McLEAN, Va. - Freddie Mac has changed its Loan Prospector automated underwriting service and is upgrading its Home Possible suite of affordable mortgage products to help more low- and moderate-income borrowers qualify for mortgages that are eligible for purchase by Freddie Mac on the secondary market.
As a result of the changes Freddie Mac said it expects more mortgages submitted to Loan Prospector will get an "accept" response.
The housing Government Sponsored Enterprise also said it is waiving the Loan Prospector assessment fee when a "caution" is returned on the first submission of a conforming, conventional mortgage. Caution responses are triggered by higher risk mortgages that Freddie Mac purchases as well as by loans that don't meet the company's loan purchase guidelines.
Freddie Mac emphasized that it's not changing the way Loan Prospector assesses risk, but it's expanding its purchases of higher risk mortgages submitted through Loan Prospector that will meet the company's federal affordable housing goals.
Freddie Mac is also eliminating the $500 borrower cash contribution and pre-purchase homeownership education requirement for borrowers who use Home PossibleT mortgage products.
The company is also cutting the cash contribution from five to 3% of the purchase price for Home Possible borrowers buying a three-to-four unit property.
Lastly, in a separate effort to qualify more Home Possible borrowers, Loan Prospector is also being changed to exclude Affordable Seconds when calculating total loan-to-value ratios. Affordable Seconds are second mortgages that federal, state or local housing programs, nonprofit organizations or employers provide to borrowers who need additional assistance to effectively deal with financial hurdles resulting from the downpayment, closing costs or home purchase price. The change means lenders will enter Affordable Seconds into Loan Prospector as gifts. -