4602.8: Underwriting the Permanent Financing (07/06/17)

Owned by Marsha Freeman
Last updated: Nov 20, 2018
2 min read

© Freddie Mac Single-Family Seller Servicer Guide

(a) Original and subsequent underwriting

The Seller is required to underwrite the Mortgage for the Permanent Financing that will be sold to Freddie Mac prior to the Effective Date of the Permanent Financing. For Construction Conversion Mortgages and Renovation Mortgages, underwriting may occur prior to or after closing of the Interim Construction Financing.Changes in the terms of the financing or in the Mortgage Product are permitted prior to the Effective Date of the Permanent Financing. A change in Borrowers is permitted provided that requirements of Section 4602.6 are met. If there are changes in the terms of the Permanent Financing or if the property value has declined after the Mortgage has been underwritten then:

  • If a Non-Loan Product Advisor Mortgage, it must be re underwritten, or
  • If a Loan Product Advisor® Mortgage, it may require resubmission of the Mortgage to Loan Product Advisor as described in Section 4602.8(b).

(b) Resubmission of Loan Product Advisor Mortgages

Loan Product Advisor Mortgages must meet the requirements in Chapter 5101 including the resubmission requirements in Section 5101.6except that resubmission of a Mortgage to Loan Product Advisor is not required if there is:

  • A change from the previous submission if the change involves one of the exceptions in Section 5101.6
  • A decrease in the loan amount, provided the Permanent Financing complies with the following conditions:
    • When there is an increase in the Down Payment, all funds used to reduce the loan amount must meet the requirements of Chapter 5501
    • When there is a decrease in the reserves amount, the amount of verified reserves is no less than the reserves required to be verified on the Feedback Certificate
    • The decrease in the loan amount does not change the level of Mortgage insurance coverage. For example, if the property value is $120,000 and the loan amount is $114,000 (which equals a 95% loan-to-value (LTV) ratio), the loan amount may decrease to $109,200 (91% LTV ratio). However, if the loan amount decreases to $108,000 (90% LTV ratio) the loan must be resubmitted.
  • A change from an ARM to a fixed-rate Mortgage, provided the Permanent Financing complies with the following conditions:
    • The Permanent Financing is not subject to a temporary subsidy buydown plan
    • In the prior submission, the Borrower was qualified with an ARM monthly housing expense payment equal to or greater than the fixed-rate monthly housing expense
    • The Mortgage term of the fixed-rate Mortgage is the same as the Mortgage term for the ARM
  • A decrease in the reserves amount, provided that the amount of verified reserves is no less than the reserves required to be verified on the Feedback Certificate