4205.1: Section 502 GRH Mortgages (07/06/17)

© Freddie Mac Single-Family Seller Servicer Guide

(a) Overview

Freddie Mac will purchase Section 502 GRH Mortgages in accordance with the provisions of this chapter and the Purchase Documents.The Seller should be familiar with Freddie Mac's definitions in the Glossary for:

• Section 502 GRH Mortgage
• RHS

The following additional terms apply for purposes of this section:

• Lender Agreement: The current RHS Agreement for Participation in Single Family Guaranteed/Insured Loan Programs of the United States Government Lender Agreement — Form RD 1980-16 executed by the Seller
• Guaranteed Regulations: The RD Instructions 1980D of Title 7, Part 1980, Subpart D of the Code of Federal Regulations, collectively with the forms, agreements, manuals and other material and documents issued by RHS, as may be modified by RHS from time to time
• Conditional Commitment: The current Conditional Commitment for Single Family Housing Loan Guarantee — Form RD 1980-18
• Lender Record Change: The current Guaranteed Rural Housing Lender Record Change — Form RD 1980-11
• Loan Guarantee: The current RHS guarantee issued on Form RD 1980-17

Each Section 502 GRH Mortgage must be originated in compliance with all of the requirements of the Guaranteed Regulations and the Lender Agreement, unless these requirements are either:

• Modified or waived in writing by RHS, and Freddie Mac has approved those modifications or waivers, or
• Specifically restricted or modified by this chapter

(b) Eligible Mortgages

A Section 502 GRH Mortgage must be:

• An assumable or nonassumable first-lien secured by a Primary Residence
• A purchase transaction or "no cash-out" refinance of existing Section 502 GRH Mortgage
• A 30-year fully amortizing fixed-rate Mortgage that is not a Seasoned Mortgage
• A Non-Loan Product Advisor Mortgage

Section 502 GRH Mortgages must be sold to Freddie Mac with recourse, within the meaning of Section 6201.7(a).

The Seller must obtain Freddie Mac's written approval, which must be expressly included in the Seller's Purchase Documents, to sell Section 502 GRH Mortgages. The Seller should request this written approval by calling its account manager or (800) FREDDIE.

(c) Loan limits

No Section 502 GRH Mortgage may have an original principal balance in excess of the maximum principal loan amount allowed under the RHS Guaranteed Regulations, or in excess of the maximum loan amounts for conventional Mortgages stated in Section 4203.3, whichever is less. A Section 502 GRH Mortgage may not be a super conforming Mortgage.

(d) Requirements

Each Section 502 GRH Mortgage must comply with the provisions of the Guide, except that if there are Guaranteed Regulations applicable to the following matters, the Guaranteed Regulations will apply:

• Borrower underwriting
• Loan-to-value (LTV) ratios and total LTV (TLTV) ratios
• Sources of funds for Down Payment, Closing Costs and reserves
• Financing concessions and temporary subsidy buydown plans
• Secondary financing
• Property eligibility
• Title insurance
• Property insurance, and
• Mortgage insurance

Each Section 502 GRH Mortgage must comply with the Guaranteed Regulations for LTV/TLTV ratios, and the LTV/TLTV ratios must not exceed 115%, as calculated under the requirements in Section 4203.2.

(e) Special RHS documentation instructions

• Loan Guarantee Freddie Mac will purchase Section 502 GRH Mortgages prior to the receipt of the Loan Guarantee if:
  
  • RHS has issued its Conditional Commitment and the conditions precedent to the issuance of the Loan Guarantee stated in the Guaranteed Regulations and the Conditional Commitment have been satisfied
  • The Seller has delivered the Guaranteed Loan Closing Report, current Form RD 1980-19, to RHS and has paid the RHS Loan Guarantee fee
  • As of the Delivery Date, the Seller represents and warrants that there is no basis for RHS to fail to issue the Loan Guarantee and that it has not been notified by RHS that the Loan Guarantee has been denied
• Lender Record Change The Seller must complete and execute the Lender Record Change and submit it to the appropriate RHS Servicing Office within 15 calendar days after the Delivery Date of each Section 502 GRH Mortgage. For purposes of completing the Lender Record Change, the Seller is the "Selling Lender," Freddie Mac is the "Purchasing (Holding) Lender," and the Seller is the "Lender's Servicing Agent." Freddie Mac's lender identification number is 52-0904874. Leave the "Purchasing Lender Agency Assigned Branch No." blank.

(f) Mortgage file contents

In addition to the documents required in Chapters 3401 and 3301, the Mortgage file for each Section 502 GRH Mortgage must contain:

• A Conditional Commitment
• A Loan Guarantee
• A Lender Record Change

(g) Special Seller warranties

The Seller warrants to Freddie Mac, as of the Delivery Date of each Section 502 GRH Mortgage, that:

• The Seller has obtained a determination from RHS that the Seller is eligible to participate as an originating lender for Section 502 GRH Mortgages
• The Seller has executed the Lender Agreement that is and will remain in full force and effect
• The Loan Guarantee by RHS of the Section 502 GRH Mortgage is in full force and in effect as of the Delivery Date
• The Seller has complied and will continue to comply with the RHS Guaranteed Regulations, the RHS Lender Agreement and all other applicable RHS guidelines, regulations and requirements

(h) Mortgage instruments

If the Section 502 GRH Mortgage is assumable, it must be originated on Mortgage instruments approved by the FHA for FHA-insured assumable fixed-rate Mortgages with all applicable riders and addenda required by FHA.If a Section 502 GRH Mortgage is not assumable, it must be originated on the then current Fannie Mae/Freddie Mac Uniform Instruments including all applicable riders required in Section 4101.2 for the jurisdiction in which the Mortgaged Premises are located.