Freddie Mac Single-Family Seller/Servicer Guide Section 4301.4 — "No cash-out" refinance Mortgages

Freddie Mac Single-Family Seller/Servicer Guide Section 4301.4 — "No cash-out" refinance Mortgages

4301.4: “No cash-out” refinance Mortgages (02/04/26) A “no cash-out” refinance Mortgage is a Mortgage for which the proceeds may be used only as described in this section. A “no cash-out” refinance Mortgage must meet the Borrower requirements in Section 4301.2. This section contains requirements related to: ■ Allowable uses of proceeds from a “no cash-out” refinance Mortgage ■ Allowable uses of proceeds for Refi Possible® Mortgages, CHOICERenovation® Mortgages, GreenCHOICE Mortgages®, Construction to Permanent Mortgages and Renovation Mortgages ■ Treatment of excess proceeds (a) Allowable uses of proceeds from a “no cash-out” refinance Mortgage Proceeds from a “no cash-out” refinance Mortgage may be used only to: ■ Pay off the principal and interest due, which may include the payoff of a balance deferred under a loss mitigation plan, for the following: Freddie Mac Single-Family Seller/Servicer Guide Chapter 4301 As of 02/04/26 Page 4301-5 ❑ First Mortgage, regardless of its age, provided the first Mortgage was used to acquire the property, regardless of the age of the first Mortgage, or ❑ First Mortgage, originated as a refinance transaction, with a Note Date no less than 30 days prior to the Note Date of the “no cash-out” refinance Mortgage, as documented in the Mortgage file (e.g., on the credit report or the title commitment) ■ Pay off any costs or fees associated with the satisfaction and release of the first Mortgage (e.g., late fees, prepayment penalties, etc.) ■ Pay off or pay down any junior liens secured by the Mortgaged Premises that were used in their entirety to acquire the subject property. Any remaining balance must be subordinated to the refinance Mortgage. ❑ The Borrower is not required to satisfy outstanding junior liens secured by the Mortgaged Premises, provided that the junior lien meets the requirements for secondary financing in Section 4204.1 and/or Affordable Seconds® in Section 4204.2, as applicable ❑ If a junior lien was paid off as part of the “no cash-out” refinance transaction, the Seller must maintain documentation in the Mortgage file demonstrating that the full amount of the lien was used for the purchase of the subject property ■ Pay any required share of appreciation due to the subsidy provider per the resale restricted covenants, subject to the requirements in Section 4406.8(b) ■ Pay related Closing Costs. Note: Real estate taxes that are past due and/or delinquent, as defined by the taxing authority, may not be paid with the proceeds of the “no cash-out” refinance Mortgage, except that if the transaction results in cash out as permitted in the following bullet, these funds may be used to pay the delinquent taxes. ■ Disburse cash out to the Borrower (or any other payee) up to the greater of 1% of the new refinance Mortgage or $2,000 ■ Pay off the outstanding balance of a land contract or contract for deed if the following requirements from Section 4404.1 are met: ❑ A copy of the executed land contract or contract for deed must be included in the Mortgage file ❑ The land contract or contract for deed must have been executed at least 12 months prior to the Application Received Date Freddie Mac Single-Family Seller/Servicer Guide Chapter 4301 As of 02/04/26 Page 4301-6 ❑ The Mortgage file must include third-party documentation evidencing payments in accordance with the land contract or contract for deed for the most recent 12-month period ❑ The loan-to-value ratio must be calculated using the current appraised value of the Mortgaged Premises ■ Pay off a Property Assessed Clean Energy (PACE) or PACE-like obligation, subject to the additional requirements in Section 4301.8 (b) Allowable uses of proceeds for Refi Possible Mortgages, CHOICERenovation Mortgages, GreenCHOICE Mortgages, Construction to Permanent Mortgages and Renovation Mortgages ■ For Refi Possible Mortgages, see the limitations on the uses of proceeds in Section 4302.5 ■ For CHOICERenovation Mortgages, proceeds may be used to pay off the existing Mortgage debt and/or finance the eligible renovations as described in Section 4607.6, subject to the additional requirements in Sections 4607.7(c) and 4607.7(d), as applicable ■ For GreenCHOICE Mortgages, proceeds may be used to pay an Existing Debt, as defined in Section 4606.1(c), subject to the additional requirements in Section 4606.3(b), and to finance eligible improvements as described in Section 4606.1(b), subject to the additional requirements in Section 4606.3(a) ■ For Construction to Permanent Mortgages and Renovation Mortgages, see Chapter 4602 (c) Treatment of excess proceeds If there are remaining proceeds from the “no cash-out” refinance Mortgage after the proceeds are applied as described above: ■ The Mortgage amount must be reduced, or ■ The excess amount must be applied as a principal curtailment to the new refinance Mortgage at closing and must be clearly reflected on the Settlement/Closing Disclosure Statement. See Section 6302.32 for special delivery requirements for Mortgages with principal curtailments. Under no circumstances may cash disbursed to the Borrower (or any other payee) exceed the maximum permitted for “no cash-out” refinance Mortgages. Freddie Mac Single-Family Seller/Servicer Guide Chapter 4301 As of 02/04/26 Page 4301-7

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