Freddie Mac cut some paperwork from its refinance program for multifamily mortgages effective June 25 and clarified its borrower recourse and third-party guarantee requirements.
While the changes outlined in Freddie Mac Bulletin 93-12 probably will prompt some applause. the Mortgage Bankers Association says its members still have concerns that could limit the refi program, s popularity.
Under the streamlining, the Federal Home Loan Mortgage Corp. stopped requiring seller/servicers to include in their preliminary application a schedule of real estate from the borrower. From now on, Freddie Mac requires only a certificate of the borrower's financial condition and credit history. The schedule won't be required until the fun application is filed.
"For borrowers with large portfolios, it's hard to put this information together," said Tom Wells, a mortgage underwriting analyst. "And with our risk exposure, we could handle it. By reading the certificate, we'll get an idea of the borrower's financial condition."
Freddie Mac also tried to accelerate the application process for certain high-quality mortgages by letting seller/services call their regional offices for permission to file preliminary and full applications simultaneously.
The borrower recourse and third-party guarantees involved a switch in emphasis, Wells said. He said previous bulletins suggested that Freddie Mac cared more about third-party guarantees than it did borrower recourse.
"We flipped it so now it states that for multi programs for loans in imminent default we require borrower recourse and may require a third-party guarantee," he said, Wells said this was done in part because borrowers sometimes cannot guarantee third-party assistance when a multifamily loan gets into trouble.
A multifamily housing expert at the Mortgage Bankers Association welcomed the changes, but said Freddie Mac's program still needs more fine-tuning, particularly with regard to language in an exculpation rider that some MBA members consider inferior to wording in Fannie Mac's program.