4201.16: Investment Property Mortgages (11/30/18)

Freddie Mac will purchase Investment Property Mortgages under the terms of the Purchase Documents and this section.

(a) Eligible Mortgages

(i) Each Investment Property Mortgage must comply with Section 4203.4

(ii) Each Investment Property Mortgage must be an Accept Mortgage, an A-minus Mortgage or a Manually Underwritten Mortgage with a minimum Indicator Score as set forth in Exhibit 25, Mortgages with Risk Class and/or Minimum Indicator Score Requirements

(iii) Mortgages with temporary subsidy buydowns are not eligible for delivery as Investment Property Mortgages

(iv) Freddie Mac will purchase Investment Property Mortgages made to Borrowers who own more than one financed Investment Property, provided that the Investment Property Mortgage being sold to Freddie Mac is:

An eligible fixed-rate, level-payment Mortgage, or
A 7/1 or 10/1 ARM, and
Not an A-minus Mortgage

(b) Special underwriting requirements

An Investment Property Mortgage delivered to Freddie Mac must meet the following special underwriting requirements:
(i) For newly constructed homes that are purchase transactions, the Borrower may not be affiliated with or related to the builder, developer or property seller

(ii) Each Borrower individually and all Borrowers collectively must not be obligated on (e.g., Notes, land contracts and/or any other debt or obligation) more than six 1- to 4-unit financed properties, including the subject property and the Borrower's Primary Residence. Examples of financed properties that do not have to be counted in this limitation include:

Commercial real estate
Multifamily (five or more units) real estate
Timeshares
Undeveloped land
Manufactured homes not titled as real property (chattel lien), unless the property is situated on the land that is titled as real property
Property titled in the name of the Borrower's business provided that the Borrower, in his or her individual capacity, is not obligated on Notes, land contracts and/or any debt or obligation related to such property
Property titled in the name of a trust where the Borrower is a trustee, provided that the Borrower, in his or her individual capacity, is not obligated on Notes, land contracts and/or any debt or obligation related to such property

(iii) The monthly housing expense related to the Borrower's current Primary Residence must be used in calculating the Borrower's monthly housing expense-to-income ratio

(iv) Regardless of whether rental income from the Mortgaged Premises is used in qualifying, the reserves requirements in Sections 5501.2 and 5501.3 must be met

(v) Refer to Chapter 5306 for requirements related to rental income

(vi) Gift funds, gift of equity or grants, as described in Section 5501.3(c) are not permitted

(c) Additional documentation requirement

An Investment Property Mortgage must be originated using the 1-4 Family Rider, Form 3170. See Exhibit 5, Authorized Changes to Notes, Riders, Security Instruments and the Uniform Residential Loan Application, Section VIII for authorized changes to the 1-4 Family Rider for Investment Property Mortgages.

(d) Credit Fees in Price for Investment Property Mortgages

A special Credit Fee in Price will be assessed and billed to the Seller in conjunction with the sale of Investment Property Mortgages. The Seller must refer to Exhibit 19, Credit Fees in Price, for information on the Investment Property Mortgages Credit Fee in Price and other Credit Fees in Price. Credit Fees in Price are paid in accordance with the Credit Fee in Price provisions outlined in Chapter 6303.