source:
  type: guide
  id: fhlmc-4204.1
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 4204.1 — Mortgages
    with secondary financing
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 4204.1 — Mortgages
    with secondary financing.
  coverage_tier: operative
obligations:
- id: fhlmc-4204.1-full
  canonical_id: fhlmc-4204.1-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 4204.1 — Mortgages
    with secondary financing
  type: do
  tags:
  - regulator-direct
  - fhlmc
  - freddie-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Freddie Mac Single-Family Seller/Servicer Guide Section 4204.1 — Mortgages
      with secondary financing
    source_class: fhlmc-guide
    source_url: https://guide.freddiemac.com/ci-guide
    snapshot_id: 5869ee9e606cd4ae
    fetched_at: '2026-05-23T00:27:40Z'
    content_hash: sha256:9a1b23e5024bb369e7a59d36b3702383c11ace68b5d209fdef791bc8f955c637
    paragraph_quote: '4204.1: Mortgages with secondary financing (03/05/25) This section
      contains information related to: ■ Requirements for all secondary financing
      ■ Additional requirements for new secondary financing ■ Additional requirements
      for existing secondary financing ■ Credit Fees and other delivery instructions
      for Mortgages with secondary financing (a) Requirements for all secondary financing
      Secondary financing means any financing that is subordinate in lien priority
      to the First Lien Mortgage. Freddie Mac will purchase First Lien Mortgages with
      secondary financing under the terms of the Purchase Documents and this section.
      The terms of any secondary financing must be disclosed to the appraiser and
      to the MI. The secondary financing terms that must be disclosed include the
      Note Rate and the name of the institution or individual providing the financing.
      The Seller may not indicate a value needed to support the transaction, or provide
      to the appraiser any information about an expected loan-to- value (LTV) ratio.
      Except as specifically stated in Section 4204.2 with respect to Affordable Seconds®,
      the terms of secondary financing must not permit the provider or any other party
      to share in the appreciation of the Mortgaged Premises (equity sharing). Secondary
      financing is not eligible for sale to Freddie Mac. Note: For special requirements
      for Affordable Seconds, refer to Section 4204.2. Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4204 As of 04/12/26 Page 4204-2 (b) Additional requirements for
      new secondary financing Requirements for new secondary financing (i.e., the
      First Lien Mortgage and the secondary financing originated on the same day)
      Topic Requirements Amortization period The amortization period for the secondary
      financing must run for at least five years after the Note Date, unless the secondary
      financing is fully amortizing or is a Home Equity Line of Credit (HELOC). Call
      provision The secondary financing must not contain a call provision that is
      exercisable within the first five years after the Note Date, unless the secondary
      financing is a HELOC. Maturity date The maturity date of the secondary financing
      must be at least five years after the Note Date, unless the secondary financing
      is fully amortizing or a HELOC. Scheduled payments The terms of the secondary
      financing must provide for regular monthly payments that cover at least the
      interest that accrues during the previous month. Documentation requirements
      The Seller must include a copy of the following documentation in the Mortgage
      file: ■ Note or other evidence of secondary financing terms ■ Settlement/Closing
      Disclosure Statement or an alternative form required by law that evidences the
      fees and costs related to the secondary financing paid by the Borrower at closing
      ■ For HELOCs, the HELOC agreement showing all fees and costs paid by the Borrower
      at closing, and the maximum permitted credit advance Note: Refer to Section
      4302.5 for special requirements for Refi Possible® Mortgages with new secondary
      financing. Additional requirements for Employer Assisted Homeownership (EAH)
      Benefit If the secondary financing is an EAH Benefit: ■ The terms of the secondary
      financing must not require repayment in full unless: ❑ 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, Freddie
      Mac Single-Family Seller/Servicer Guide Chapter 4204 As of 04/12/26 Page 4204-3
      elimination of the Borrower’s position or a reduction-in- force ■ The amount
      of the monthly payment may be excluded from the monthly housing expense-to-income
      ratio and the monthly debt payment-to-income ratio when: ❑ The monthly payments
      of principal and interest or interest only begin on or after the due date of
      the 61st monthly payment under the First Lien Mortgage, or ❑ Repayment of principal
      is due only upon sale or default (c) Additional requirements for existing secondary
      financing Freddie Mac will purchase First Lien refinance Mortgages with existing
      secondary financing (including HELOCs) that is not paid off from the proceeds
      of the refinance Mortgage if: ■ The Seller includes in the Mortgage file evidence
      of the subordination of all outstanding secondary financing, and ■ The secondary
      financing has scheduled payments sufficient to meet the interest due (d) Credit
      Fees and other delivery instructions for Mortgages with secondary financing
      Refer to Exhibit 19, Credit Fees, for Credit Fees related to Mortgages with
      secondary financing. Credit Fees are paid in accordance with the Credit Fee
      provisions stated in Chapter 6303. Note: Refer to Section 6302.34 for delivery
      instructions for Mortgages with secondary financing.'
  judgment: false
