Freddie Mac announces standardized mortgage documents for DPA programs

Standardization is part of Freddie Mac's goal to make DPA programs more accessible

Freddie Mac rolled out standardized subordinate lien documents for subordinate mortgages offered by down payment assistance (DPA) providers to facilitate easier and greater use of DPA program.

Historically, subordinate-lien documents for various DPA programs have been housing finance agency (HFA)-specific and worded differently, leaving room for confusion when interpreting terms and payment plans. 

“Saving for a down payment continues to be the largest barrier to homeownership for lower-income and first-time homebuyers,” said Danny Gardner, single-family senior vice president of mission and community engagement at Freddie Mac.

“By embracing standardization and creating a set of industry-wide documents, we are providing clarity and consistency that will enable more lenders to help more individuals and families leverage down payment assistance programs across the country.”

Freddie Mac partnered with Fannie Mae and state HFAs to construct the standardized subordinate-lien documents.

By the end of this year, standardized-lien documents will be available for at least 19 states followed by the remaining states and the District of Columbia.

The standardized mortgage documents complement the National Council of State Housing Agencies‘ (NCSHA) HFA Affordable Homeownership Lender Toolkit online resource, which enables mortgage lenders to partner more efficiently with state HFAs in providing mortgages loans and down payment assistance to lower-income home buyers.

The online tools developed by the NCSHA and 23 of its member state HFAs identify the key features of HFA homeownership programs that are most important for lenders in determining how and where to partner with the agencies.

The standardization will also help increase the number of lenders interested in participating in DPA programs, Freddie Mac added. 

In an origination-compressing environment, lenders jumped in to offer low-down-payment programs or down payment assistance for first-time homebuyers, including Rocket, Guild, Guaranteed Rate, Zillow Home Loans, Wells Fargo and CrossCountry.

Freddie Mac’s standardized mortgage documents launch follows the agency’s rollout of a down payment assistance tool in October. 

DPA One streamlines the available state programs into a single source that lenders can use to find and compare programs for their borrowers, making it easier for mortgage lenders of all kinds to participate in HFA DPA programs, the agency said.

DPA One currently covers down payment assistance programs for 48 of the 50 state housing finance agencies and has local and municipal programs for Texas and Minnesota. 

By the end of 2023, DPA One will have local and municipal assistance programs for Florida, Virginia, California and Kentucky and expects to bring the remaining local and state programs online throughout 2024.

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