source:
  type: regulation
  id: fhlmc-4204
  authority: FHLMC Single-Family Seller/Servicer Guide Chapter 4204 — Secondary Financing and Other Financing
    Arrangements
  description: 'FHLMC Single-Family Guide §4204.1 governs Mortgages with secondary

    financing (subordinate liens, HELOCs, EAH Benefits, Affordable

    Seconds carve-out): disclosure to appraiser and MI; prohibition on

    sharing LTV-target information with the appraiser; no-equity-

    sharing rule (except Affordable Seconds); 5-year minimum

    amortization, maturity, and call-provision rules for new secondary

    financing; regular-monthly-payment-covering-interest rule;

    subordination-evidence requirement for existing secondary

    financing. Fills FHLMC Selling Guide Chapter 4204 gap.

    '
obligations:
- id: fhlmc-4204-full
  canonical_id: fhlmc-4204-full
  section: FHLMC Single-Family Seller/Servicer Guide Chapter 4204
  description: "4204.1: Mortgages with secondary financing (03/05/25) \n \n■ Requirements for all secondary\
    \ financing \n \n■ Additional requirements for new secondary financing \n \n■ Additional requirements\
    \ for existing secondary financing \n \n■ Credit Fees and other delivery instructions for Mortgages\
    \ with secondary fin…"
  type: dont
  tags:
  - regulator-direct
  - section-complete
  - fhlmc-guide
  primary_source:
    tier: 1
    authority: FHLMC Single-Family Guide §4204.1(a) — Requirements for all secondary financing
    source_class: fhlmc-guide
    source_url: https://guide.freddiemac.com/app/guide/
    snapshot_id: fbba421721d90cb1
    fetched_at: '2026-05-25T14:09:48Z'
    content_hash: sha256:placeholder-snapshot-content-hash-from-source-json
    paragraph_quote: "4204.1: Mortgages with secondary financing (03/05/25) \n \n■ Requirements for all\
      \ secondary financing \n \n■ Additional requirements for new secondary financing \n \n■ Additional\
      \ requirements for existing secondary financing \n \n■ Credit Fees and other delivery instructions\
      \ for Mortgages with secondary financing \n \n(a) Requirements for all secondary financing \n \n\
      Secondary financing means any financing that is subordinate in lien priority to the First Lien \n\
      Mortgage. Freddie Mac will purchase First Lien Mortgages with secondary financing under the \nterms\
      \ of the Purchase Documents and this section. \n \nThe terms of any secondary financing must be\
      \ disclosed to the appraiser and to the MI. The \nsecondary financing terms that must be disclosed\
      \ include the Note Rate and the name of the \ninstitution or individual providing the financing.\
      \ The Seller may not indicate a value needed to \nsupport the transaction, or provide to the appraiser\
      \ any information about an expected loan-tovalue (LTV) ratio. \n \nExcept as specifically stated\
      \ in Section 4204.2 with respect to Affordable Seconds®, the terms of \nsecondary financing must\
      \ not permit the provider or any other party to share in the appreciation of \nthe Mortgaged Premises\
      \ (equity sharing). \n \nSecondary financing is not eligible for sale to Freddie Mac. \n \nNote:\
      \ For special requirements for Affordable Seconds, refer to Section 4204.2. \n \n\n \nPage 4204-2\
      \ \n(b) Additional requirements for new secondary financing \n \nRequirements for new secondary\
      \ financing (i.e., the First Lien Mortgage and the \nsecondary financing originated on the same\
      \ day) \nAmortization \nThe amortization period for the secondary financing must run for at \nleast\
      \ five years after the Note Date, unless the secondary financing \nis fully amortizing or is a Home\
      \ Equity Line of Credit (HELOC). \nCall provision \nThe secondary financing must not contain a call\
      \ provision that is \nexercisable within the first five years after the Note Date, unless the \n\
      secondary financing is a HELOC. \nMaturity date \n \nThe maturity date of the secondary financing\
      \ must be at least five \nyears after the Note Date, unless the secondary financing is fully \n\
      amortizing or a HELOC. \nScheduled \n \nThe terms of the secondary financing must provide for regular\
      \ \nmonthly payments that cover at least the interest that accrues during \nthe previous month.\
      \ \nThe Seller must include a copy of the following documentation in \nthe Mortgage file: \n■ Note\
      \ or other evidence of secondary financing terms \n■ Settlement/Closing Disclosure Statement or\
      \ an alternative form \nrequired by law that evidences the fees and costs related to the \nsecondary\
      \ financing paid by the Borrower at closing \n■ For HELOCs, the HELOC agreement showing all fees\
      \ and costs \npaid by the Borrower at closing, and the maximum permitted \ncredit advance \nNote:\
      \ Refer to Section 4302.5 for special requirements for Refi \nPossible® Mortgages with new secondary\
      \ financing. \nrequirements for \nEmployer Assisted \nHomeownership \n(EAH) Benefit \nIf the secondary\
      \ financing is an EAH Benefit: \n■ The terms of the secondary financing must not require \nrepayment\
      \ in full unless: \n❑ The Borrower terminates their employment for any reason, \n❑ The employer\
      \ terminates the Borrower’s employment for \nany reason other than the Borrower’s long-term disability,\
      \ \n\n \nPage 4204-3 \nelimination of the Borrower’s position or a reduction-inforce \n■ The amount\
      \ of the monthly payment may be excluded from the \nmonthly housing expense-to-income ratio and\
      \ the monthly debt \npayment-to-income ratio when: \n❑ The monthly payments of principal and interest\
      \ or interest \nonly begin on or after the due date of the 61st monthly \npayment under the First\
      \ Lien Mortgage, or \n❑ Repayment of principal is due only upon sale or default \n \n(c) Additional\
      \ requirements for existing secondary financing \n \nFreddie Mac will purchase First Lien refinance\
      \ Mortgages with existing secondary financing \n(including HELOCs) that is not paid off from the\
      \ proceeds of the refinance Mortgage if: \n \n■ The Seller includes in the Mortgage file evidence\
      \ of the subordination of all outstanding \nsecondary financing, and \n \n■ The secondary financing\
      \ has scheduled payments sufficient to meet the interest due \n \n(d) Credit Fees and other delivery\
      \ instructions for Mortgages with secondary financing \n \nRefer to Exhibit 19, Credit Fees, for\
      \ Credit Fees related to Mortgages with secondary \nfinancing. Credit Fees are paid in accordance\
      \ with the Credit Fee provisions stated in Chapter \n \nNote: Refer to Section 6302.34 for delivery\
      \ instructions for Mortgages with secondary \nfinancing."
    drafter_attestation: 'Verbatim Freddie Mac Guide Section 4204.1 from snapshot fbba421721d90cb1 via
      reading projection (furniture stripped); section-bounded by NNNN.N: headers; substring-verified.'
  judgment: false
