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How will Freddie Mac’s Seller/Servicer Updates Affect Your Business in 2016?

pen-and-paperFreddie Mac sellers/servicers can expect some changes regarding the way that they do business in the coming year.

The government-sponsored enterprise recently updated its Single-Family Seller-Servicer Guide bulletin with many changes to push the company's focus of "making homeownership accessible to more first-time homebuyers and low-to-moderate-income borrowers."

The announcement, sent out to all Freddie Mac Sellers, stated that a new postsettlement delivery fee will be introduced in the coming year for Home Possible and Home Possible Advantage Mortgages, which will go into effect January 4, 2016.

The GSE noted that the introduction of the delivery fee is to assist with pipeline coverage for pricing purposes. The delivery fee cap will be 0.00 percent for those with a credit score above 680 and 1.50 percent for those will a credit score below 680.

"We are implementing a new delivery fee cap structure for Home Possible Mortgages to help preserve affordability for low-to-moderate income Borrowers or Borrowers in an Underserved Area across a broad spectrum of loan-to-value (LTV) ratios and credit scores. This fee cap structure is designed to manage both affordability and risk, and do so in a balanced and responsible manner," Freddie Mac said in the letter.

In addition, Freddie Mac also announced changes to the mortgage insurance requirements for Home Possible Mortgages and Home Possible Mortgages secured by manufactured homes, which will also go into effect January 4, 2016.

The new requirements  require standard coverage for mortgages with LTV ratios greater than 80 percent and less than or equal to 90 percent, and the minimum coverage level is 25 percent for mortgages with LTV ratios greater than 90 percent.

The company's announcement also included a reduction to the delivery fee rates for mortgages secured by manufactured homes from 100 basis points to 50 basis points. Existing mortgage insurance coverage level requirements for mortgages secured by manufactured homes will now be standard mortgage insurance.

Lastly, in an effort to provide more mortgage insurance options, Freddie Mac is allowing it sellers/servicers to offer custom mortgage insurance to include mortgage products with certain LTV ratio ranges not previously covered, including Home Possible Mortgages.

These changes will begin on March 1, 2016.

Click here to view Freddie Mac's letter to its sellers/servicers.

Editors Note: Want to read more about Freddie Mac policy changes in 2016? Be sure to catch MReport's December 2015 Take 5 interview with Donna Corley, SVP and Single-Family Chief Risk Officer for Freddie Mac's Single-Family Business.

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