New Freddie Mac 2nd Position Mortgage
Freddie Mac just announced a new second position mortgage that could be PERFECT for ADUs and save homeowners tens of thousands of dollars…
…or it could be an UNUSABLE nothing burger that never goes anywhere…
…and YOU can make the difference between those two outcomes with a simple email
Use this template email
Subject: Public Comment - New Product Notice for Freddie Mac Second Mortgage Proposal
Body of email:
Hello,
The new second mortgage proposal from Freddie Mac is very exciting and I'd like to make some recommendations.
I am a homeowner and would be eager to use this product to access equity in my home and build an Accessory Dwelling Unit (ADU).
In my region, ADU construction and related fees often add up to $250,000 so I hope that the max loan value will be conducive.
There are many homeowners in my position who equity in our homes but can't access it without refinancing our first position mortgages.
If you allow for high maximum loan values, this product will be very appealing and will help create more missing middle housing around the country.
The risks should be mitigated by the LTV limit of 80% and the fact that Freddie owns the primary mortgage.
Regards,
YOURNAME
CITY, STATE
Hello,
The new second mortgage proposal from Freddie Mac is very exciting and I'd like to make some recommendations.
I am a homeowner and would be eager to use this product to access equity in my home and build an Accessory Dwelling Unit (ADU).
In my region, ADU construction and related fees often add up to $250,000 so I hope that the max loan value will be conducive.
There are many homeowners in my position who equity in our homes but can't access it without refinancing our first position mortgages.
If you allow for high maximum loan values, this product will be very appealing and will help create more missing middle housing around the country.
The risks should be mitigated by the LTV limit of 80% and the fact that Freddie owns the primary mortgage.
Regards,
YOURNAME
CITY, STATE
More information
You can look up if Freddie owns your first mortgage here: https://myhome.freddiemac.com/resources/loanlookup
Freddie Mac announced a new loan product, and it could save you tens of thousands of dollars when you’re getting financing to build an ADU. Or it could be a big nothing burger – and YOU can make a difference.
The people in this building work at the FHFA and they need to hear from people like you.
I’m going to explain very briefly what this loan is, and the specific feedback you need to send in to make it useful
But first I need to explain some of the limitations of this loan, and how we can tweak it to be better.
Okay, so the great thing about this is it’s a second position mortgage. So you can get a bunch of money secured against your house, WITHOUT losing your current mortgage rate. Since so many homeowners have incredible rates right now (like 3% 4%), and current mortgage rates are much higher (like 7% 8%), we’ve seen a real crunch where nobody wants to refi their primary.
By itself, this isn’t revolutionary. There are already quite a few second position products - like our sponsors renofi (link in the description below).
But what’s different here is that when Freddie does something, it has HUGE implications across the entire country.
To understand this, you have to wrap your head around how lenders actually work.
When you go to a lender, and get a mortgage or a HELOC, they have to have a certain amount of money in the bank for your loan. And if they kept your loan in their portfolio, they’d be really limited to how many loans they can make.
So the banks don’t hold all the loans they make. They turn around and sell those loans on the secondary market to entities like Fanny and Freddie.
So if Freddie says its willing to deal in these second position mortgages, it can create a secondary market that will really motivate lenders to offer more second position loans.
Lots of lenders will look at this as an opportunity. They know that borrowers don’t like refinancing that primary mortgage - and this will be a very appealing alternative.
But now we get to the tricky part where the tweaks matter a lot.
- What kind of limits is Freddie going to set on things like the max loan value?
- What kind of products will lenders actually introduce into the market?
That second question we can’t deal with right now. It’s honestly. It’s complicated. I just spent a ton of time with Julee Felsman from rate.com learning how this works and honestly, I think that video would bore you to tears (even though Julee is a great teacher).
But the first question is something we can actually affect.
Some of the limits have already been set as part of this announcement.
But this is a public comment period where you can email the FHFA (the people sitting in this office behind me) with feedback and you should send 1 of these 2 messages:
- I am a homeowner interested in using this loan to build an ADU - it will likely cost me $200,000 to finance this construction in my market, so I hope that the loan maximum is high enough to accommodate my project.
- I am a homeowner who would love to use this but my first loan isn’t owned by Freddie Mac - I hope you’ll encourage Fannie and create a broader secondary market that will help us all.
Record scratch. That’s right, one of the limits on this secondary product is that Freddie has to own your first mortgage. You can look up whether Freddie owns your mortgage here: https://myhome.freddiemac.com/resources/loanlookup
If your current mortgage is owned by Freddie, send that first message about max loan value
If your current mortgage is not owned by Freddie, send that second message about encouraging Fannie and more secondary loans
If they hear from like 20 people, they’ll be blown away. Normal people rarely write into this feedback process. So every email matters.
And for more information about loans and secondary markets, check out this video here
LETS BUILD MORE HOUSING
