© Freddie Mac Single-Family Seller Servicer Guide
(a) Types of interested party contributions and eligibility requirements
Freddie Mac will purchase Mortgages that include interested party contributions under the terms of the Purchase Documents and this section.Interested parties include, but are not limited to:
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- The donor has no affiliation with the builder, real estate agent or any other interested party to the transaction, and
- All of the requirements pertaining to gift funds or gift of equity from a Related Person as stated in Section in Section 5501.3 are 3 are met
When a Seller or originating lender is affiliated with an interested party to the transaction, a lender credit is not considered an interested party contribution when it is derived from an increase in the interest rate.
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(b) Financing concessions
Financing concessions are funds that originate from an interested party to the transaction, as described in Section in Section 5501.5(a), that are used to:
- Reduce permanently the interest rate on the Mortgage
- Fund a buydown plan to temporarily subsidize the Borrower's monthly payment on the Mortgage (see Section see Section 4204.4)
- Make contributions in any way related to the Borrower's Closing Costs, including up to 12 months of homeowners association dues
Based on "value," as defined in Section in Section 4203.1, the maximum permitted financing concessions are as follows:
| Occupancy | LTV/TLTV ratios >90% | LTV/TLTV ratios > 75% and ≤ 90% | LTV/TLTV ratios ≤ 75% |
| Primary Residences and second homes | 3% | 6% | 9% |
| Investment Properties | 2% | 2% | 2% |
The amount of any financing concessions in excess of the limitations set forth above will be considered a sales concession.
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- Financing concessions in excess of the maximum financing concession limitations in Section 5501.5(b)
- Any contributions such as vacations, furniture, automobiles, securities or other giveaways granted by any interested party to the transaction
- Interested party contributions used to reimburse the Borrower for payment of fees charged to process or negotiate a short sale (commonly referred to as short sale processing fees, short sale negotiation fees, buyer discount fees, or short sale buyer fees)
For purposes of determining the value of the Mortgaged Premises pursuant to to Section 4203.1, the dollar amount of any excess financing concessions, the value of any contributions and/or the dollar amount of any short sale fee reimbursements granted by an interested party to the transaction must be deducted from the purchase price. The LTV ratio is then calculated using the lower of the reduced purchase price (after the reduction for all sales concessions has been made) or the appraised value of the Mortgaged Premises.
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- The sales price of the property must be fixed in the sales contract and the transaction must be closed at that price
- The terms of the financing must be specified in the sales contract. The interest rate must be either specified in the contract or sufficiently identified so as to be fixed (for example, prevailing VA rate) in the contract
- The amount paid as an unplanned buydown must have been caused by an increase in Mortgage market interest rates between the date of the sales contract and the Note Date
- Any unplanned buydown that is a temporary subsidy buydown plan must comply with the provisions of Section of Section 4204.4
The following items are not unplanned buydowns and must not exceed the limitations specified in Section 5501.5(b) above:
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(e) Special documentation requirementsThe amount and the source of all interested party contributions must be documented in the Mortgage file and be clearly shown on the Settlement/Closing Disclosure Statement.Mortgages with interested party contributions paid outside of closing and not disclosed on the Settlement/Closing Disclosure Statement are not eligible for sale to Freddie Mac.When the Settlement/Closing Disclosure Statement discloses financing concessions that exceed Freddie Mac's limits and an unplanned buydown was involved, the Mortgage file must contain a written analysis and documentation evidencing that the unplanned buydown met each of the conditions in Section 5501.5(d) above.For Loan Product Advisor® Mortgages, the Seller must ensure that the data submitted to Loan Product Advisor accurately reflects the presence of any financing and sales concessions.Additional Resource: https://www.allregs.com/tpl/Viewform.aspx?formid=00051759&formtype=agency#page=453