FHFA Announces Freddie Mac Pilot to Purchase Second Mortgages of up to $78,277

[AJ Wong]

The Federal Housing Finance Agency (FHFA) gave conditional approval on Friday for a pilot program allowing Freddie Mac to purchase SFR closed end second mortgages.

The Programs includes or covers:

- Up to $2.5B in second loan purchases

- A maximum programs duration of 18 months

- A maximum loan amount of $78,277

- A minimum seasoning requirement on the first mortgage of 24 months

- Only for Primary Residences

The effect of a guaranteed government backed second mortgage for homeowners would be significant and likely put eligible second mortgage terms in line with below market FHA and guaranteed first position mortgage rates.

We've seen a tremendous uptick in interest for secondary lien positions HELOC's and fixed second mortgages but many for loan amounts above the new second mortgage pilot program maximum. Investors are increasingly expanding secondary mortgage underwriting guidelines to allow borrowers access to their equity positions and reserves.

Just recently many mortgage lenders are announcing or launching second positions HELOC's and second mortgages that use bank statement deposits or even DSCR (rental income) on investment properties to qualify.

Are government backed second mortgage a good idea?