Freddie Mac Bulletin 2021-36, issued December 1, 2021, announced updates and clarifications to Freddie Mac policies. Highlights of the Bulletin are detailed below.
Refi Possible Enhancements: Effective Date Announced
Freddie Mac provided an effective date for the Refi Possible enhancements previously announced . The enhancements are effective for loans with a Note date on or after January 31, 2022. As a reminder, the enhancements are detailed below:
- The borrower’s income limit must be at or below 100% of the AMI for the subject property location (currently required to be at or below 80% of the AMI)
- The requirement that the loan be seasoned no more than 120 months (10 years) is being removed
Freddie Mac provided guidance on the eligibility of cryptocurrency as follows:
- Income paid to the borrower in cryptocurrency is not eligible as qualifying income
- If evidence of sufficient remaining assets is required to establish likely continuance of the income (e.g. retirement account distributions, trust income, dividend and interest income, etc.) those assets may not be in the form of cryptocurrency
- Cryptocurrency is not eligible to be used when calculating assets as a basis for repayment of debt
- Any monthly payment(s) on debt secured by cryptocurrency must be included in the borrower’s DTI calculation; standard installment debt secured by financial asset policy does not apply
- Cryptocurrency must be exchanged for U.S. dollars when it is used by the borrower for any funds required for the transaction (down payment, closing costs, and reserves)
Limited Cash-Out Refinance Transactions: Financed Real Estate Taxes
Clarification was provided on using the proceeds from a limited cash-out refinance (rate/term) as it pertains to real estate taxes
- Prepaid real estate taxes are an allowable closing cost that may be paid from the proceeds of the rate/term refinance
- Financed real estate taxes that exceed the prepaid amount are not considered an allowable closing cost and are subject to the maximum cash-out limit for a rate term transaction (the greater of 1% of loan amount or $2,000)
Documentation of Funds Used to Pay Off or Pay Down Debt
When an unverified deposit is used to pay off or pay down debt to qualify, documentation must be provided as to the source of funds. This applies to all transactions (purchase and refinance) regardless of the amount of the unverified deposit.
Self-Employment Income Not Used for Qualifying
Homebridge is clarifying that if the borrower has self-employment income that is not used for qualifying (e.g. the borrower’s primary source of income is from salaried income or the self-employed income is a secondary source of income, etc.) documentation and evaluation of the self-employment income is not required
Preliminary Title Policy
Homebridge will allow the title policy to be dated within 180 days of the Note date (currently 120 days)
The Freddie Mac guidelines have been updated with the FHLMC Bulletin information and some additional updates and posted on the Homebridge website at www.HomebridgeWholesale.com
These updates are effective immediately and may be applied to new submissions and pipeline transactions.
Reminder, the Refi Possible enhancements are eligible for loans with a Note date on or after January 31, 2022.
If you have any questions, please contact your Account Executive