Expanding Homeownership Responsibly with

Freddie Mac® Home Possible

March 23, 2017

© Freddie Mac 2

A Better Freddie Mac …and a better housing finance system

For families

...innovating to improve the liquidity, stability and

affordability of mortgage markets

For customers

...competing to earn their business

For taxpayers

...reducing their exposure to mortgage risks

© Freddie Mac 3

Offering financing solutions to help qualified borrowers

become homeowners

» For low- and moderate-income households

» For first-time homebuyers

Supporting underserved markets

» Rural housing

» Manufactured housing

Working with housing finance agencies

Forming alliances across the industry to create ownership

opportunities

Conducting education and outreach

Providing resources, training, and tools

Advancing Affordable Lending

© Freddie Mac 4

2016 First-Time Homebuyer Demographics

Share slipped 32% in 2016 – Well below the historical

norm of 40%

Median age – 30; Median income - $77,400

Down payment sources – 81% savings; 27% gifts from

friends or relatives

Typical FTHB home: 1,720 sq. ft.

FTHBs plan to stay in homes for 10 years

First Time Homebuyers

32%

Repeat Homebuyers

68%

2016 Homebuyers

Married 67%Single Female

15%

Single Male 9%

Unmarried Couple 7%

Other 2%

Source: National Association of Realtors

2016 Home Buyer and Seller Generational

Trends

First-time homebuyers

© Freddie Mac 5

15.9

27.6

39.2

5.510.1

17.2

0

10

20

30

40

50

2015 2020 2025

(millio

ns)

Households Homeowners

4.6mm new

Millennial

homeowners

by 2020

11.7mm new

Millennial

homeowners

by 2025

Sources: JCHS of Harvard University – chart depicts middle projection (interpolated):

http://www.jchs.harvard.edu/research/publications/baseline-household-projections-next-decade-and-beyond ; Collingwood Group.

Growth in Millennial Households and

Homeowners

© Freddie Mac 6

Hispanics

and Asians

growing

fastest

Growth in Millennial Households

and Homeowners

© Freddie Mac 7

Millennial characteristics

Millennials

AGE 26.3 years

$50,908

636

14%

$4,002

64%

AVERAGE INCOME INSIGHT

AVERAGE

AVERAGE

PERCENT WITH A MORTGAGE

AVERAGE REVOLVING CARD BALANCE

STUDENT LOAN DEBT AS A PERCENTAGE OF TOTAL DEBT

(for those with student debt)

1 in 5 Millennials

are Hispanic:

© Freddie Mac 8

Mortgage Ready= Strong + Moderate

Mortgage readiness – underwriting criteria:

Strong

VantageScore® 3.0 greater than 737

Total DTI < 45%

Moderate

VantageScore® 3.0 between 661 and 736

Total DTI < 45%

Weak

VantageScore® 3.0 less than 661 AND / OR

Total DTI > 45%

Foreclosure in the past 84 months

Bankruptcy in the past 12 months

Severe delinquency (120-180 DPD) in the past 12 months

No foreclosures in the past 84 months

No bankruptcies in the past 12 months

No severe delinquencies (120-180 DPD) in the past 12 months

© Freddie Mac 9

How many millennials are Mortgage Ready?

Millennials

Strong 14%

Moderate 19%

Weak 50%

Have a mortgage 14%

Unscorable 3%

24,508,934

Strong + Moderate

Mortgage Ready Millennials

19%

23%22%

26%

Age Distribution of Weak Segment:

18-21

22-25

26-29

30-34

29.1%

70.5%

Near-Moderate in Weak Segment:

601-660< 601>660

VantageScore® 3.0

range:

© Freddie Mac 10

Mortgage Ready millennials in Minneapolis

MSA

Variables ↓, Metro-Areas →

Minneapolis MSA (Minneapolis-St. Paul-Bloomington, MN-WI)

Percentage of millennials in the metro area a 32%

Percentage of millennials with a mortgage b 22%

Percentage of millennials mortgage ready c 41%

Percentage of mortgage-ready millennials that can afford SF d 51%

Percentage of mortgage-ready millennials that can afford condo e 87%

Housing Stock (Inventory/Sales) f 1.76

Note: Experian data for Dec 2015 to investigate mortgage ready millennials. Data combines anonymized individual credit bureau data with marketing data to obtain race/ethnicity

associated with each individual and is weighted by American Community Survey’s (ACS) Public Use Microdata Sample (PUMS) data. Housing Stock data from Redfin for the month of

May 2016.

a. Calculates the share of millennials in the metro area.

b. Calculates the percentage of the millennials in the metro area that have at least one mortgage trade.

c. Calculates the percentage of the millennials in the metro area that are mortgage ready. Please refer to slide 3 for definition.

d. Calculates the percentage of the mortgage ready millennials in the metro area that can afford a median-priced single family house. The calculations are based on affordability

indicators such that if the quarterly gross income exceeds the annual mortgage payment on a median priced single family house (under the assumption of 10% down payment, 4%

interest rate and 30 year contract), then the house is affordable.

d. Calculates the percentage of the mortgage ready millennials in the metro area that can afford a median-priced condo. The calculations are based on affordability indicators such

that if the quarterly gross income exceeds the annual mortgage payment on a median priced condo (under the assumption of 10% down payment, 4% interest rate and 30 year

contract), then the condo is affordable.

e. Housing Stock indicator =Inventory/Sales. Includes single-family, condo and townhomes. Industry Rule-of-thumb is if the ratio exceeds 6, then stock is adequate, otherwise it is not.

© Freddie Mac 11

Minneapolis MSA amongst top 15 metro areas

with mortgage-ready millennials

Note: Experian data for Dec 2015 to investigate mortgage ready millennials. The Housing Stock data is from Redfin for the month of May 2016.

© Freddie Mac

Agenda

Key Selling Points and

Resources

Sources of

funds

General Requirements

Features and Benefits

Home Possible

© Freddie Mac 13

Responsible, high LTV mortgage options for first-time homebuyers,

low- and moderate-income borrowers and move up buyers

Borrower Profile

First-time homebuyers

Repeat homebuyers

Families in underserved areas

New immigrants

Very-low and low-to-moderate

income borrowers

Home Possible Mortgages – Features and

Benefits

Key Features

Maximum LTV/TLTV:

Home Possible Advantage -

97% LTV / 105% TLTV

Home Possible – 95% LTV /

95% TLTV

Eligible annual income of up to

100% of Area Median Income

(higher in high cost areas)

No income limit in Underserved

Areas

Homebuyer education only

required for one borrower when

all borrowers are First-Time

Homebuyers

Borrower Benefits

Low down payment

No minimum borrower

contribution from personal

funds

Flexible down payment and

closing cost funding options

No cash-out refinancing

No reserves required on 1

unit owner-occupied

properties (2 months reserves

on 2-4 units)

Homebuyer education

available at no cost to the

borrower

© Freddie Mac 14

Eligibility Criteria Home Possible Home Possible Advantage

Eligible Mortgages

− 15-, 20- and 30-year fixed− 5/1, 7/1 and 10/1 CMT- and LIBOR-

indexed ARMS− Construction Conversion and Renovation

Mortgages

− 15-, 20- and 30-year fixed− Construction Conversion and Renovation

Mortgages

Occupancy Primary residence Same

Property Type1- to 4- units: Single-family, Condos, PUDs, Manufactured Housing (1-unit primary residences only)

1-unit: Single-family, Condo, PUD

Underwriting Method Loan Prospector or Manual Same

Other Income

Boarder income (1-unit properties only) up to 30% of qualifying income from this source allowed if 12 months documentation of recent rent payments and continued rental arrangement included

Same

Fund Sources for Down Payment & Closing Costs

Gifts, grants, Affordable Seconds Same

Home Possible Mortgages Eligibility Criteria*

* See Freddie Mac Single-Family Seller/Servicer Guide for details.

© Freddie Mac 15

General Requirements

Area Median Income (AMI) Limit:

The maximum allowed qualifying income based on the median income

for the area in which the mortgaged premises is located

Guide Chapter 4501

Affordable Income and Property Eligibility

*All stable monthly income for all borrowers for qualifying. The Seller must attempt to verify all income reported on the

Form 65, Uniform Residential Loan Application, in accordance with the Guide. Any discrepancies, including

underreported income, must be corrected before submitting the mortgage to Loan Prospector. All income reported on

the Form 65 that has been verified and that meets the criteria for stable monthly income as described in Chapters 5300-

5305 must be used to qualify the borrower and submitted to Loan Prospector® for Loan Prospector Mortgages.

Qualifying Income* up to 100% of the AMI

Higher AMI limits in designated High Cost Areas

Lifted in Underserved Areas

© Freddie Mac 16

Home Possible Income & Property Eligibility Tool

www.FreddieMac.com/Home

Possible/eligibility.html

© Freddie Mac

Home Possible Income & Property Eligibility Tool

17

© Freddie Mac

Home Possible Income and Property Eligibility Tool

18

© Freddie Mac

Home Possible Eligible Census Tracts -

Minneapolis

19

© Freddie Mac

Home Possible Eligible Census Tracts –

St. Paul

20

© Freddie Mac 21

What is an “Underserved Area”?

Underserved Areas are determined at the census tract or county level on the

basis of median income, minority population level and disaster area

designation. An Underserved Area is defined as any of the following:

Low income tract: Census tracts or block numbering areas in which

median income does not exceed 80% of the AMI.

Disaster area designation: Disaster areas are designated at the county

level by FEMA. A county will be treated as a designated disaster area for

three years, beginning January 1 after the FEMA designation.

Minority census tracts: Census tracts that have a minority population of

at least 30%.

When a property is located in a designated Underserved Area, AMI

requirements do not apply. The Home Possible Income Limit shown in the

eligibility tool will say “No Limit”.

© Freddie Mac 22

Number of UnitsMinimum Contribution from Borrower Personal Funds

Reserves

Home Possible Advantage

1-unit primary residence,

that is not a Manufactured

Home

None required None required

Home Possible Mortgages

LTV/TLTV/HTLTV

< 80%

LTV/TLTV/HTLTV

> 80% < 95%

1-unit primary residence None required None required None required

2- to 4-unit primary residence None 3% 2 months

Manufactured Home None None required None required

Features and Benefits: Borrower Contribution

and Reserves

Guide Chapter 4501

© Freddie Mac 23

Flexible Sources of Funds

Flexible

Sources of Funds

Financing Concessions» 3% of value for LTV/TLTV ratio > 90%

» 6% of value for LTV/T LTV ratio > 75% < 90%

» 9% of value for LTV/TLTV ratio < 75%

Unsecured Loan: Originating Lender (Refer to Guide Section 4204.3(b))

Borrower Personal Funds

From the Single-Family Seller/Servicer Guide

Chapter 4501

IDA: include matching funds only if

not subject to recapture tax

Rent Credits

Trade Equity

Community Savings

deposited by the Borrower

Depository accounts

Loan secured by Finan Asset

Sale of Borrower Asset

Cash on hand

Trust disbursement

Pooled funds

Credit card charges, cash advances or unsecured line

of credit to pay fees associated with the Mortgage

application process (Refer to Guide Section 4501.10)

Other

Borrower Funds

Gifts–Related Person

Gift/Grant: Agency or Seller(as the originating lender)

Affordable Seconds

Secondary Financing (must be Affordable Second)

Employer Assisted Homeownership Benefit

IDA: matching funds subject to recapture tax

Unsecured loan: Agency/Related Person or Community Savings Systems (funds in excess of Borrowers contribution)

Sweat equity (once 5% downpayment from personal funds has been met)

© Freddie Mac

Subsidized secondary financing or

other financial assistance, evidenced in

land records, that is provided by an

Agency and that meets the

requirements of Section 4204.1

Sources of Funds: Secondary Financing

*Home Possible Advantage secondary financing source

must be an Affordable Second, and it may not be a home

equity-line-of-credit

Note: RHS Leveraged Seconds are not permitted with Home

Possible Advantage

Variety of sources such as:

a municipality which includes any duly

authorized authority or agency of the

federal, state, local or municipal

government; a nonprofit community or

religious organization (other than a

credit union); the borrower’s employer;

or a Regional Federal Home Loan Bank

under one of its affordable housing

programs that meet the requirements of

Guide Chapter 4204.

Evidenced in land records

www.FreddieMac.com/singlefamily/expmkts/affprod.html

Affordable Seconds®*

Guide Chapter 5501

© Freddie Mac

When all borrowers are first-time

homebuyers, at least one

qualifying borrower must

participate in a homeownership

education program before the Note

Date*

» A copy of a Homeownership Education

Certification, or another document with

comparable information, to be retained

in the mortgage file

2- to 4-unit primary residence

(Home Possible only): At least one

qualifying Borrower must

participate in a landlord education

program before the Note Date*

» A copy of a certificate evidencing

successful completion of the landlord

education program must be retained in

the Mortgage file

This requirement stresses the importance of utilizing a curriculum that contains the minimum

core content specified by the National Industry Standards for Homeownership Education and

Counseling. These standards help ensure quality education and counseling is delivered with

fairness and respect to homebuyers and homeowners

Homeownership Education

Guide Chapter 4501

*or the Effective Date of Permanent Financing for Construction Conversion and Renovation Mortgages

Purchase Transactions Required:

Post-purchase and Early Delinquency Counseling

© Freddie Mac 26

Key Selling Points and Resources

© Freddie Mac 27

Key Selling Points

High LTV – No minimum down payment

Higher AMI limits (100% AMI;100%+ in high cost areas)(not just

80% AMI) means broader borrower income eligibility so

more borrowers will qualify

No income limit on properties located in Underserved

Areas

Flexible sources of funds

Free homebuyer education – Credit Smart

Can use Loan Product Advisor to provide greater

certainty that the loan meets purchase requirements

© Freddie Mac 28

Why choose Home Possible over FHA?

Mortgage Insurance

Stays for the life of the loanEnds when LTV < 80%

FHA: Upfront AND monthly

premiums

Conventional MI: monthly

OR single premiums

Down payment funds applied

to principal AND upfront PMI

Down payment funds

applied to principal

WHAT THIS MEANS: With more funds applied toward the

principal upfront, a Home Possible mortgage with PMI lets the

borrower build equity faster.

Home Possible FHAvs.

Required regardless

of the LTV

Only required if the LTV is 80%

or higher

© Freddie Mac 29

For more information on Home Possible

FreddieMac.com/homepossible

FreddieMac.com/learn/mp/homepossible.html

© Freddie Mac 30

Website for consumers on renting, buying and owning a home

My Home by Freddie Mac

MyHome.FreddieMac.com

© Freddie Mac 31

Financial education curriculum

» 12 financial education modules

» Available online and in multiple

languages

» Use CreditSmart workshops to

gain entry to realtor shops

» Counts for CRA credit

CreditSmart®

FreddieMac.com/

CreditSmart

© Freddie Mac 32

Work with trusted national nonprofit intermediaries

Support Freddie Mac’s ongoing commitment of:

» Preparing prospective buyers for responsible homeownership

» Helping struggling borrowers with Freddie Mac-owned mortgages

avoid foreclosure

HUD-certified counselors

13 Borrower Help Centers across the country (Phoenix, Ontario,

Los Angeles, Miami, Orlando, Ft. Lauderdale, Atlanta, Chicago (2),

Metropolitan Washington, DC, Detroit, Las Vegas, New York City)

Work with lenders in minority and underserved communities

Freddie Mac Borrower Help Centers

and National Network

© Freddie Mac 33

Down Payment Resource Website - Helps lenders connect their

borrowers with homeownership programs that can help with down

payment.

Down Payment Assistance

* Available on FreddieMac.com

DownPaymentResource.com/are-

you-eligible/

© Freddie Mac

Marketing Materials You Can Use

FreddieMac.com/purchasemarket

© Freddie Mac

FreddieMac.com/RealEstatePros

5 Ways to Boost Your Referrals

Be a Housing Industry Expert

Networking Events and Trainings

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e.html

© Freddie Mac

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© Freddie Mac 37

Low interest rates and lower home prices will continue

homebuyer affordability

Build business from first-time homebuyers

Prepare for changing demographics

Qualified first-time homebuyers need your help to overcome

misconceptions and concerns

Freddie Mac provides a wide variety of products and

offerings to help you attract well-qualified buyers

What does this all mean for

YOU and YOUR borrower?

37

© Freddie Mac 38

&QA