable Conforming FRM – Not assumable
Conforming ARM – May be assumable under specific conditions. See ARM
Summary
Borrowers See the Underwriting Chapter for Eligible Borrowers
Eligible States See the states in which FSM is able to accept loans on the website at this link:
FSM Eligible States; See FSM State-Specific Guidelines for product/lending
restrictions in these states.
✓ The Seller must be fully licensed or legally exempt to originate loans in
the state
Escrow / Impound waiver
Permitted per FSM guidelines for conventional loans with an LTV less than
80.00%, unless higher limits are permitted by state law (e.g. CA where waiver is
permitted to 89.99%; LTV’s > 90.00% requires escrows).
✓ The impound/escrow for hazard insurance and taxes may be waived;
✓ The impound/escrow for mortgage insurance may not be waived;
✓ The impound for hazard insurance only may be waived. The impound for
taxes only may not be waived.
✓ See Underwriting for additional details. See the Current rates for
applicable price adjustments;
✓ If the loan is HPML, the loan requires escrows, regardless of the LTV
and/or state laws;
✓ After January 1, 2016, any loan designated in an A or V flood zone must
have an escrow established for flood insurance irrespective of LTV
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Loan Details, Continued
Energy
Efficient Mortgages
FSM does not accept mortgages which are subject to any type of “special” “EEM
mortgage” program(s) or guidelines.
Price Adjustments
Price adjustments may be applied against conventional conforming loans. All price
adjustments are cumulative.
See the Current rates on http://www.msiloans.biz/index.html for details.
Loan Limits Maximum Loan Amount for Conforming Products – 2020
Property Type 48 Contiguous States & DC
1 Unit $510,400
2 Units $653,550
3 Units $789,950
4 Units $981,700
Minimum Loan
Amount FSM will not accept mortgage loan amounts less than $20,000.00
Mortgage Credit Certificate
Mortgage Credit Certificate (MCC) is permitted in the Retail business channel.
Negative
Amortization Not applicable or allowable for any offered product.
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Loan Details, Continued
Occupancy Within specific product parameters, the following occupancy types are available:
✓ Owner-occupied
✓ Second vacation home
✓ Investment (non-owner occupied)
✓ See the Underwriting chapter for additional details
Prepayment Penalty
Not Permitted
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Loan Details, Continued
Property Types
The following matrix outlines the applicable property types:
Eligible Property Types Ineligible Property Types
Unless otherwise specifically restricted or
not permitted by the applicable loan
parameters, the following property types
are acceptable to FSM/Agency Guidelines:
✓ 1-4 Unit Properties
✓ Condominiums (condo) to FSM
guidelines, regardless of AUS
findings. See Underwriting/Condo
requirements for details
✓ Land contract for sale
✓ Leasehold Estate properties must
be common to the area. See
Underwriting/Leasehold for full
details
✓ Modular/Factory Built homes to
Fannie Mae guidelines. See
Underwriting/Modular Homes for
full details
✓ PUDs to applicable agency
guidelines
✓ Rural Properties
✓ Mixed use properties (see
Underwriting for details)
✓ Auction-Properties purchased at
auction – See
Underwriting/Property Types for
exception
✓ Commercial operations
✓ Condotels
✓ Cooperative Projects
✓ Geodesic domes
✓ Earth homes
✓ Houseboats
✓ Mobile(manufactured)homes,
single or double-wide
✓ Model home leaseback properties
✓ Multi-dwelling or Multi-Unit
condos
✓ Non-conforming zoning projects
✓ Non-warrantable condos
✓ Timeshare/segmented ownership
✓ Projects with pending litigation
✓ Properties with deed restrictions
that limit transferability of title or
contain a “first right of refusal”
provision
✓ Properties located outside the
contiguous United States; US
Territories; and any property
located in a state where FSM does
not lend
✓ Properties with assignments of
purchase (assigning the purchase
contract to another party)
✓ Property located on an Indian
reservation
✓ Unimproved (raw) land
✓ Working farms, ranches or
orchards
✓ Any property type not permitted
by Fannie Mae or Freddie Mac
Note: See Underwriting/Property Types for additional details and State Restrictions for
any lending restrictions.
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Documentation Requirements
FSM Requirements
FSM adheres to the AUS findings and requires the following minimum
documentation on all loans:
✓ Income
The initial VVOE
Closing Verbal VOE must be done within 10 days of settlement
A current YTD pay stub reflecting a minimum 30 day’s earnings,
And
W-2 and/or Tax returns, as applicable
✓ Assets
FSM requires a copy of the 2 most recent consecutive bank statements to validate funds to close and/or reserves, regardless
if a VOD is included in the loan file
Large deposits see Underwriting/Assets
Note: FSM still requires the 4506-T signed/dated by each Borrower for personal
and each business entity at underwriting to facilitate Underwriting review. FSM Underwriting conditions for the 4506-T’s to be signed at closing to facilitate post-
funding quality audit/review.
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General Underwriting Guidelines
Overview The conforming loans in this section require submission through either Fannie Mae
Desktop Underwriter® (DU) or Freddie Mac Loan Product Advisor® (LPA). The underwriting guidelines (AUS findings) of each agency must be met, unless
otherwise indicated in the loan parameters.
All loans must meet the guidelines outlined in this General Underwriting
Guidelines section unless otherwise noted in a specific product sub-set.
Note:
✓ Throughout the product suite references to the Underwriting chapter are indicated in the following manner: Underwriting/Credit – this tells you to
go to the Underwriting chapter, Credit section. References in blue with an underline indicate a link within this chapter, click on the link to go to that
reference.
✓ Guidelines that are not provided in this product suite or in the Underwriting chapter default to the applicable Fannie Mae or Freddie Mac
guidelines
Underwriting
Method Conforming Conventional
✓ AUS required
Loans must be submitted through either Fannie Mae DU or Freddie
Mac LPA and receive an Approve or Accept to be eligible to FSM
✓ Validation
Loans must be validated by an underwriter in accordance with the
applicable agency requirements
Note:
Loans may not be manually underwritten under any circumstances.
Presentation The guidelines in this section are presented in alphabetical order
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General Underwriting Guidelines, Continued
Acceptable
AUS Decisions FSM will accept Agency Conforming loans only with the following credit
recommendations.
Note: Manual Underwriting or “Overturning” loans is not permitted regardless of circumstances or compensating factors. Excessive submissions or manipulation of
the AUS system is not acceptable.
Credit Recommendation Eligible for FSM
DU Decision
DU Approve/Eligible Yes
DU Approve/Ineligible No (except for statutory increase in
loan amount)
All other DU Recommendations No
LPA Decision
Standard Accept Yes
Streamline Accept Yes
Caution No
Note:
✓ A copy of the final AUS findings report and completed Fannie Mae 1008
must be in the loan file at time of submission to underwriting
✓ The report/findings must be the most current used to close the loan and
may not be older than 120 days from the date of closing (Note date).
✓ The AUS findings summary and executed Fannie Mae 1008 must reflect
the terms of the closed loan and final 1003
AUS Loans may not be manually underwritten
✓ All conventional conforming loans must be submitted to either DU or LPA
Excessive Submissions
✓ FSM will not close loans with an “Excessive Submission” message in the
DU or LPA findings
✓ When you send loans to FSM for underwriting, ensure that you do not “manipulate” the data with multiple submissions; if the “Excessive Submission” warning/message appears when FSM submits for final
approval, the loan is not eligible for close by FSM.
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General Underwriting Guidelines, Continued
Bankruptcy / Foreclosure
See the Underwriting Chapter/Credit/Bankruptcy for full details regarding
guidelines and documentation requirements.
Condos FSM will accept loans where the subject property is a Condo.
✓ The condo must meet all current FSM/Fannie Mae/Freddie Mac guidelines.
See the Seller Guide/Underwriting Chapter/Condo for full details.
Condos may be submitted to DU or LPA
✓ FSM requires that Questionnaires be completed as required
✓ Ineligible Project List
For all conforming condo loans, regardless of AUS findings, FSM
must validate that the condo is not included on any Ineligible
Project list.
✓ Florida Condos that are primary, second home or investment, if using a streamline review then the LTV must be reduced by 5%; if using a full
condo review LTV can remain.
Additional Note:
✓ Loans must be identified as a condo at time of lock. Failure to do so may
change pricing and also may delay underwriting decision
✓ FSM will not submit condos for full Fannie Mae Approval, nor PERS, nor
CVAS.
Construction to Perm
✓ Construction to Perm loans, as two separate transactions only, are
permitted.
✓ See Underwriting/Construction to Permanent Financing and New
Construction in the Underwriting chapter for additional assistance
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General Underwriting Guidelines, Continued
Conversion of a Principal Residence
✓ For all conforming loans, when converting the departure residence to an
investment property rental or retaining as a second home:
If converting current principal residence to a second home, reserves as determined by the AUS and the full payment (PITI)
must be included in the back ratio for qualifying
If converting current principal residence to a rental/investment
property: an executed lease and documented market rent schedule is required. Lesser of lease or market rent will be used
for the offset calculation
✓ The lender will require a copy of the security deposit, 1st month rent
received and proof of deposit;
✓ Rental income from an interested party to the transaction is not allowed;
✓ Form 1007/Form 216 will be required to determine fair market rent. Gross
rents will be determined by the lease or 1007/216, whichever is less;
✓ The standard financial reserve requirements when the Borrower converts
current principal resident to an investment property must be applied. See B3-3.1-08: Rental Income (08/07/2018) FNMA 5306.1 Rental Income
FHLMC
Credit Score Minimum score required by FSM, regardless of DU/LPA, see the specific loan
parameter matrices for details.
Important Reminder: Regardless of the FSM minimum FICO, if the AUS or an MI company requires a higher FICO minimum, the loan must comply with the more
restrictive guidelines.
Disputed Credit and Authorized User Accounts – See Underwriting/Credit
Down Payment
Assistance / Grants
FSM may permit the use of Down Payment Assistance (DPA) programs or Grants as Down Payment, regardless of who funds the DPA or Grant. Loan must be
registered with the accurate CLTV.
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General Underwriting Guidelines, Continued
Financial Reform – ATR/QM
FSM will accept only those loans that meet the Consumer Protection Financial Board Qualified Mortgages/Ability to Repay (QM/ATR) guidelines published in the
final rule. See Underwriting/CFPB for full details.
Gifts – 100% ✓ Permitted for Fannie Mae DU/Freddie Mac LPA Approve/Eligible loans with
an LTV 80.01% - 97.00%
✓ Allowable for Conforming and High Balance
Requirements:
✓ FSM will accept a Gift for 100% of the down payment; no minimum
Borrower contribution is required.
✓ For this “100% Gift Program” FSM will accept the following donors:
Parent/Stepparent
Any blood relative
A domestic partner or fiancé
An employer with an established employee assistance program
✓ The gift must be documented to the more restrictive of AUS findings or
FSM published requirements.
Note: A spouse or domestic partner’s funds, who has resided with the Borrower
prior 12 months and will occupy the subject property, can be used as Borrower’s
funds to close with the attestation of residency, prior and future, along with
relationship to the Borrower, are not considered gift funds.
✓ Additionally, the following product guideline requirements must be met:
Subject to final MI approval
Property must be a single unit, primary residence
Non-occupant Co-Borrowers are not permitted on 97%
Minimum FICO 620
Maximum DTI 50% without DPA
LPMI is available
Homebuyer
Education Purchase transactions with LTV, CLTV or HCLTV ratios greater than 95% when all
Borrowers are first-time homebuyers.
✓ See HomeReady and Home Possible for additional guidelines
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General Underwriting Guidelines, Continued
Mortgage / Rental History
Unless otherwise noted in a specific product sub-set, FSM will not accept any conventional loan for which the mortgage history shows more than 2
mortgage late payments in the past 12-months (FSM accepts 2x30 in the past 12
months).
✓ FSM always requires a mortgage payment history for any mortgage (reporting or not) for the past 12-months, unless held for less time. If the current mortgage has been held for less than 12 months the following
applies:
If the Borrowers are previous homeowners, the previous mortgage history is required to provide a minimum 12-month
mortgage history, or the previous duration of ownership
If the Borrower’s did not previously own a home, FSM
accepts the previous rental history as required by the AUS
findings. Not required if not reflected in the AUS findings.
Mortgage Insurance
See Underwriting, Mortgage Insurance Requirements for details.
Mortgage Insurance – Lender Paid
See FSM-LPMI-Conforming FRM for details
Multiple
Mortgages to the Same Borrower
FSM applies the following limitations to Borrowers that hold multiple financed
properties (See 5-10 Financed Properties).
Public
Assistance and/or Section 8
FSM will accept public assistance and/or Section 8 assistance in accordance with
current Fannie Mae or Freddie Mac guidelines.
However, FSM requires that all housing payments must be made directly to the servicer by the Borrower; payment plans that provide for the assistance providers
to make payments to the servicer to supplement the Borrower’s housing
payments are not acceptable under any circumstances.
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General Underwriting Guidelines, Continued
Purchase Contracts – Re-Negotiated
Please see the Underwriting chapter, Property/Purchase Agreement (Contract)-Re-Negotiated for details regarding FSM’s restrictions for re-negotiated purchase
contracts. Once appraisals have been uploaded to the agency portals, no alterations or changes to the purchase price are allowed except for a valuation
below the purchase price.
Qualifying
Ratios As determined by DU/LPA/MI restrictions or the specific product limitations.
✓ The more restrictive guidelines for any product prevail
Refinance Transactions
Follow current applicable more restrictive of agency/FSM requirements for
refinance loans.
✓ See Underwriting/Refinance for full details
✓ Minimum 640 FICO score required for cash out
May do 620 if LTV is 60% and below
Note:
Cash out refinances are not permitted on primary (homestead) residences in the
state of Texas.
Reserve Requirements
FSM requires that all conventional loans receive an Accept or Approve decision
from either DU or LPA
FSM will align with Fannie Mae/Freddie Mac reserve requirements.
Short Sales See the Underwriting chapter/Short Sales for specific restrictions/guidelines. Short
sales and/or Deed in lieu of foreclosure have a minimum 4 years from consummation/finalization. The exception is 2 years with a documented
“extenuating circumstance”. Note: Divorce is never an extenuating circumstance.
Subordinate
(Secondary) Financing
Must meet the product-specific loan parameter requirements.
✓ As required by the product parameters, subordinate financing is permitted
and must meet the more restrictive of FSM/Agency (DU/LPA) guidelines
FSM will not accept Employer seconds or seller seconds.
Community seconds only per specific product allowance.
✓ Home Equity Lines of Credit (HELOC) must meet the applicable agency
guidelines.
See Underwriting/Subordinate Financing for details
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Restrictions
High Cost and Responsible Lending
Restrictions
FSM high cost policy will conform to all Federal, State, County, City, and Agency
requirements, including consumer laws per the CFPB.
No loan sold may violate high cost regulations as set forth by the above-
mentioned entities.
State Restrictions
FSM accepts loans on properties located only in specifically approved States. See Eligible States for full details. The matrix below outlines additional geographic
restrictions applied by FSM.
State FSM State-Specific Guidelines
All
✓ FSM product or underwriting guidelines and/or restrictions do
not supersede any more restrictive regulatory, state or local
requirements;
✓ Seller is responsible to ensure that each loan originated,
underwritten and closed is in full compliance with all
regulatory, state or local guidelines and/or restrictions
Florida
✓ Properties in Broward & Miami/Dade Counties not permitted
✓ High Balance loans are not permitted
✓ Condos: Primary Residence – Established Only/No new
projects
CPM/Limited Review = 75%
Existing PERS = 95%
✓ Condos: Second Home – Established Only/No new projects
CPM/Limited Review = 70%
Existing PERS = 90%
Ohio
The Seller must warrant that each loan secured by property located in
Ohio, irrespective of the originating lender’s exempt status under the
Ohio Consumer Sales Practices Act, relies on full verified documentation
of the Borrower’s financial resources to determine the Borrower’s
probability of repayment. FSM requires that all supporting
documentation used by the originating lender to analyze the probability
of repayment at time of origination be included in the delivered
mortgage loan file.
Texas Cash Out Refinance loans for primary (homestead) properties are not
acceptable for purchase
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Conforming Fixed Rate Mortgage (FRM)
Summary FSM’s Conforming FRM products are the “standard” Fannie Mae/Freddie Mac
products offered through the applicable Automated Underwriting System (AUS).
✓ The loans must be underwritten using either DU or LPA
✓ More restrictive parameters may apply. All loans must meet FSM loan parameters noted herein to be eligible for approval, regardless of the AUS
finding.
Loan
Parameters – Agency FRM 30 Year
✓ AUS: Approve/Accept required
✓ DTI: Maximum DTI is 50% with AUS Approve/Accept. All loans must
comply with QM/ATR guidelines which may results in a lower DTI despite
the AUS or the most restrictive of MI and specific product limitations
✓ See State Restrictions for additional restrictions
✓ Texas Section 50(a)(6) (True Texas Cash Out) loans are not permitted
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Conforming Fixed Rate Mortgage (FRM), Continued
Standard Conforming Fixed (Rev 09/25/19)
Purpose # Units Min Fico DU LPA
LTV CLTV LTV CLTV
Primary Residence
Purchase & Rate/Term Refi
1 620 95 95 95 95
1 620 70 70 70 70
2 620 85 85 85 85
3-4 620 75 75 80 80
Cash Out Refi 1 620 60 60 60 60
1 640 80 80 80 80
2-4 640 75 75 75 75
Second Home
Purchase & Rate/Term Refi
1 640 90 90 90 90
Cash Out Refi 1 640 75 75 75 75
Investment Property
Purchase 1 660 85 85 85 85
2-4 680 75 75 75 75
Rate/Term Refi 1 660 75 75 85 85
2-4 680 75 75 75 75
Cash Out Refi 1 680 75 75 75 75
2-4 680 70 70 70 70
✓ Investment Property: Max LTV of 80% on Condos
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Conforming Fixed Rate Mortgage (FRM), continued
Fannie Mae 97% Standard
✓ Standard purchase transaction
First Time Homebuyer: an individual is to be considered a first-
time homebuyer:
▪ Is purchasing the security property
▪ Will reside in the security property as a principal residence
▪ Had no ownership interest (sole or joint) in a residential
property during the three-year period preceding the date of the purchase of the security property. Note: an individual who is a displaced homemaker or single parent will also be considered a first-time homebuyer if he or she
had no ownership interest in a principal residence (other than a joint interest with a spouse) during the preceding
three-year time period.
Desktop Underwriter® (DU) underwriting required
Approve/Eligible required
Reserves (if required per DU) may be gifted
Home Buyer Education is not required for Fannie Mae; however,
you must be in full compliance with CFPB
Standard contribution requirements apply
Standard Conforming loan amounts only
All loans must be fixed rate
Secured by a one-unit principal residence
35% Standard Mortgage Insurance only, no reduced MI permitted:
Monthly MI only.
Fannie Mae 97% Standard (Rev 09/25/19)
Purpose # Units Min FICO DU LPA
LTV CLTV LTV CLTV
Primary Residence
Purchase 1 620 97 97 N/A N/A
✓ Fannie 97: Borrower required to be First Time Homebuyer
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FSM-LPMI – Conforming FRM
Summary Loans with a fixed interest rate and payment for the life of the loan are eligible for
the FSM Lender Paid Mortgage Insurance (LPMI).
FSM-LPMI provides pricing that enables Lender Paid MI to be added to the loan by
FSM.
✓ The Borrower “pays” for the mortgage insurance in the loan interest rate
✓ FSM Loan Limits apply
✓ See the Current rates on http://www.msiloans.biz/index.html for pricing
details
Mortgage Insurance
MI Requirements
✓ Standard coverage applies
✓ The cost of the MI cert is included in the loan pricing for LPMI
Restrictions Appraisal:
✓ A full appraisal is required
Appraisal waiver may be permitted with MI Company approval
High Balance:
✓ Not permitted
Underwriting:
✓ DU/LPA Approve or Accept are required
✓ Available only when priced on the Rate Sheet as LPMI
✓ Decision by the mortgage insurer may supersede and a lower DTI or a
higher FICO may be required. The MI decision is final.
✓ Amortization terms greater than 30-years are not permitted for LPMI
Please Note: All loan parameters and requirements are governed by the
applicable MI company and are subject to change without notice. If the MI
company will not issue a Certificate, the loan is not eligible.
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Split Mortgage Insurance
Summary Loans with a fixed interest rate and payment for the life of the loan are eligible for
Split Mortgage Insurance (MI).
Split MI provides an MI premium alternative that reduces the monthly cost of the
MI premium for the Borrower.
The premium is split into an upfront fee, paid at closing by the Borrower or the property seller (within allowable Seller Contributions), with a reduced monthly
premium paid by the Borrower beginning with the first payment due.
✓ FSM Loan Limits apply
Note: See the Current rates on http://www.msiloans.biz/index.html for pricing
alternatives
Mortgage Insurance
MI Requirements:
✓ Standard Coverage is required, see MI Standard Coverage
Reduced mortgage insurance is not permitted, regardless of the
AUS findings
✓ Proper MI disclosure must be made to the Borrower
Evidence that the proper MI disclosures were issued is required in
the delivery file
✓ FSM orders the MI
Important Note: Loan parameters are dictated by the MI company and are
subject to change without prior notice.
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Split Mortgage Insurance, Continued
Restrictions Appraisal:
✓ A full appraisal is required
Appraisal waiver may be permitted with MI company approval
High Balance:
✓ Not permitted
Underwriting:
✓ In all instances where the MI guidelines are more restrictive, they
supersede FSM guidelines
✓ DU/LPA Approve or Accept are required
✓ If the MI Premium is property Seller paid, the Underwriter must validate
that the cost is within Seller Contribution limits
Subordinate Financing
Not Permitted.
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Financed Mortgage Insurance
Summary The MI premium is included as part of the principal amount of the Mortgage
(financed premium). The entire Borrower purchased mortgage insurance premium
is included in the loan amount.
✓ FSM Loan Limits apply
✓ See the Current Rates on http://www.msiloans.biz/index.html for pricing
alternatives
Mortgage Insurance
MI Requirements:
✓ Standard Coverage is required, see MI Standard Coverage
✓ Fixed Rate
✓ 1-unit property, principal residence or 2nd home
✓ Loan amount includes financed mortgage insurance premium cannot
exceed maximum conforming loan limits
✓ Special LTV Calculations:
Base LTV ratio: LTV ratio calculated using the Mortgage amount
without financed MI premium
Gross (higher) LTV ratio: LTV ratio calculated using the Mortgage amount that includes financed MI premium. Gross LTV
must not exceed 97%
Note: the original loan amount of the mortgage plus the amount
of any financed mortgage insurance premium may not exceed the maximum original loan limits provided in Fannie Mae or Freddie
Mac Guides.
Important Note: Loan parameters are dictated by the MI company and are
subject to change without prior notice.
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Financed Mortgage Insurance, Continued
Restrictions Appraisal:
✓ A full appraisal is required
Appraisal waiver may be permitted with MI company approval
High Balance:
✓ Not permitted
Underwriting:
✓ Cash out refinance loans are not permitted
✓ 2-4-unit properties are not permitted
✓ Investment properties are not permitted
✓ In all instances where the MI guidelines are more restrictive, they
supersede FSM guidelines
✓ DU/LPA Approve or Accept are required.
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Conforming Adjustable Rate Mortgages –
TEMPORARILY SUSPENDED (5/7/20)
ARM Summary The following products are adjustable rate mortgages (ARM) that allow for a
changing rate/payment over the life of the mortgage.
Products included herein are:
Fully Amortizing Conforming ARM Products
Product Margin Adjustment Caps Rate Fixed
for (1)
Conversion
to FRM? Assumable
1st Annual Lifetime
5/1 2.25% 2 2 5 60 months No After the initial fixed rate period
7/1 2.25% 5 2 5 84 months No
10/1 2.25% 5 2 5 120 months No
Note: ✓ Index – 1 Year LIBOR: The one-year London Interbank Offered Rate (“LIBOR”) which is the
average of interbank offered rates for one-year U.S. dollar-denominated deposits in the
London market, as published in The Wall Street Journal. The most recent Index figure available as of the date 45 days before each Interest Change Date is the current rate.
✓ Floor: Margin – the rate will never be lower than the Margin. The minimum rate is 5% below
the Note rate, but never less than the Margin on the loan. ✓ Assumable: Subject to credit approval
✓ Interest rate is fixed at close for the period note, at the end of which time the rate changes annually thereafter.
Presentation This product subset will provide the “common” product guidelines that apply to
Conforming ARM loans.
Guidelines Unless otherwise specifically noted in this product subset, the Conforming ARM
products are subject to the following:
✓ See Loan Limits for product minimum and maximum loan amounts
✓ Applicable DU/LPA guidelines and requirements
✓ FSM Conforming product guidelines
✓ See the Underwriting chapter for topics not addressed in this product
suite.
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Conforming Adjustable Rate Mortgages – TEMPORARILY SUSPENDED (5/7/20), TEMPORARILY SUSPENDED (5/7/20) Continued
HPML 5/1 ARM loans that fail the HPML test are not eligible for FSM
Product
Disclosures ARM disclosures are required in accordance with any federal, state, jurisdictional
or regulatory requirements.
Qualifying
Rate
ARM Products Qualify at…
5/1 Greater of:
The fully indexed rate or
The Note Rate +2.0
7/1, 10/1 Greater of:
Note Rate, or
Fully indexed rate
Important Note:
✓ Fully indexed rate is defined as the index plus the margin as entered into
DU or LPA. FSM qualifying rates apply regardless of AUS used.
✓ For DU: to calculate the fully indexed rate, the user must input the Index
and Margin into DU.
Failure to input the Index and Margin into DU will result in an “ineligible” finding and loans with an “ineligible” finding are not
eligible for FSM
✓ For LPA: If LPA does not calculate using the higher of the Note rate or Fully indexed rate, the user must input the correct qualifying rate or
calculate manually.
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Conforming Adjustable Rate Mortgages – TEMPORARILY SUSPENDED (5/7/20), TEMPORARILY SUSPENDED (5/7/20) Continued
Loan Parameters –
Agency 30-Year
✓ DTI: Maximum DTI is 50% with AUS Approve/Accept. All loans must comply with QM/ATR guidelines which may result in a lower DTI despite
the AUS
✓ See State Restrictions for additional restrictions
✓ Texas Section 50(a)(6) (True Texas Cash Out) loans are not permitted
Standard Conforming ARM’s (Rev 09/25/19)
Purpose # Units Min Fico DU LPA
LTV CLTV LTV CLTV
Primary Residence
Purchase & Rate/Term Refi
1 640 95 95 95 95
2 640 85 85 85 85
3-4 640 75 75 80 80
Cash Out Refi 1 640 80 80 80 80
2-4 640 75 75 75 75
Second Home
Purchase & Rate/Term Refi
1 640 90 90 85 85
Cash Out Refi 1 640 75 75 75 75
Investment Property
Purchase 1 680 75 75 80 80
2-4 680 75 75 75 75
Rate/Term Refi 1 680 75 75 75 75
2-4 680 75 75 75 75
Cash Out Refi 1 680 75 75 75 75
2-4 680 70 70 70 70
✓ Investment property: Max LTV of 75% on Condos
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Fannie Mae HomeReady Mortgage®
Summary Fixed Rate, fully amortizing Purchase and Limited Cash Out Refinance (LCOR)
product for Primary Residence only.
✓ Offered by Fannie Mae for low-to-moderate income Borrowers who need a
low-down payment and credit flexibility
✓ Loans must be in full compliance with Fannie Mae for HomeReady
Mortgage® loans and must meet FSM requirements unless specifically
addressed herein.
✓ Product Code: 300053
Maximum Loan Limits
✓ Standard conforming loan limits only
✓ High Balance loans are not allowed
Loan Parameters – Standard
HomeReady FRM 30 Year
✓ Community second subordinate financing permitted/new or existing
✓ All loans are subject to MI approval; If MI approval cannot be obtained,
the loan is not eligible
✓ Purchase and LCOR transactions only
✓ LCOR max LTV 95%
✓ Non-Occupant Co-Borrower max LTV 95%
✓ CLTV up to 105% with Eligible Community Seconds
HomeReady – Conforming Fixed (Rev 09/25/19)
Purpose # Units Min FICO
DU
Min Down Payment
% of Min DP Req. from Borrower Personal
Funds
LTV CLTV
Primary Residence
Purchase
1 640 97 97 3% 0%
1 620 95 95
2 640 85 85 15% 3%
3-4 640 75 75 25% 3%
LCOR
1 620 97 97 N/A N/A
2 640 85 85 N/A N/A
3-4 640 75 75 N/A N/A
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Fannie Mae HomeReady Mortgage®, Continued
Product Guidelines
The following matrix provides the HomeReady Mortgage® Guidelines with FSM overlays. All loans must meet the more restrictive of FSM or Fannie Mae
guidelines.
Topic Fannie Mae HomeReady Requirements
Amortization 30-year terms only
Appraisal Appraisal subject to AUS and MI requirements
ARM features Not applicable
Assets As required by DU
Assumable No
ATR/QM All HomeReady Mortgage® loans must meet the ATR/QM guidelines
AUS DU Approve/Eligible
Borrower
Eligibility
✓ FSM eligible Borrower(s)
✓ Inter-Vivos Trust allowed ✓ Non-occupant Co-Borrower(s) are permitted but income goes into the AMI
calculation ✓ Trailing Spouse income not permitted
✓ Occupying Borrower(s) may only own a total of two financed residential properties, including the subject property, as of the Note Date. Financed
properties owned by Non-occupant Borrower(s) do not have to be
included.
Borrower Income
Eligibility
✓ 80% AMI*
✓ When determining whether a mortgage is eligible under the Borrower income limits, lenders must count the income from any Borrowers listed on the mortgage Note whose income is considered in evaluating creditworthiness for the mortgage loan
Note: Area Median Income (*AMI) Source = FHFA; https://homeready-eligibility.fanniemae.com/homeready/
Condos Eligible condos are allowed. See State Restrictions
Contributions Contributions by interested parties are permitted
LTV/TLTV >90% 3% of the lesser of sales price or appraised value
✓ Financing concessions may not exceed the actual costs for Closing costs, Financing costs and Prepaids/Escrows
LTV/TLTV>75%&<90% 6% of the lessor of sales price or appraised value
LTV/TLTV < 75% 9% of the lessor of sales price or appraised value
Documentation Standard documentation. Adhere to AUS
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Fannie Mae HomeReady Mortgage®, Continued
Topic Fannie Mae HomeReady Requirements
DTI/Ratios Regardless of AUS Approval, Max 50%; subject to MI approval
Escrows Escrow accounts are required for all loans with LTVs greater than 80% ✓ Properties located in the state of California may waive escrows up to but
not greater than 89.99% LTV
Escrow Holdback See UW Guide for acceptable weather-related items
FICO See HomeReady loan parameters table
Funds to Close Down Payment for Purchase
Borrower Personal funds and other Borrower funds only Closing Costs/Financing Costs/Prepaids/Escrows
Borrower personal funds and Other Borrower funds and Flexible sources of funds
Note: Cash-on-hand and Sweat Equity are not permitted
Funds Defined Borrower Personal Funds – fully sourced and defined as: ✓ Funds on deposit in the Borrowers checking, saving, money market or
certificate of deposit account or other depository account
✓ Proceeds of a loan fully secured by the Borrowers own tangible assets ✓ Proceeds from the sale of a Borrowers tangible assets
Other Borrowers Funds – fully sourced and defined as: ✓ Gifts from a related person per FSM guidelines
✓ Grants and Community Seconds ✓ Any eligible loan may have more than one Community second
Flexible Sources of Funds – fully sourced and defined as: ✓ Seller concessions per Fannie guidelines
✓ Premium pricing per Fannie guidelines Note: Flexible Sources of Funds may be used ONLY for Closing costs/Financing
Costs/Prepaids/Escrows
Geocode DU will geocode the property address for eligibility and a new additional screen
field will allow for entering census tract information if DU is unable to geocode the subject property address. Note: The FIPS code is not required, but it can be used if DU is unable to
determine the census tract. When the FIPS code is provided, DU uses that census tract to determine the AMI to be used in the income eligibility determination.
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Fannie Mae HomeReady Mortgage®, Continued
Topic Fannie Mae HomeReady Requirements
Home Buyer Education
For purchase transactions, when all occupying Borrowers are first-time homebuyers and regardless of the LTV ratio, must participate in a homeownership
education program before the Note date. ✓ Must be provided by Framework, the online program approved by FNMA ✓ Home - Framework Homeownership
✓ If Borrowers have a disability, lac of Internet access, or other issues where they would be better served through other education modes, Borrowers are to call Framework’s toll-free number where they can be
directed to a HUD approved counseling agency that can meet their needs Note:
✓ Underwriting will not review loan files if the Homebuyer Education Certificate is not included in the underwriting submission
✓ Borrowers will have access to post-purchase homeownership support for the life of the loan through Framework’s homeownership advisor service
Income and Census Tract Eligibility
Based on the census tract and Borrower income, DU will notify users when a casefile appears to be eligible for HomeReady, but the lender has not underwritten the loan casefile as HomeReady. Resubmit the loan as a HomeReady
loan to obtain the appropriate HomeReady messaging. New additional data screen field will allow entering census tract information if DU is unable to geocode the property address.
✓ All HomeReady mortgages must be submitted to DU
✓ DU will determine income eligibility, qualifying ratios and reserves
Max ratio is 50% regardless of AUs ✓ Rental income on all 2-4-unit properties allowable per FNMA rental income
guidelines.
Mortgage
Insurance – Fixed Rate Term >21 years
LTV Coverage Req.
Note: Standard MI Required ✓ Borrower paid monthly permitted
✓ LPMI options available ✓ Custom, Reduced, Split premium
or Financed MI not permitted
90.01-97.00% 25%
85.01-90.00% 25%
80.01-85.00% 12%
Mortgage Insurance – Fixed Rate Term
<20 years
LTV Coverage Req.
90.01-97.00% 25%
85.01-90.00% 12%
80.01-85.00% 6%
Non-Occupant
Borrowers
Permitted on 1-unit Primary Residence
Occupancy Primary Residence
Property Eligibility
1-4 Unit Primary Residence ✓ Fannie Mae eligible Condos are permitted
✓ PUDs are permitted ✓ No cooperatives ✓ No Manufactured Housing
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Fannie Mae HomeReady Mortgage®, Continued
Topic Fannie Mae HomeReady Requirements
Reserves Reserves as determined by AUS
Subordinate
Financing
Community seconds are allowable
Note: Underwriting must approve any Community Second prior to Closing
Transaction Type Purchase and Limited Cash Out Refinance (LCOR)
FSM also has the following product overlays/exclusions:
✓ Buy-downs are not permitted
✓ Boarder income is not permitted ✓ Cash-on-hand is not permitted ✓ Employer funded 2nd lien allowance is not permitted
✓ Manual underwriting is not permitted ✓ Rental income for qualifying from any accessory unit or area not zoned as a legal rental is not
permitted
✓ HomeStyle Renovation loans are not permitted ✓ Non-Traditional credit is not permitted ✓ Community Land Trusts are not permitted
FAQs: https://www.fanniemae.com/content/faq/homeready-faqs.pdf
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Freddie Mac Home Possible Mortgages®
Summary Freddie Mac Home Possible® and Home Possible Advantage® mortgages
(collectively referred to as Home Possible mortgages) are a fixed rate, fully amortizing Purchase and Limited Cash Out Refinanced (LCOR) product for Primary
Residence only.
✓ Offered by Freddie Mac for low-to-moderate income Borrowers who need a
low-down payment and credit flexibility
✓ Loans must be in full compliance with Freddie Mac guidelines for Home Possible® mortgages (HP) loans and must meet FSM requirements unless
specifically addressed herein
✓ Product Code: 300036
Maximum
Loan Limits ✓ Standard conforming loan limits only
✓ High Balance loans are not allowed
Loan
Parameters Standard Home Possible
FRM 30 Year
✓ All loans are subject to MI approval; If MI approval cannot be obtained,
the loan is not eligible
✓ Purchase and LCOR transactions only
✓ CLTV up to 105% with Affordable Seconds
Home Possible/Home Possible Advantage Mortgages – Conforming Fixed (Rev 09/25/19)
Purpose # Units Min FICO
LPA Min Down Payment
% of Min DP Req.
from Borrower Personal Funds LTV CLTV
Primary Residence
Purchase &
LCOR
1 640 97 105 3% 0%
1 620 95 95 5% 0%
2 620 90 90 10% 3%
3-4 620 80 80 20% 3%
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Freddie Mac Home Possible Mortgages®, Continued
Product Guidelines
The following matrix provides the Home Possible® Guidelines with FSM overlays.
All loans must meet the more restrictive of FSM or Freddie Mac Guidelines.
Topic Freddie Mac Home Possible® mortgages (HP) Requirements
Amortization 30-year terms only
Appraisal Appraisal subject to AUS and MI requirements
ARM Features ARMs available upon request; contact Pricing
Assets As required by LPA
Assumable No
ATR/QM All Home Possible mortgage loans must meet the ATR/QM guidelines
AUS LPA Accept/Eligible
Borrower Eligibility
✓ FSM eligible Borrowers ✓ Inter-Vivos Trust allowed
✓ Trailing Spouse income not permitted ✓ Borrower does not have to be first time homebuyer ✓ Occupying Borrower(s) may only own a total of two financed residential
properties, including the subject property, as of the Note Date.
Condos Eligible condos are allowed. See State Restrictions
Contributions Contributions by interested parties are permitted
LTV/TLTV >90% 3% of the lessor of the sales price or appraised
value ✓ Financing concessions may not exceed the
actual costs for Closing costs, Financing
costs and Prepaids/Escrows
LTV/TLTV>75% & <90% 6% of the lessor of sales price or appraised value
LTV/TLTV <75% 9% of the lessor of sales price or appraised value
Documentation Standard documentation. Adhere to AUS
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Freddie Mac Home Possible Mortgages®, Continued
Topic Freddie Mac Home Possible® mortgages (HP) Requirements
DTI/Ratios Regardless of AUS Accept, Max 50%; subject to MI approval
Escrows Escrow accounts are required for all loans with LTV greater than 80%
✓ Properties located in the state of California may waive escrows up to but not greater than 89.99% LTV
Escrow Holdback See UW Guide for acceptable weather-related items
FICO See Home Possible mortgages parameters table
Funds to Close Down Payment for Purchase Borrower Personal Funds and Other Borrower funds only
Closing Costs/Financing Costs/Prepaids/Escrows
Borrower Personal Funds and Other Borrower funds and Flexible Sources of Funds
Funds Defined Borrower Personal Funds – fully sourced and defined as: Funds on deposit in Borrower’s checking, savings, money market or
certificate of deposit account or other depository accounts
Proceeds of a loan fully secured by the Borrower’s own tangible assets Proceeds from the sale of a Borrower’s tangible assets
Other Borrower’s Funds – fully sourced and defined as: Gift from a related person per FSM guidelines
No Borrower minimum personal funds required on 1 unit (see
Home Possible Mortgages matrix)
If 2-4 unit, the Borrower must have 3% personal funds
Flexible Sources of Funds – fully sourced and defined as:
Seller concessions per Freddie guidelines Premium pricing per Freddie guidelines
Note: Flexible Sources of Funds may be used ONLY for Closing costs/Financing costs/Prepaids/Escrows
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Freddie Mac Home Possible Mortgages®, Continued
Topic Freddie Mac Home Possible® mortgages (HP) Requirements
Homebuyer
Education
For purchase transactions secured by 1-4-unit primary residence, when all
Borrower(s) are First-Time Homebuyers, at least one occupying Borrower must participate in a homeownership education program before the Note date.
✓ The following Homeownership education programs are acceptable: Homeownership education programs offered by FSM’s currently
approved MI companies or provided by HUD-approved counseling agencies and Housing Finance Agencies Community Development Financial Institutions.
▪ A copy of the Homeowners Education Certificate must be included in the mortgage loan file submitted for underwriting
When the property is a 2-4-unit Primary Residence, Landlord Education is required.
✓ Purchase transactions: At least one qualifying Borrower must participate in a landlord education program before Note date (Note: If the Borrower
is a First Time Homebuyer, a First Time Homebuyer Education certificate is also required).
A copy of the successful Landlord Education Certification must be
included in the mortgage file at time of underwriting Landlord education must not be provided by an interested party to
the transaction, originating lender or the seller.
Note: ✓ Refinance Landlord Education is recommended for Borrowers who have
not previously attended a program ✓ Underwriting will not review loan files if the Homebuyer Education or the
Landlord Education (as applicable) Certificates are not included in the underwriting submission
✓ The seller must provide Post-Purchase and Early Delinquency Counseling
to the Borrower(s) at no cost to them.
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Freddie Mac Home Possible Mortgages®, Continued
Income and Census Tract
Eligibility
The Borrower must meet income limits. Loan Product Advisor will indicate income eligibility; Use of the Home Possible Income and Property Eligibility - Freddie Mac
is available on Freddiemac.com The Borrowers qualifying income, converted to an annual basis, must not exceed
80% of the area median income (AMI) for the location of the Mortgaged Premises; applies to all Home Possible Mortgages, including those secured by properties in low-income census tracts. To determine whether the Borrower’s income exceeds the income limits, the Seller must rely on the income used to qualify the Borrower
and submitted to Loan Product Advisor for the Loan Product Advisor Mortgages. See Guide Section 4501.7.
Note: Underwriters must validate the income; print the validation page and retain it in the credit file.
Rental income from a 1-unit primary residence can only account for 30% of qualifying income. Any portion of the Borrower’s rental income from their 1-unit primary residence which exceeds 30% of the total income can’t be used to qualify the Borrower. For rental income requirements, see Guide Section 4501.9:
Borrower income and qualifying ratios for Home Possible Mortgages.
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Freddie Mac Home Possible Mortgages®, Continued
Topic Freddie Mac Home Possible® mortgages (HP) Requirements
Mortgage Insurance – Fixed Rate Term
> 21 years
LTV Coverage
Req.
Note: Standard MI Required ✓ Borrower Paid Monthly permitted ✓ LPMI options available
✓ Custom, Reduced, Split Premium or Financed MI not permitted
90.01-97.00% 25%
85.01-90.00% 25%
80.01-85.00% 12%
Mortgage Insurance – Fixed Rate Term <20 years
LTV Coverage
Req.
90.01-97.00% 25%
85.01-90.00% 12%
80.01-85.00% 6%
Non-Occupant
Borrowers
Permitted on 1-unit Primary Residence when the LTV/TLTV/HTLTV ratio is less
than or equal to 95% (TLTV 105% with Affordable Second)
Occupancy Primary Residence
Property Eligibility
1-4 Unit Primary Residence ✓ Condos are permitted
✓ PUDs are permitted ✓ No cooperatives ✓ No Manufactured Housing
Rental Income Rental income from a 1-unit primary residence that meets in requirements in Guide Section 4501.9(a) may be considered as stable income; Rental income from a 2- to 4-unit primary residence that meets Guide Chapter
5306 may be used as qualifying income
Reserves As determined by AUS
Subordinate Financing
New and existing subordinate financing must be an Affordable Second. An Affordable Second that does not require a payment before the due
date of the 61st payment may be entered in Loan Product Advisor in the “Total Gift Fund” field. In all other respects, the Affordable Second must be considered as secondary financing.
HELOCS are not permitted.
Transaction Type Purchase and LCOR
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Freddie Mac Home Possible Mortgages®, Continued
If a particular census tract would be eligible under two separate sets of guidelines, the eligibility that is most favorable to the Borrower would be used. For example, if the property is located in both a high-minority census tract and a low-income census tract, we would apply the low-income census tract
criteria and there would be no income limit requirement (instead of the high-minority census tract income limit of 100% of the AMI).
FSM also has the following product overlays/exclusions: ✓ Buy-downs are not permitted ✓ Boarder income is not permitted ✓ Cash-on-hand is not permitted
✓ Employer funded 2nd lien allowance is not permitted ✓ Manual underwriting is not permitted ✓ Non-Traditional credit is not permitted
✓ Community Land Trusts are not permitted
FAQs: Frequently Asked Questions Home Possible Mortgages - Freddie Mac
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FSM Fannie Mae High Balance/Freddie Mac Super
Conforming Mortgages
Summary The High Balance/Super Conforming loan requirements are mortgages originated
using higher maximum loan limits. These loan limits are permitted in designated
high-cost areas as established by Federal Housing Financing Agency (FHFA).
✓ Product Codes: 300017,150017
Conforming Fixed High Balance (Rev 09/25/19)
Purpose # Units Min FICO DU LPA
LTV CLTV LTV CLTV
Primary Residence
Purchase & Rate/Term Refi
1 620 95 95 90 90
2 620 85 85 75 75
3-4 620 75 75 75 75
Cash Out Refi 1 640 80 80 75 75
2-4 640 75 75 65 65
Second Home
Purchase & Rate/Term Refi
1 640 90 90 80 80
Cash Out Refi 1 640 75 75 65 65
Investment Property
Purchase 1 700 85 85 80 80
2-4 700 75 75 70 70
Rate/Term Refi 1 700 75 75 75 75
2-4 700 75 75 70 70
Cash Out Refi 1 700 75 75 65 65
2-4 700 70 70 65 65
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FSM Fannie Mae High Balance/Freddie Mac Super Conforming Mortgages, Continued
FSM Loan Limits
The original principal balance of each mortgage loan must not exceed the applicable maximum loan limit for the specific area. For specific loan limits as
released by FHFA, visit their conforming loan limits page FHFA Maximum
Conforming Loan Limits or Fannie Mae Loan Limit Geocoder: Home Page.
A copy of the screen print, validating the “high balance” loan must be included in
the credit section of the loan file.
Maximum Loan Amount for 2020
Units FSM Approved States
1 $510,400
2 $653,550
3 $789,950
4 $981,700
Maximum Loan Amount for High-Cost Areas for 2020
Units FSM Approved States
1 $765,600
2 $980,325
3 $1,184,925
4 $1,472,550
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FSM Fannie Mae High Balance/Freddie Mac Super Conforming Mortgages, Continued
High Balance and Super Conforming
Requirements
The following matrix outlines the requirements for Conventional High Balance
loans; all loans must meet the more restrictive of the applicable agency or FSM.
Important:
Any topic not addressed herein must follow the requirements outlined in the FSM
Seller Guide Conforming Product Suite or Underwriting Chapter.
✓ Topics not addressed in FSM Seller Guide revert to the applicable agency
AUS requirements
Topic High Balance/Super Conforming Requirements
Amortization 30-year and 15-year terms
Appraisal Standard appraisal requirements except “One-Unit Residential Appraisal Field
Review Report” (Form 2000) is also required if the property value is >$1 million and LTV/CLTV/HCLTV >75%. Use the lower of original appraised value, field review value or sales price (on purchase) to calculate LTV. Must be performed by
a Supervisory Appraiser.
ARM Features Not Applicable
Assets Adhere to AUS
ATR/QM All High Balance loans must meet the ATR/QM guidelines
AUS DU Approve/Eligible for Fannie Mae High Balance LPA Accept/Eligible for Freddie Mac Super Conforming
Contributions
LTV/TLTV Maximum IPS
>90% (maximum 95%) 3
75.01% - 90.00% 6
<=75% 9
Documentation Standard documentation
DTI/Ratios DU Approve/Eligible; Max 50% LPA Accept/Eligible; Max 50%
Escrows Escrow Accounts are required for all loans with LTV’s greater than 80% Properties located in the state of California may waive escrows up to but
not greater than 89.99% LTV
Escrow Holdback See UW Guide for acceptable weather-related items
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FSM Fannie Mae High Balance/Freddie Mac Super Conforming Mortgages, Continued
Topic High Balance/Super Conforming Requirements
FICO All Borrowers on the loan must have a credit score. See Conforming Fixed High
Balance Parameters table
Funds to Close Adhere to AUS
Geographic Restrictions
Property must be located in a designated High Balance Area
Income Eligibility Adhere to AUS
Ineligible Must meet requirements of Fannie Mae CPM or Limited Review
Mortgage Insurance
Standard MI required; Custom or Reduced MI is not permitted ✓ Borrower paid MI, Lender paid MI, monthly, single and split premium are
all permitted ✓ Financed MI is permitted, but LTV may not increase above the maximum
LTV that is otherwise permitted
Note: Annual or Monthly LPMI is not permitted
Non-Occupant
Borrowers
Allowed per DU AUS
Occupancy Primary Residence, Secondary Residences and Investment Properties
Property Type Single family, attached and detached
2-4 Units
PUD Condo *All properties to FSM Guidelines
Reserves Adhere to AUS
Subordinate
Financing
Permitted to Agency/FSM Guidelines
Seller Carry-Back Seconds are not permitted
Transaction Type Purchase, Rate/Term Refinance and Cash-Out Refinance to current FSM guidelines
FSM also has the following product overlays/exclusions:
✓ DU Refi Plus is not permitted ✓ Non-Traditional credit is not permitted ✓ Temporary Buy-Downs are not permitted
✓ Manual underwriting is not permitted ✓ LP Open Access is not permitted ✓ Seller owned modified mortgages not permitted
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Multiple Financed Properties (5-10 Properties)
Product Codes ✓ Product Codes
• 300032,
• 150032
Primary Residence
FSM imposes no limit to the number of financed or unfinanced properties a Borrower may own. See the Underwriting Chapter for details on “Other Real
Estate Owned”.
Second Home and
Investment
✓ DU allows for the 5-10 financed property investment ownership with the reduced LTV and additional reserves required; DU Approve/Eligible
required;
✓ LPA allows for a maximum number of financed properties permitted to 10
provided that when the number of financed properties is greater than six:
The mortgage must be LPA Accept/Eligible
Have a minimum FICO score of 740
The Seller must verify reserves of 8 months of the monthly payment (as described in 5501.2(a)) on each additional second home and/or 1-to-4-unit investment property that is financed and
on which the Borrower is obligated.
▪ If the Borrower owns 1-6 financed properties including the
subject property and the Borrowers primary residence, 2 months of the monthly payment amount on each additional second home and/or 1-to 4-unit investment property that is financed and on which the Borrower is
obligated;
▪ If the Borrower owns 7 or more financed properties including
the subject property and the Borrower’s primary residence, 8 months of the monthly payment amount on each additional second home and/or 1-to 4-unit
investment property that is financed and on which the
Borrower is obligated.
✓ See the Underwriting Chapter/Borrowers/Multiple Mortgages to the Same Borrower for full details. See Pricing/Aggregate Loan limits for loan
amount limits;
✓ Additionally, follow the more restrictive of FSM or the applicable agency (DU or LPA) requirements for guidelines regarding the use of rental income to qualify (market rent for properties not reflected on tax returns,
conversion of current principal residence or newly acquired properties,
must have third party support for market rent data).
Note: Limits for multiple properties serviced by the same servicer. Each
servicer has specific limits to the number of properties it will service for one Borrower. Underwriting must take that into consideration at the time of
Underwriting; if the limit is reached, FSM cannot approve the loan.
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Delayed Financing
Delayed Financing
Per Fannie Mae B2-1.2-03:
“Borrowers who purchased the subject property within the past six months (measured from the date on which the property was purchased to the
disbursement date of the new mortgage loan) are eligible for a cash-out refinance
if all of the following requirements are met:”
Requirements for Delayed Financing:
✓ The original purchase transaction was an arms-length transaction
✓ Borrower must meet Fannie Mae’s Borrower eligibility requirements B2-2-
01: General Borrower Eligibility Requirements (07/28/2015). The Borrower(s) may have originally purchased the subject property as one of
the following:
A natural person
An eligible Inter-Vivos revocable trust, when the Borrower is both the individual establishing the trust and the beneficiary of the
trust;
An eligible land trust when the Borrower is the beneficiary of the
land trust; or
An LLC or Partnership in which the Borrower(s) have an individual
or joint ownership of 100%
✓ The original purchase transaction is documented with a settlement statement that confirms no mortgage financing was used to obtain the
subject property (a recorded Trustees Deed (or similar alternative)
confirming the amount paid by the grantee to the trustee may be used in place of a settlement statement if a settlement statement was not provided to the purchaser at the time of the sale). The preliminary title
search or report must show there are no existing liens on the subject
property.
✓ The source of funds for the original purchase transaction must be
documented (such as bank statements, personal loan documents or a
HELOC on another property).
If the source of funds used to purchase the subject property was an unsecured loan or a loan secured by an additional asset other than the subject property (i.e. HELOC on another property), the
settlement statement for the refinance transaction must reflect that all cash-out proceeds be used to pay off or pay down (as applicable) the loan used to purchase the subject property. Any
payments on the remaining balance from the original loan must be included in the debt-to-income ratio calculation for the refinance transaction. Note: Funds received as a gift and used to purchase the subject property may not be reimbursed with proceeds of the
new mortgage loan.
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Delayed Financing, Continued
Delayed Financing, continued
✓ The new loan amount can be no more than the actual documented amount of the Borrower’s initial investment in purchasing the property
plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to the maximum LTV, CLTV and HCLTV ratios for
the cash-out transaction based on the current appraised value).
✓ All other cash-out refinanced eligibility requirements must be met. Cash-
out pricing is applicable.
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DU Loan Case Files: At least one Borrower has no
credit score and another Borrower has a credit score
1 FICO Score FSM will accept loans where at least one Borrower does not have a valid credit
score under the following guidelines. The loan must meet each of the following
applicable requirements:
✓ Applicable to all Fannie Mae conforming loan programs
✓ DU Approve/Eligible loans only
✓ Conforming loan amounts only (no high balance mortgages)
✓ Purchase or limited cash-out refinance
✓ One-unit, principal residence and all Borrowers must occupy
✓ At least one Borrower on the loan must have a valid credit score of 620 or
greater
✓ The Borrower with a valid credit score must contribute more than 50% of
the qualifying income
✓ Reserves will be determined by DU Approve/Eligible AUS
LO & Pricing Requirements
To utilize this feature, the following steps must be applied:
✓ Select the “FSM” program in Optimal Blue (OB)
✓ Email Pricing stating in the Subject line:
The Borrowers loan number and the statement “Borrower without
a valid credit score” loan feature
Pricing will code the loan to the appropriate investor as well as
identifying the loan feature in the “Notes” section of the General
Information screen in LOS.
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Opportunity for Elderly Parent(s) and Disabled
Child
Opportunity for Elderly
Parent and Disabled Child
General Requirements:
✓ Purchase or Rate/Term refinancing
✓ Cash-Out refinance not permitted
✓ 1 unit
✓ DU required Approve/Eligible
✓ 95% LTV/CLTV
✓ Subordinate Financing is not permitted
✓ Family member Borrower is purchasing for does not have to be in title or
on the loan
Elderly Parent
requirements ✓ Must be able to document that the parents are unable to afford the
mortgage (i.e. provide parents tax return)
✓ Borrower must qualify for both their home and parents’ home
✓ Property must be occupied as the primary residence by the parents
✓ Property location does not need to be a certain distance away from
Borrower – it can be near Borrower
✓ Letter of Explanation detailing the parents’ financial inability and their
intent to occupy the home
Disabled Adult
Child requirements
✓ Must be able to document that child is disabled (unable to work) or
doesn’t have sufficient income
✓ All other requirements are the same as Elderly Parents
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Retail Specific Programs
Freddie Mac Direct
Freddie Mac Direct (Rev 09/25/19)
Purpose # Units Min FICO DU LPA
LTV CLTV LTV CLTV
Primary Residence
Purchase & Rate/Term Refi
1 620 N/A N/A 95 95
1 680 95 95 95 95
2 620 N/A N/A 85 85
2 680 85 85 85 85
3-4 620 N/A N/A 80 80
3-4 680 75 75 80 80
Cash Out Refi 1 640 N/A N/A 80 80
1 680 80 80 80 80
2-4 640 N/A N/A 75 75
2-4 680 75 75 75 75
Second Home
Purchase &
Rate/Term Refi
1 640 N/A N/A 90 90
1 680 90 90 90 90
Cash Out Refi 1 640 N/A N/A 75 75
1 680 75 75 75 75
Investment Property
Purchase 1 680 75 75 85 85
2-4 680 75 75 75 75
Rate/Term Refi 1 680 75 75 85 85
2-4 680 75 75 75 75
Cash Out Refi 1 680 75 75 75 75
2-4 680 70 70 70 70
Product Codes: 300010, 200010, 150010 Investment Property: Max LTV of 80% on Condos
DU on-exception basis with 680 FICO DU Appraisal Waiver is not permitted DU Leasehold properties are not permitted
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FSB Servicing Retained
Summary FSM offers for the Retail Channel a FSB Servicing Retained program where the
loan will be sold to Freddie Mac, but the servicing will be retained by our parent
company, First State Bank.
Loan Parameters
The programs available for retained servicing are:
✓ Conventional fixed rate only (30,20 & 15-year terms)
✓ LTVs 80% and below
✓ All IL counties (except Cook)
✓ FICOs of 680 and above
✓ Use of LPA preferred, although DU is available
✓ Aggressive pricing on lower loan amounts
(<=$85,000; <=$110,000; <=$150,000)
✓ Product codes: 300059, 200059, 150059
Freddie Mac – FSB Servicing Retained (Rev 09/25/19)
Purpose # Units Min FICO DU LPA
LTV CLTV LTV CLTV
Primary Residence
Purchase & Rate/Term Refi
1 680 80 80 80 80
2-4 680 75 75 80 80
Cash Out Refi 1 680 80 80 80 80
2-4 680 75 75 75 75
Second Home
Purchase & Rate/Term
1 680 80 80 80 80
Cash Out Refi 1 680 75 75 75 75
Investment Property
Purchase & Rate/Term Refi
1 680 75 75 80 80
2-4 680 75 75 75 75
Cash Out Refi 1 680 75 75 75 75
2-4 680 70 70 70 70
✓ Leasehold properties not allowed when using DU
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Piggyback Buster Program
Loan Parameters
✓ LPMI is Investor paid
✓ Notice Concerning Private Mortgage Insurance Disclosure is required
✓ Product Code: 300052
Topic Piggyback Buster Program Requirements
Amortization 30-year fixed rate with level payments for life of loan
Appraisal Fully completed URAR is required
Assumable Not assumable
ATR/QM All Piggyback Buster loans must meet the ATR/QM guidelines
AUS LPA Accept/Eligible and DU Approve/Eligible
Borrower Eligibility
✓ All Borrowers must have a valid Social Security number ✓ Must be a US Citizen or Permanent Resident Alien or Non-Permanent
Resident Alien
✓ Ineligible Title/Ownership: Land Trusts, Inter-Vivos Trust, Life Estates, Non-Revocable Trusts, Guardianships, Conservatorships, LLCs, Corporations and Partnerships
✓ Investment Properties in the name of LLC is ineligible Note: Employment Authorization Document (EAD Card) will be required if the Visa is expiring within 12 months or is expired.
Condos Eligible Condos are allowed. See State Restrictions. Note: Non-Warrantable Condos are not allowed.
Contributions Primary Residences: 3% of the lessor of the sales price or appraised value
Documentation Underwritten to Freddie Mac Guidelines
DTI/Ratios Regardless of AUS Approve/Accept, Max 50%
Note: Attached properties in Florida and Nevada are restricted to a max DTI <=41%
Escrows Required; Waivers are not permitted
Escrow Holdback See UW Guide for acceptable weather-related items
FICO Minimum 680 FICO is required
Funds to Close Standard Freddie Mac requirements
HPML FSM will not purchase any loan defined as “high cost” under any federal or state law/regulation or local ordinances and any subsequent amendments thereto
Income Eligibility Adhere to Freddie Mac Guidelines
Mortgage Insurance
Investor paid Mortgage Insurance
Non-Occupant Borrowers
Not permitted
Property Type 1 unit detached or attached
Reserves Standard Freddie Mac required reserves
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Piggyback Buster Program, Continued
Topic Piggyback Buster Program Requirements
Subordinate Financing
Not permitted
Transaction Type ✓ Purchase ✓ Rate/Term refinance limited to the following:
The payoff of the outstanding principal balance of an existing first mortgage
The payoff of the outstanding principal balance of any existing
subordinate mortgage that was used in whole to acquire the subject property
The financing of closing costs (including prepaid expenses), and Cash back to the Borrower in the amount no more than the lesser
of 2% of the balance of the new refinance mortgage or $2,000 ✓ Streamline refinances are not permitted ✓ Cash out refinances are not permitted
FSM also has the following product overlays/exclusions: ✓ Temporary Buy-downs are not permitted
✓ Multi-unit properties are not permitted ✓ Manufactured homes, Second Homes and Investment property are not permitted ✓ Trailing Co-Borrower not permitted
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Down Payment Assistance Programs
IHDA https://www.ihda.org/lenders-realtors/common-forms/
Assist https://www.ehousingplus.com/available-
programs/illinois/illinois-assist/
FHLB https://www.fhlbc.com/community-investment/downpayment-plus-
programs
Note: Please contact SVP of Sales for Stand Alone MCC documents