Guideline changes at the Federal Home Loan Mortgage Corp. favorably impact cashout refinances for borrowers who didn’t use a mortgage to purchase the property. The secondary lender additionally updated its appraisal requirements.
Approved Freddie Mac sellers were advised of new cashout guidelines for properties that were recently acquired for cash. The McLean, Va.-based company also revised its underwriting guide for manufactured housing refinances.
Freddie covered the updates Friday in Bulletin No. 2011-25.
A cashout will be allowed on some properties that were purchased for cash less than six months. But the underlying purchase transaction and the cashout refinance will be subject to specific requirements.
Freddie has clarified when loans to pay off land contracts are considered purchase or refinances. Updates were made to Sections 23.7, Land Contract; Contract for Deed, 24.5, Requirements for “No Cash-Out” Refinance Mortgages, and H33.3, General Eligibility Requirements.
Sellers are now required to utilize Guide Form 1032, One-Unit Residential Appraisal Field Review Report, or Form 1072, Two-to Four-Unit Residential Appraisal Field Review Report, when obtaining an appraisal field review report.
On appraisal updates, sellers now need to use Form 442, Appraisal Update and/or Completion Report.
When a seller determines that the opinions of market value from multiple reports are equally accurate and well-supported, then the lower value needs to be used in the loan underwriting.
Freddie reminded sellers that they need to address rescinded mortgage insurance coverage immediately and could be required to repurchase loans that lose coverage.
