Washington, D.C. – Today, the Federal Housing Finance Agency (FHFA) announced its conditional approval for Freddie Mac to undertake a limited pilot program aimed at purchasing specific types of single-family closed-end second mortgages. This move marks a significant step following FHFA’s recent introduction of a proposed new product by either Freddie Mac or Fannie Mae (the Enterprises), as mandated by the Prior Approval for Enterprise Products regulation, effective since April 2023.
Director Sandra L. Thompson highlighted the rigorous evaluation process that led to this decision, stating, "The thoughtful engagement from public stakeholders confirmed the value of a transparent process for evaluating potential new Enterprise products and informed the parameters of the conditional approval."
The pilot initiative will allow FHFA to assess whether this closed-end second mortgage product effectively serves Freddie Mac’s statutory objectives and benefits borrowers, with a particular focus on rural and underserved communities.
FHFA’s role in overseeing new Enterprise activities underscores its responsibility to ensure compliance with statutory requirements, safeguard public interest, and maintain financial stability. This oversight is governed by FHFA’s Prior Approval for Enterprise Products regulation.
Key limitations of the pilot include:
- A maximum purchase volume capped at $2.5 billion,
- A duration not exceeding 18 months,
- A maximum loan amount aligned with Consumer Financial Protection Bureau guidelines,
- A minimum seasoning period of 24 months for the first mortgage,
- Eligibility restricted to principal/primary residences.
At the conclusion of the pilot, FHFA will analyze data on Freddie Mac’s second mortgage purchases to assess its effectiveness. Any expansion of volume, duration, or programmatic transition will necessitate a new public comment period and FHFA approval, informed by pilot results.
This initiative reflects FHFA’s commitment to innovation in housing finance while ensuring rigorous evaluation and transparency in introducing new products to the market.
For more information, please visit FHFA’s official announcement on their website.