Freddie Mac announced that it's expanding its use of risk-based pricing and increasing fees on mortgages with higher risk and will discontinue purchases of some higher-risk mortgages altogether which is due to continued deterioration of credit quality and declining home values.
Freddie Mac will no longer purchase:
- Mortgages with loan-to-value ratios great than 97 percent, with the exception of FHA/VA mortgages and Home Possible mortgages in which borrowers have credit scores of 700 or better
- "Alt 97" mortgages with "Affordable Seconds". Affordable Seconds are no longer an acceptable source of borrower funds
- Streamlined purchase for homeowners mortgages
Fredde Mac will require a 5 percent reduction in the maximum TLTV ratio when the property is located in a market with declining values.
- Freddie Mac uses the OFHEO House Price Index at: http://www.ofheo.gov/hpi_downloadl.aspx as a tool to help identify markets where home prices may be declining.
In addition, first-time homebuyers applying for a loan through Freddie Mac's "Home Possible" program will be required to take a homeowner education class and all loans with a LTV ratio greater than 97 percent must have an credit score of 700 or better.
