4301.7: Texas Equity Section 50(a)(6) Mortgages (01/01/18)

Pursuant to Bulletin 2017-28, during the period from and including January 1, 2018 through January 12, 2018 Freddie Mac will not purchase Texas Equity Section 50(a)(6) Mortgages with Note Dates on or after January 1, 2018.

(a) Eligibility to sell and service Texas Equity Section 50(a)(6) Mortgages

Unless otherwise notified in writing, Sellers are eligible to deliver Texas Equity Section 50(a)(6) Mortgages.The Servicer must be eligible to service Texas Equity Section 50(a)(6) Mortgages in accordance with Section 8101.5 and related Servicing provisions.

(b) Eligible Mortgages

A Texas Equity Section 50(a)(6) Mortgage must be a conventional First Lien Mortgage that is a:

15-, 20- or 30-year fixed-rate Mortgage, or
1/1, 3/1, 5/1, 7/1 or 10/1 ARM

A Texas Equity Section 50(a)(6) Mortgage must be a cash-out refinance Mortgage, as described in Section 4301.5, or a "no cash-out" refinance Mortgage as described in Section 4301.4, depending on the applicable facts.

A Texas Equity Section 50(a)(6) Mortgage may not be a special purpose cash-out refinance Mortgage.

The generally accepted commercial terms used to describe Mortgages originated under Article XVI of the Texas Constitution ("cash-out refinance," "rate-term refinance") may not correspond to the meaning given the same or comparable terms when used in Chapter 4301. Sellers must understand the distinctions between Freddie Mac's refinance definitions in Chapter 4301 and the provisions of Section 50(a)(6) and determine when Section 50(a)(6) applies, regardless of the definitions of cash-out and "no cash out" refinance transactions used in Chapter 4301.

The Seller is responsible for determining whether the proposed refinance of a Mortgage secured by the Borrower's homestead in the State of Texas is a Mortgage that must be originated pursuant to Section 50(a)(6) of Article XVI of the Texas Constitution.

(c) Mortgaged Premises; appraisal; fair market value

Each Mortgage must be secured by a Mortgaged Premises that is:

A 1-unit Primary Residence
Located in the State of Texas
The Borrower's homestead, and
A residential property, not a farm, ranch or used for any agricultural purposes

A Living Trust that meets the eligibility requirements of Section 5103.5 may be a Borrower for a Texas Equity Section 50(a)(6) Mortgage if the Living Trust meets the requirements for a "qualifying trust" under Texas law for purposes of owning residential property that qualifies for the homestead exemption.

The Seller must provide an appraisal that meets Freddie Mac requirements and complies with Section 50(a)(6)(Q)(ix) and Section 50(h) of Article XVI of the Texas Constitution.

The Seller and the owner of the homestead must execute a written acknowledgment of the "fair market value" of the homestead property as of the date the extension of credit is made. The appraisal report must be attached to the acknowledgment.

(d) LTV and TLTV Ratios

The maximum loan-to-value (LTV) and total LTV (TLTV) ratios for Texas Equity Section 50(a)(6) Mortgages must not exceed 80% and must be lower if necessary to comply with the provisions of Sections 4203.4 and 4301.4 for "no cash out" and cash out refinances, as applicable.

(e) Texas Equity Uniform Instruments and other documents

Texas Equity Section 50(a)(6) Mortgages must be originated using the most recent version of the following special Fannie Mae/Freddie Mac Texas Home Equity Uniform Instruments:

(i) Note

Texas Home Equity Note (Fixed Rate - First Lien) - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3244.1 01/01 (rev. 01/18)
Texas Home Equity Fixed/Adjustable Rate Note – One-Year Treasury Index (First Lien) Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3522.44 01/01 (rev. 01/18)
Texas Home Equity Fixed/Adjustable Rate Note—WSJ One-Year Libor (First Lien) Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3528.44 1/04 (rev. 01/18)

(ii) Security InstrumentTexas Home Equity Security Instrument (First Lien) - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3044.1 01/01 (rev. 01/18)

(iii) Rider

Texas Home Equity Fixed/Adjustable Rate Rider – One-Year Treasury Index (First Lien) Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3182.44 01/01 (rev.06/16)
Texas Home Equity Fixed/Adjustable Rate Rider – WSJ One-Year Libor (First Lien) Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3187.44 01/04 (rev. 06/16)

(iv) Borrower AffidavitTexas Home Equity Affidavit and Agreement (First Lien) - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3185 01/01 (rev. 01/18). The affidavit must be recorded together with the Security Instrument and any applicable riders.

(v) Condominium RiderTexas Home Equity Condominium Rider - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3140.44 01/01, if the property is a Condominium Unit

(vi) Planned Unit Development (PUD) RiderTexas Home Equity Planned Unit Development Rider - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3150.44 01/01, if the property is in a PUD.

Seller may access the Fannie Mae/Freddie Mac Texas Home Equity Uniform Instruments at http://www.freddiemac.com/singlefamily/guide/?tab=2&tog.

The Seller must prepare, obtain and/or provide any and all other documentation that the Seller determines is necessary to originate Texas Equity Section 50(a)(6) Mortgages in compliance with all applicable laws.

(f) Special representations and warranties

Seller represents and warrants that:

1. Neither the Seller nor its Correspondents or Mortgage Brokers has been found by any federal regulatory agency to have engaged in the practice of refusing to make loans because the applicants for the loans reside in a certain area or the property proposed to secure the loans is located in a certain area

2. All refinance Mortgages that fall within the provisions of Section 50(a)(6) of the Article XVI of the Texas Constitution have been originated as Texas Equity Section 50(a)(6) Mortgages and comply with Section 50(a)(6) of Article XVI and related provisions of the Texas Constitution, as amended, and all other applicable lawsIn connection with this representation and warranty, Freddie Mac recommends that the Seller obtain advice from Texas legal counsel that confirms that the Seller's lending and servicing policies, procedures, and practices are in compliance with Section 50(a)(6) of Article XVI of the Texas Constitution, all other applicable Texas Constitutional provisions, statutes, court decisions, regulations and rules and applicable State and federal law.

3. The estate or interest in the Mortgaged Premises is vested in the Borrower. There is no defect in the Borrower's title to the Mortgaged Premises

4. The Mortgage is a valid and enforceable First Lien on the Mortgaged Premises

(g) Specific remedies

Any action taken, or not taken, in connection with the origination of a Texas Equity Section 50(a)(6) Mortgage that results in any of the following (even if such action is a result of lender's effort to cure a failure to comply with the provision of the Section 50(a)(6)) is a breach of the representations and warranties in this Section 4301.7 and Freddie Mac shall be entitled to any of the remedies stated in Section 3601.1, including the right to require the Seller to repurchase the Mortgage immediately upon Freddie Mac's request, at a price determined in accordance with Section 3602.4:

A forfeiture of any principal or interest due under the Mortgage
The invalidation of the Mortgage as a First Lien
The abatement of accrual of interest and the Borrower's obligations under the Mortgage
A reduction in the principal amount of the Mortgage
Any modification of the amount, interest rate, term or other provision of the Mortgage

(h) Delivery and pooling

See Section 6302.16 for delivery and pooling requirements for Texas Equity Section 50(a)(6) Mortgages.

(i) Related provisions

In addition to the requirements in this section, other requirements related to Texas Equity Section 50(a)(6) Mortgages are described in the following locations:

Topic	Location
Delivery Requirements	Section 6302.16
Refinance Mortgages	Chapter 4301
Title Insurance	Section 4702.1, 4702.3 and 4702.5
Special Servicing	Sections 8104.1, 8201.1 and 9206.13