Freddie Mac Single-Family Seller/Servicer Guide 4401.2 — Underwriting requirements for ARMs
Freddie Mac Guide §4401.2 (Underwriting requirements for ARMs). Gap-fill (verbatim, ID-diff).
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Freddie Mac Single-Family Seller/Servicer Guide 4401.2 — Underwriting requirements for ARMs
This section contains information related to: ■ Special ARM qualifications ■ ARM qualifying rates ■ Buydowns (a) Special ARM qualifications For 3/6-Month ARMs and 5/6-Month ARMs, the initial Note Rate cannot be more than three percentage points below the fully indexed rate. (b) ARM qualifying rates The following table provides the minimum Borrower qualification requirements for each eligible ARM product. Borrower qualifying rate requirements by ARM product SOFR ARM product Borrower qualified at no less than the: 3/6-Month ARM1 Note Rate + Life Cap (5%) 5/6-Month ARM1 Greater of the Note Rate plus two percentage points or the fully indexed rate2 7/6-Month ARM 10/6-Month ARM ■ Note Rate for Mortgages that are not Higher-Priced Covered Transactions (HPCTs) or Higher-Priced Mortgage Loans (HPMLs) ■ Greater of the Note Rate or the fully indexed rate2 for Mortgages that are HPCTs or HPMLs 1The qualifying rate must, at a minimum, equal the maximum interest rate that may apply during the first 5 years after the first payment Due Date. If the ARM qualifying rate requirements above are more restrictive, those requirements must be satisfied. 2For purposes of this section, the fully indexed rate is the sum of the Margin plus a value of the applicable Index (at any time within 90 days preceding the Note Date), rounded to the nearest one-eighth of 1% (0.125%). (c) Buydowns For ARMs that are Financed Permanent Buydown Mortgages and ARMs with temporary subsidy buydown plans, the Borrower must be qualified in accordance with the requirements of this section. For additional buydown provisions related to ARMs, refer to Section 4204.3 for ARMs with temporary subsidy buydown plans and Chapter 4601 for Financed Permanent Buydown Mortgages. 3/6-Month ARMs are not eligible as Financed Permanent Buydown Mortgages or ARMs with temporary subsidy buydown plans.
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Source of record: https://claudeforcompliance.com/regs/fhlmc-4401-2/
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