FHFA Announces Conditional Approval of Freddie Mac Pilot Project for Purchasing Second Mortgages

Washington, D.C. – The Federal Housing Finance Agency (FHFA) today announced its conditional approval for Freddie Mac to engage in a limited pilot project to purchase certain single-family closed second mortgages. This conditional approval follows the FHFA’s first release of a new product proposed by Freddie Mac or Fannie Mae (the Companies) for public comment under the new process mandated by the pre-approval of product regulations. company, effective April 2023. In her statement, Director Sandra L. Thompson further discussed FHFA’s analysis of required statutory criteria for Charter Act compliance, public interest , safety and solidity.

“The thoughtful engagement of public stakeholders confirmed the value of a transparent process for evaluating Enterprise’s potential new products and informed the parameters of conditional approval,” Director Thompson said. “The limited pilot will allow FHFA to explore whether this closed-end second mortgage product effectively advances Freddie Mac’s statutory goals and benefits borrowers, particularly in rural and underserved communities. »

In recognition of the significant impact that corporate activities have on the U.S. housing finance system, market participants, and the economy as a whole, FHFA is required by law to review new corporate activities. company and to approve new company products before these activities and products are authorized. offered to the market. The FHFA implements this requirement through its pre-approval of enterprise product regulations.

Freddie Mac’s conditional approval of a pilot for second mortgage purchases includes several limitations on the product, including:

• A maximum purchasing volume of $2.5 billion;
• A maximum duration of 18 months;
• A maximum loan amount of $78,277, meeting certain subordinate loan thresholds in the Consumer Financial Protection Bureau’s definition of qualified mortgage;
• A minimum acquisition period of 24 months for the first mortgage; And
• Eligibility only for primary/primary residences.

At the conclusion of the pilot, FHFA will analyze data on Freddie Mac second mortgage purchases to determine whether the objectives of the pilot were met. FHFA has determined that any increase in volume or extension of the duration of the pilot project, or a conversion of the pilot project to a programmatic activity, would be treated as a new product subject to public notice and comment and approval by the FHFA. Any subsequent approvals would be informed by the preliminary results of the pilot project.

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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac, and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide more than $8.4 trillion in financing to America’s mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on Twitter @FHFAYouTube, Facebook and LinkedIn.

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