Freddie Mac on Wednesday released its guidelines for conforming jumbos -- and, yes, that's what the GSE is formally calling the newly-and-temporarily conforming loans above the traditional lending limit. The guidelines at Freddie, interestingly, paint some areas of contrast from Fannie Mae; the differences likely signal an attempt to capture some additional share, and come somewhat as a surprise to some market participants that had expected guidelines at each GSE to mirror one another. Perhaps the two largest areas of divergence lie in underwriting and which products are considered eligible under the "jumbo conforming" program at each GSE. Freddie said it will allow underwriting via Loan Prospector, its automated underwriting system, which means loans are eligible for its "Accept Plus" program as a result. Tanta at the Calculated Risk blog explains:
"Accept Plus" allows partially-verified income for salaried borrowers and stated income for self-employed borrowers. Loans receive "Accept Plus" eligibility based on LP's internal evaluation of the entire loan file; it cannot be used with non-LP loans.
Freddie's move towards automated underwriting sits in stark contract to Fannie Mae's requirement that all conforming jumbos be manually underwritten, a move that a few originators have said will likely favor Freddie. "Most originators still want to push their loans through the AUS, because it's easier and they are often more familiar with the process," said one source Housing Wire spoke with, a residential mortgage broker. Freddie also will allow cash-out refis, as well as offering a 10-year interest-only fixed-rate product and fixed-rate terms up to 40 years. Cash out refis don't come free, however: the GSE said such refinancing would come with a 1 percent ding up front. 10-year interest-only mortages carry an additional 25 bps delivery charge. Nonetheless, the fact that Freddie is allowing cash out refis at all represents a departure from Fannie Mae, who said last week it will not allow any cash-out refis under its jumbo conforming program. Not that many in California will be able to qualify to refinance at all anyway, cash out or not, say lenders. "The bigger deal here is the 10 year IO," said a broker in the Golden State that spoke with Housing Wire Wednesday morning. "That's a great product for borrowers here right now."