4205.2: Home Possible® Mortgages with RHS Leveraged Seconds (10/29/18)

(a) Overview

Freddie Mac will purchase a Home Possible Mortgage with an RHS Leveraged Second in accordance with the provisions of this chapter and the Purchase Documents. Freddie Mac will not purchase the RHS Leveraged Second.The Seller should be familiar with Freddie Mac's definition in the Glossary for RHS Leveraged Second. The following additional terms apply for the purposes of this section:

Second Loan Documents are all of the following RHS documents:
- Promissory Note, Form RD 1940-16 (Rev. 10-96)
- Real Estate [Deed of Trust] or [Mortgage] for [the State in which the Mortgaged Premises are located], Form RHS 3550-14 (Rev. 10-96)
- Subsidy Repayment Agreement, Form RD 3550-12 (Rev.10-96)
- Interest Credit Agreement (Section 502 RHS Loans), Form FmHA 1944-6 (Rev. 12-95), and
- Agreement with Prior Lienholder, Form FmHA 1927-8 (Rev. 1-92)
Second Loan Regulations are the provisions applicable to:Section 502 direct leveraged Mortgages originated by RHS contained in Part 3550 of Title 7 of the Code of Federal Regulations and the RHS Direct Single Family Housing Loans and Grants Field Service Handbook and Centralized Servicing Center Handbook collectively with the forms, agreements, manuals and other material and documents issued by RHS, as may be modified by RHS from time to time.

(b) Eligible Mortgages

The Home Possible Mortgage purchased by Freddie Mac must be:

A first-lien, purchase transaction, 30-year fully amortizing fixed-rate Mortgage
Secured by a 1-unit Primary Residence

(c) Maximum loan-to-value (LTV) and total LTV (TLTV) ratio limits

The maximum LTV ratio of the Home Possible Mortgage is 50% and the maximum TLTV ratio, including the RHS Leveraged Second and all other secondary financing, is the lesser of 95% or the maximum allowed under the second loan regulations.

(d) RHS requirements

The Seller must comply with all Freddie Mac requirements for Home Possible Mortgages. Freddie Mac may allow the Borrower underwriting and qualification flexibilities with Home Possible Mortgages that are not permitted for the first Mortgage under the Second Loan Regulations. In the following areas, the Seller must comply with the provisions of the Second Loan Regulations pertaining to the first Mortgage even in situations where the underwriting and qualification requirements for Home Possible Mortgages are more flexible.

Temporary subsidy buydown plans
Maximum allowable qualifying ratios
Borrower income limits
Amount and source of funds for the Down Payment and Closing Costs
Borrower reserves
Rural designation as defined by RHS
Property inspection
Homeownership education

Financing concessions, if used as a source of funds, must be limited to such Closing Costs as are customary in the market where the Mortgaged Premises are located.

(e) Additional documentation

In addition to documentation required for the Home Possible Mortgage, the Mortgage file must contain:

A Borrower's Certification of Eligibility, Form RD 1944.59 (Rev. 10-96)
Copies of the executed Second Loan Documents and any other documents executed by the Borrower in connection with the RHS Leveraged Second

(f) Special Seller warranties

The Seller warrants that the RHS Leveraged Second:

Has been closed and all proceeds advanced to the Borrower or at the Borrower's designation, prior to the Delivery Date of the Home Possible Mortgage
At all times after the Note Date of the Home Possible Mortgage, the debt obligation and lien or other restriction on the Mortgaged Premises, of the RHS Leveraged Second and any recorded Second Loan Document are subordinate to the Home Possible Mortgage
Was originated on the Second Loan Documents. Any changes or modifications to the Second Loan Documents must be approved by Freddie Mac.
Was originated by RHS pursuant to the Second Loan Regulations in effect on the closing date of the RHS Leveraged Second. Any waivers or modifications to the RHS Second Loan Regulations with respect to an individual Borrower must be approved by Freddie Mac.
Was originated by a Seller approved by RHS

In addition, the Borrower must be underwritten and approved by the RHS Field Office for the RHS Leveraged Second.

(g) Delivery instructions

See Section 6302.14 for delivery and pooling requirements for Home Possible Mortgages with RHS Leveraged Seconds sold to Freddie Mac.

(h) Credit Fees in Price

The Seller must refer to Exhibit 19, Credit Fees in Price, for information on Credit Fees in Price for a Home Possible Mortgage with an RHS Leveraged Second. Credit Fees in Price are paid in accordance with the Credit Fee in Price provisions stated in Chapter 6303.See Section 4501.14 for information regarding Credit Fees in Price applicable to Home Possible Mortgages.