Freddie Mac Single-Family Seller/Servicer Guide Section 4204.3 — Temporary subsidy buydown plans

Freddie Mac Single-Family Seller/Servicer Guide Section 4204.3 — Temporary subsidy buydown plans

4204.3: Temporary subsidy buydown plans (04/12/26) This section contains information related to: ■ Eligible buydown plans ■ Ineligible Mortgages ■ Special underwriting requirements for Mortgages with buydown plans ■ Special documentation requirements for Mortgages with buydown plans ■ Other requirements for Mortgages with buydown plans ■ Delivery requirements for Mortgages with buydown plans (a) Eligible buydown plans Temporary subsidy buydown plans (“buydown plans”) allow the Borrower to benefit from a temporary subsidy of the monthly payment of principal and interest. Freddie Mac will purchase Limited Buydown Mortgages and Extended Buydown Mortgages pursuant to the terms of the Purchase Documents and this section. For a Limited Buydown Mortgage, the initial interest rate must be: ■ Temporarily reduced to no more than two percentage points below the Note Rate, and ■ Increased by no more than one percentage point annually for no more than two years from the first scheduled payment date For an Extended Buydown Mortgage, the initial interest rate must be: ■ Temporarily reduced by more than two percentage points, but no more than three percentage points, below the Note Rate, and ■ Increased by no more than one percentage point annually for more than two years, but no more than three years, from the first scheduled payment date Home Possible® Mortgages and HeritageOne® Mortgages with buydown plans must meet the requirements of this section and Sections 4501.2 and 4504.5, respectively. (b) Ineligible Mortgages The following Mortgages are not eligible for buydown plans: Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-10 ■ 3/6 Month ARMs ■ 5/6-Month ARMs secured by a 3-to 4-unit Primary Residence ■ Cash-out refinance Mortgages ■ “No cash-out” refinance Mortgages with a buydown plan funded with a lender credit derived from an increase in the interest rate ■ Investment Property Mortgages For any Mortgage with a buydown plan, the initial interest rate may not be more than three percentage points below the Note Rate. The buydown plan may not extend for more than three years after the first scheduled payment date. (c) Special underwriting requirements for Mortgages with buydown plans (i) Establishing housing and debt payment-to-income ratios For fixed-rate Mortgages, the Seller must qualify the Borrower using monthly payments calculated at the Note Rate; however, the interest rate used to qualify the Borrower must be equal to or greater than the maximum interest rate that may apply during the first five years after the date on which the first regular periodic payment will be due, based on the loan amount over the term of the Mortgage. For ARMs, the Seller must qualify the Borrower using monthly payments calculated in accordance with Section 4401.2. (ii) Calculation of reserves If reserves are required, the reserves must be calculated using the Note Rate. Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-11 (d) Special documentation requirements for Mortgages with buydown plans The Mortgage file must contain: ■ A copy of the executed buydown agreement, and ■ The Seller’s calculations of the total cost of the buydown plan, any interested party contributions and the annual percentage increase in the Borrower’s monthly principal and interest payment during the buydown period. The buydown agreement must provide that: ■ The funds in the buydown account will be automatically applied each month to reduce the monthly payment of principal and interest; ■ If, for any reason, the buydown funds are not available or the buydown funds are not paid, the Borrower will remain obligated to make the full monthly Mortgage payments required under the terms of the Note; and ■ The Borrower will not assign, transfer or close the buydown account, or withdraw buydown funds, except as permitted by the terms of the buydown agreement (e) Other requirements for Mortgages with buydown plans (i) Custodial Account requirements for buydowns Each buydown plan must be fully funded at origination. See Sections 8302.1(a)(ii) and 8302.2(b) for Custodial Account requirements for buydown plans. (ii) Note and Security Instrument No references to the buydown plan are permitted in the Note and Security Instruments. In no event may the buydown agreement change the terms of the Note or the Security Instrument. The interest rate and monthly payments shown in the Note must be calculated without reference to the buydown plan. (iii) Servicing requirements If the Mortgage is foreclosed, the funds in the buydown account must be used to reduce the Mortgage debt. If the Mortgage is paid in full, the funds must be distributed in accordance with the buydown agreement. If the property is sold and the Mortgage is assumed by the purchaser, the funds may continue to be used to reduce the Mortgage payments in accordance with the original terms of the buydown agreement. Freddie Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-12 (f) Delivery requirements for Mortgages with buydown plans Refer to Section 6302.18 for information on the delivery and pooling requirements for Mortgages with a buydown plan.

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