A Freddie Mac-approved Mortgage insurance policy issued by an MI that, as of the Delivery Date, is a Freddie Mac-approved MI (see Exhibit 10, Freddie Mac-Approved Mortgage Insurers) is required on each conventional Mortgage Freddie Mac purchases that has a loan-to-value (LTV) ratio of more than 80%. The LTV ratio is obtained by dividing the original loan amount by the value, as defined in Section 4203.1. The "value" of Mortgaged Premises located in the State of New York, as used solely for the purpose of determining whether mortgage insurance is required or should be canceled, is the appraised value of the Mortgaged Premises on the Note Date of the Mortgage. (This definition of the "value" of Mortgaged Premises located in the State of New York applies only to the above-stated mortgage insurance requirements, and is not applicable for any other purposes under the terms of the Purchase Documents. In particular, this definition of "value" is not applicable in determining the LTV ratios for the required percentage of mortgage insurance coverage.)
The required mortgage insurance must be in full force and effect as of the Delivery Date. Mortgage insurance coverage must not be subject to any exclusion besides those exclusions stated in the MI's master policy. Coverage must run to the benefit of Freddie Mac for a whole loan or a participation loan insured under a participation policy, or to the Seller for any other insured participation loan. No action may have been taken, or no action may have failed to be taken, that would impair the rights of Freddie Mac or the Seller. Participation policies with provisions inconsistent with this section or that impose premium payment or reporting requirements on Freddie Mac are not acceptable.
The insurance must remain in force until canceled in accordance with the requirements of Sections 8203.2 through 8203.7 or pursuant to applicable law. The Seller warrants that the Borrower has been given all disclosures required by law, including, but not limited to, the Homeowners Protection Act of 1998 (HPA), as amended, relating to the terms on which Borrower-paid mortgage insurance may be canceled. This includes all disclosures required by the HPA at loan origination to describe the Borrower's mortgage insurance cancellation rights under the HPA.
Mortgage insurance coverage must continue to be carried with the MI that insured the Mortgage when it was delivered to Freddie Mac, except as provided for in Section 8203.10.
Freddie Mac's mortgage insurance coverage level options
Freddie Mac offers two mortgage insurance coverage level options: standard mortgage insurance and custom mortgage insurance.
Custom mortgage insurance option provides an alternative to standard mortgage insurance coverage.
Custom mortgage insurance is available only for Accept Mortgages. The premiums for custom mortgage insurance may not be financed as part of the principal amount of the Mortgage. The lender-paid mortgage insurance option may not be used in conjunction with custom mortgage insurance.
Custom mortgage insurance is not permitted for super conforming Mortgages.
A special Credit Fee in Price will be assessed and billed to the Seller in conjunction with the sale of Mortgages with custom mortgage insurance coverage. The Seller must refer to Exhibit 19, Credit Fees in Price, for information on the custom mortgage insurance Credit Fees in Price and other Credit Fees in Price. Credit Fees in Price are paid in accordance with the Credit Fee in Price provisions outlined in Chapter 6303.
Mortgages sold to Freddie Mac with custom mortgage insurance may be delivered through the Cash, Guarantor or MultiLender Swap programs and may be pooled with other conventional/conforming loans.
The standard and custom minimum coverage levels apply as stated in the table below:
| Transaction type | Mortgage insurance coverage | LTV ratio | |||
| > 80% & <85% | > 85% & <90% | > 90% & <95% | >95% & <97% | ||
| Fixed rate, term < 20 years | Standard | 6% | 12% | 25% | N/A |
| Custom* | N/A | N/A | 16% | N/A | |
| Standard | 12% | 25% | 30% | N/A |
| Custom* | 6% | 12% | 16% | N/A | |
| Home Possible® Mortgages, fixed rate, term < 20 years | Standard | 6% | 12% | 25% | 25% |
| Custom* | N/A | N/A | 16% | 18% | |
Home Possible Mortgages:
| Standard | 12% | 25% | 25% | 25% |
| Custom* | 6% | 12% | 16% | 18% | |
1 Manufactured Homes are limited to a maximum LTV ratio of 95%.
* If custom mortgage insurance is chosen, in addition to all other applicable Credit Fees in Price, the custom mortgage insurance Credit Fee in Price in Exhibit 19 applies, including on Home Possible Mortgages.
| Related Guide Bulletins | Issue Date |
|---|---|
| Bulletin 2017-2 | March 16, 2017 |