4201.15: Second home Mortgages (08/20/18)

Freddie Mac will purchase Mortgages secured by second homes under the terms of the Purchase Documents and this section.

(a) Eligible and ineligible Mortgages

To be eligible, second home Mortgages must:

Comply with Section 4203.4 or the maximum loan-to-value (LTV), total LTV (TLTV) and Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratio requirements for certain Mortgage products or offerings found in other Guide chapters
Be secured by a 1-unit property owned by an individual who is also the Borrower, occupied by the Borrower for some portion of the year and the property must be:
- In such a location as to function reasonably as a second home
- Suitable for year-round occupancy
- Available for the Borrower's exclusive use and enjoyment

The property must not be:

Subject to any timesharing or other shared ownership arrangement
An ineligible property (e.g., a unit in a Condominium Hotel)
Subject to any rental pools or agreements that require the Borrower to rent the property, give a management company control over the occupancy of the property, or involve revenue sharing between any owners and the developer or another party

Freddie Mac's determination of whether a property is a second home is conclusive. A 2-unit property used as a second home is considered an Investment Property and must meet all of the requirements of Section 4201.16..

A Mortgage secured by a second home must be an Accept Mortgage, an A-minus Mortgage or a Manually Underwritten Mortgage with a minimum Indicator Score as set forth in Exhibit 25, Mortgages with Risk Class and/or Minimum Indicator Score Requirements, to be eligible for delivery.

(b) Special underwriting requirementsEach second home Mortgage must meet the following requirements:

(i) For newly constructed homes that are purchase transactions, the Borrower may not be affiliated with or related to the builder, developer or the property seller

(ii) Each Borrower individually and all Borrowers collectively must not be obligated on (e.g., Notes, land contracts and/or any other debt or obligation) more than 10 1- to 4-unit financed properties, including the subject property and the Borrower's Primary Residence, provided that when the number of 1- to 4-unit financed properties (including the subject property and the Borrower's Primary Residence) is greater than six, the Mortgage must:

Be a Loan Product Advisor® Mortgage with a Risk Class of Accept, and
Have a minimum Indicator Score of 720

Examples of financed properties that do not have to be counted in these limitations include:

Commercial real estate
Multifamily (five or more units) real estate
Timeshares
Undeveloped land
Manufactured homes not titled as real property (chattel lien), unless the property is situated on the land that is titled as real property
Property titled in the name of the Borrower's business provided that the Borrower, in his or her individual capacity, is not obligated on Notes, land contracts and/or any debt or obligation related to such property
Property titled in the name of a trust where the Borrower is a trustee, provided that the Borrower, in his or her individual capacity, is not obligated on Notes, land contracts and/or any debt or obligation related to such property

(iii) The reserves requirements in Sections 5501.2 and 5501.3 must be met

(iv) Rental income from the Borrower's second home or 1-unit Primary Residence may not be considered as stable monthly income in the credit qualification analysis

(v) The monthly housing expense related to a Borrower's current Primary Residence must be used in computing the Borrower's monthly housing expense-to-income ratio

(vi) The monthly payment amount (as described in Section 5401.2) on the second home must be considered in calculating the Borrower's monthly debt payment-to-income ratio

(c) Other requirementsForm 3890, Multistate Second Home Rider, is required for all Mortgages secured by second homes.