© 2018 Freddie Mac Single-Family Seller Servicer Guide
Mortgage insurance premiums may be paid as follows:
- Monthly, annually, as a single premium, or a combination of these
- Financed premiums as described below
- Lender-paid premiums as described below
For Borrower-paid mortgage insurance premiums, the Borrower must pay the mortgage insurance premium by a single payment at closing or through monthly Escrow payments. A Mortgage that includes a Borrower-paid mortgage insurance premium in the Note Rate is not eligible for sale to Freddie Mac.
Lender-paid mortgage insurance premiums for annual and monthly premium programs must be included in the Servicing Spread included in the Note Rate on the Mortgage (see Section 4701.2(b)). Mortgages with single-premium lender-paid mortgage insurance do not require an adjustment to the Minimum Servicing Spread.
(a) Financed premiums
For purposes of this section, the following definitions apply:
- Base LTV ratio: The loan-to-value (LTV) ratio calculated using the Mortgage amount without the financed mortgage insurance premium
- Gross LTV ratio: The LTV ratio calculated using the Mortgage amount which includes the financed mortgage insurance premium
Mortgages for which the mortgage insurance premium is included as part of the principal amount of the Mortgage (that is, a financed premium) are eligible for purchase provided the Mortgage complies with the requirements below:
- The Base LTV ratio must not exceed the maximum LTV ratio permitted for the Mortgage Product or offering
- Except for Home Possible Advantage® Mortgages and HomeOneSM Mortgages, the Gross LTV ratio must not exceed 95%
- For Home Possible Advantage Mortgages and HomeOne Mortgages, the Gross LTV ratio must not exceed 97%
- The Mortgaged Premises must be a 1- to 4-unit Primary Residence or a 1-unit second home
- The Mortgage is a fixed-rate, fully amortizing Mortgage or an ARM
- The amount of coverage meets the standard coverage level requirements in Section 4701.1 using the Base LTV ratio
- The mortgage insurance premium must be paid with a single-premium payment, (i.e., monthly premium payments are not eligible)
Financed mortgage insurance premium endorsement
The mortgage insurance policy must include an endorsement, generally referred to as the "financed mortgage insurance premium endorsement." This endorsement states that adjustments will be made to the claim calculation to meet the required exposure level for the Base LTV ratio.
Maximum original loan amount
The maximum original loan amounts provided in Section 4203.3 apply to Mortgages with financed mortgage insurance premiums. The original loan amount of the Mortgage inclusive of the amount of any financed mortgage insurance premium may not exceed the maximum original loan limits provided in Section 4203.3.
Delivery requirements for Mortgages with financed mortgage insurance premium
See Section 6302.21 for delivery requirements. Any applicable Credit Fees in Price will be assessed based on the Mortgage's Gross LTV ratio and the UPB, which includes the financed mortgage insurance premium.
(b) Lender-paid mortgage insurance
Freddie Mac will purchase Mortgages with single, annual or monthly premium lender-paid mortgage insurance as follows:(i) For annual and monthly premiums:
- The Mortgage is a fixed-rate, fully amortizing Mortgage or a non-convertible ARM
- The Mortgage is not a super conforming Mortgage
- For monthly and annual premium programs, premium payments are made from the Servicing Spread compensation. To ensure that the Servicer receives sufficient Servicing compensation after premium payments are made, the Minimum Contract Servicing Spread must be no less than the sum of the Minimum Servicing Spread plus the amount necessary to pay the mortgage insurance premium when due.
- Coverage will be maintained for the life of the Mortgage. A change in MI may be allowed if approved by Freddie Mac (see Chapter 8203).
- The Mortgage is sold under the Guarantor or MultiLender Swap program
The Seller must obtain Freddie Mac's approval to sell Mortgages with annual or monthly premium lender-paid mortgage insurance to Freddie Mac. The Seller should request this approval by calling its account manager or (800) FREDDIE.
(ii) For single premiums:
- The Mortgage is a Mortgage eligible for purchase under the Purchase Documents
- Coverage will be maintained for the life of the Mortgage. A change in MI may be allowed if approved by Freddie Mac (see Chapter 8203).
- The originating lender or the Seller must pay the entire mortgage insurance premium prior to the Delivery Date
See Section 6302.21 for delivery requirements for Mortgages with lender-paid mortgage insurance.