5501.4: Employer Assisted Homeownership (EAH) Benefit (11/01/17)

© Freddie Mac Single-Family Seller Servicer Guide

(a) General requirements

An Employer Assisted Homeownership (EAH) Benefit may be used as a source of funds to qualify the Borrower for the Mortgage transaction if the terms of the EAH Benefit comply with the following:
1. The EAH Benefit is provided to an employee from the employer pursuant to an established, ongoing and documented employer benefit program, provided (i) the employer is not an interested party (as described in Section 5501.5) and (ii) the funds were not obtained from an interested party either directly or through a third party
2. The Mortgage is secured by a 1- to 4-unit Primary Residence

(b) Types of benefits

The EAH Benefit may be any of the following structures meeting the applicable requirements:

Type of benefit	Requirements
Grant	See requirements for gift or grant from an Agency in Section 5501.3(c). With respect to the subject Mortgage, the requirement that the Agency must not be the Seller or have participated in any aspect of the Mortgage origination process, and must not be affiliated with, under contract to, or financed (directly or indirectly) by the Seller or any party that participated in the Mortgage origination process, does not apply.
Individual Development Account (IDA)	See requirements for matching funds for IDAs in Sections 5501.3(b) and 5501.3(c). With respect to the subject Mortgage, the requirement that the Agency must not be the Seller or have participated in any aspect of the Mortgage origination process, and must not be affiliated with, under contract to, or financed (directly or indirectly) by the Seller or any party that participated in the Mortgage origination process, does not apply.
Unsecured loan	An unsecured loan may be fully repayable, deferred payment or forgivable, and: Must not contain provisions that allow or could result in negative amortization Must have a maturity date that: Does not exceed the maturity date of the Mortgage Is at least five years after the Note Date of the Mortgage, unless the unsecured loan is fully amortizing Must have an interest rate that is no greater than the Note Rate on the Mortgage Must not be a cash advance from a credit card or unsecured line of credit Must have its source, terms and conditions documented on Form 65, Uniform Residential Loan Application In addition, the EAH Benefit must have terms that permit the Borrower to continue making payments on the loan in the event that the Borrower no longer works for the employer and may not require repayment in full unless: The Borrower terminates his or her employment for any reason, or The employer terminates the Borrower's employment for any reason other than long-term disability, the elimination of the employee's position or reduction-in-force If the monthly payment of principal and interest or interest only begins on or after the 61st monthly payment under the First Lien Mortgage or if repayment of the loan is due only upon sale or default, the amount of the monthly payment may be excluded from the monthly debt payment-to-income ratio; otherwise, the required monthly payments must be included in calculating the monthly debt payment-to-income ratio.
Secondary financing	Secondary financing may be fully repayable, deferred payment or forgivable, and must meet the requirements in Section 4204.1(a) and Section 4204.1(b). In addition, the EAH Benefit must have terms that permit the Borrower to continue making payments on the loan in the event that the Borrower no longer works for the employer and may not require repayment in full unless: The Borrower terminates his or her employment for any reason, or The employer terminates the Borrower's employment for any reason other than long-term disability, the elimination of the employee's position or reduction-in-force If the monthly payment of principal and interest or interest only begins on or after the 61st monthly payment under the First Lien Mortgage or if repayment of the loan is due only upon sale or default, the amount of the monthly payment may be excluded from the monthly debt payment-to-income ratio; otherwise, the required monthly payments must be included in calculating the monthly debt payment-to-income ratio.
Affordable Second	An Affordable Second may be fully repayable, deferred payment or forgivable, and must meet the requirements of Section 4204.2. With respect to the subject Mortgage, the requirement that the Agency must not be the Seller or have participated in any aspect of the Mortgage origination process, and must not be affiliated with, under contract to, or financed (directly or indirectly) by the Seller or any party that participated in the Mortgage origination process, does not apply. In addition, the EAH Benefit must have terms that permit the Borrower to continue making payments on the loan in the event that the Borrower no longer works for the employer and may not require repayment in full unless: The Borrower terminates his or her employment for any reason, or The employer terminates the Borrower's employment for any reason other than long-term disability, the elimination of the employee's position or reduction-in-force If the monthly payment of principal and interest or interest only begins on or after the 61st monthly payment under the First Lien Mortgage or if repayment of the loan is due only upon sale or default, the amount of the monthly payment may be excluded from the monthly debt payment-to-income ratio; otherwise, the required monthly payments must be included in calculating the monthly debt payment-to-income ratio.

(c) Documentation requirementsIn addition to the documentation requirements for specific benefit types, the following requirements must be met:

EAH Benefits must be documented with a copy of the employer benefit program that provides the amount of the benefit and the terms of the program
Evidence of receipt of the EAH Benefit must be provided (e.g., funds on deposit in Borrower's account or funds reflected on the Settlement/Closing Disclosure Statement)

(d) Related provisions
Delivery requirements related to EAH Benefits are described in Section 6302.29.