Freddie Mac Single-Family Seller/Servicer Guide Section 4204.2 — Affordable Seconds®

Freddie Mac Single-Family Seller/Servicer Guide Section 4204.2 — Affordable Seconds®

4204.2: Affordable Seconds® (10/01/25) This section contains information related to: ■ Special requirements for Affordable Seconds® ■ Special requirements for Affordable Seconds secured by properties subject to equity sharing agreements ■ Special delivery instructions Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-4 (a) Special requirements for Affordable Seconds® Affordable Seconds must comply with the requirements of Section 4204.1(a) and the requirements of this section, regardless of whether the Affordable Second is originated simultaneously with the First Lien Mortgage (i.e., the First Lien Mortgage and the Affordable Second are originated on the same day) or is being subordinated to the First Lien Mortgage through a refinance transaction. Note: A checklist for Affordable Seconds is available as an additional resource at https://sf.freddiemac.com/docs/pdf/affordable-seconds-checklist.pdf. The special requirements in Section 4204.2(b) must be met if an Affordable Second is secured by a property that is subject to an equity sharing agreement. Affordable Seconds secured by Manufactured Homes or CHOICEHomes® must meet the additional requirements in Sections 5703.5(c) and 5703.12(g). Note: Refer to Section 4504.5 for special requirements for HeritageOne® Mortgages with Affordable Seconds. (i) Funding source The Affordable Second must not be funded in any way through the First Lien Mortgage transaction, including differential pricing in rate, discount points or fees for individual loans. The Seller may not participate in an equity sharing agreement with respect to the Mortgaged Premises, unless the equity sharing agreement meets the requirements of Section 4204.2(b). The Affordable Second must not be funded by the property seller or another interested party to the transaction, except as permitted in Section 4204.2(a)(i)(B), Section 4406.10 for Mortgages secured by properties subject to income-based resale restrictions or Section 4502.3(a) for Community Land Trust Mortgages. The terms and conditions of the Seller’s secondary financing or financial assistance program must be made available by the Seller to Freddie Mac upon request. (A) Non-Seller-funded Affordable Seconds An Affordable Second must be provided by an Agency, a credit union or a community development financial institution (CDFI) pursuant to an established, ongoing, documented secondary financing or financial assistance program. With respect to the subject Mortgage, an Agency or credit union must not: Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-5 ■ Be the Seller or have participated in any aspect of the Mortgage origination process, other than to assess the Borrower’s ability to meet the requirements of the program and to fund the Affordable Second ■ Be affiliated with, under contract to, or financed (directly or indirectly) by the Seller or by any party that participated in the Mortgage origination process such as the property seller, builder, developer or real estate agent With respect to the subject Mortgage, a CDFI working with an Agency must: ■ Be a CDFI that has received CDFI certification from the Treasury’s CDFI Fund (a “Certified CDFI”) ■ Remain a Certified CDFI through the date the Mortgage is sold to Freddie Mac ■ Not be the Seller The Agency with which the CDFI is working may participate in the origination of the subject Mortgage. The Agency may be affiliated with, under contract to or financed by the Certified CDFI if the Agency is a nonprofit entity and third-party originator that works with the Certified CDFI. For these purposes, “affiliated with” means that the Agency and the Seller or other party are related to each other as a consequence of one entity directly or indirectly controlling the other party, being controlled by the other party or being under common control with that party. The First Lien Mortgage must be: ■ A fixed-rate Mortgage or an ARM with an initial fixed-rate period of five years or more, ■ A purchase transaction or a “no cash-out” refinance, and ■ Secured by a 1-4 unit Primary Residence (B) Seller-funded Affordable Seconds A Seller may be the source of an Affordable Second if the following requirements are met: ■ If the Seller is not a CDFI, the Seller must: ❑ Be a depository institution Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-6 ❑ Have an Affordable Seconds program that supports its affordable lending and/or mission focused program(s), or a program designed to broadly support its Community Reinvestment Act (CRA) requirements ■ If the Seller is a credit union that is not required by law to participate in the CRA, the credit union must have an Affordable Seconds program that supports its affordable lending and/or mission-focused program ■ If the Seller is a CDFI, the Seller may be a non-depository institution if the established Affordable Seconds program supports affordable lending and the credit needs of prospective homebuyers in the Seller’s market(s) ■ The First Lien Mortgage must be: ❑ A Home Possible® Mortgage ❑ A fixed-rate Mortgage or an ARM with an initial fixed-rate period of five years or more ❑ An Accept Mortgage ❑ A purchase transaction Mortgage ❑ Secured by a 1-unit Primary Residence, and ❑ A Retail Mortgage (ii) Maturity date The terms of the Affordable Second must not require a balloon payment that becomes due before the maturity date or before payment in full of the First Lien Mortgage. If the Affordable Second is an Employer Assisted Homeownership Benefit, the terms of the secondary financing must not require immediate repayment in full, except when: ■ The Borrower terminates their employment for any reason, or ■ The employer terminates the Borrower’s employment for any reason other than the Borrower’s long-term disability, elimination of the Borrower’s position or a reduction in force (iii) Scheduled payments The Affordable Second may be forgivable or repayable. The interest rate of the Affordable Second must not be more than 2% higher than the interest rate of the First Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-7 Lien Mortgage. Accrued interest that is added to principal may not at any time during the term of the First Lien Mortgage increase the total loan-to-value (TLTV) ratio beyond the maximum TLTV ratio allowed for the First Lien Mortgage. If monthly payments on the Affordable Second are required and begin before the due date of the 61st monthly payment under the First Lien Mortgage, such monthly payments must be included in the Borrower’s monthly housing expense-to-income ratio and monthly debt payment-to-income ratio. If monthly payments on the Affordable Second begin on or after the due date of the 61st monthly payment under the First Lien Mortgage, or if repayment of the Affordable Second is due only upon sale or default, the amount of the Affordable Second monthly payment may be excluded from both ratios. (iv) Financing structure The Affordable Second must not be a Home Equity Line of Credit (HELOC). (v) Documentation requirements The Seller must retain in the Mortgage file the following documentation for the Affordable Second: ■ A Note or other evidence of the terms of the Affordable Second ■ The Settlement/Closing Disclosure Statement or an alternative form required by law that evidences the fees and costs related to the Affordable Second paid by the Borrower at closing ■ For refinance transactions, evidence of the subordination of any existing Affordable Second (vi) Affordable Seconds proceeds Proceeds from the Affordable Second may be used toward the Down Payment or Closing Costs. (b) Special requirements for Affordable Seconds secured by properties subject to equity sharing agreements For-profit entities may not share in the appreciation of the Mortgaged Premises. If the terms of an Affordable Second permit the Agency or subsidy provider to share in the appreciation of the Mortgaged Premises, the following requirements must be met: Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-8 ■ At the time of the origination of the Affordable Second, the share of appreciation to which the Agency or subsidy provider is entitled, expressed as a percentage, must not exceed the original principal amount of the Affordable Second divided by value as determined in accordance with Section 4203.1 (“the percentage of the Affordable Second”), except as stated in the next bullet. Example: If the original principal amount of the Affordable Second is equal to 5% of value, the percentage of the Affordable Second is 5%, and the maximum share of appreciation the Agency or subsidy can receive is 5%. ■ The share of appreciation to which the Agency or subsidy provider is entitled may exceed the percentage of the Affordable Second if the following requirements are met: ❑ The Agency or subsidy provider must not charge interest on the Affordable Second ❑ The share of appreciation must not exceed 75%, unless the Affordable Second provider is a subsidy provider or program administrator managing an income-based resale restriction program and the Seller confirms that: ■ The special requirements for Mortgages secured by properties subject to income- based resale restrictions in Chapter 4406 are met, and ■ The subsidy provider or program administrator has processes in place to allow the Borrower to receive a share of the proceeds of a subsequent sale of the property in instances where the resale sales price is higher than the subsidized sales price paid by the Borrower to purchase the property ■ The terms of the Affordable Second must allow the Borrower to recover all the following before the Agency or subsidy provider is able to share in the appreciation: ❑ Any portion of the Down Payment paid from Borrower funds ❑ Customary costs incurred by the Borrower in selling the property ❑ Payments of principal made under the First Lien Mortgage ■ The right of the Agency or subsidy provider to share in the appreciation must be clearly subordinate to the First Lien Mortgage (c) Special delivery instructions Refer to Section 6302.34(b)(iv) for special delivery instructions for Mortgages with Affordable Seconds. Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-9

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