source:
  type: guide
  id: fhlmc-4606.3
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 4606.3 — Mortgage
    requirements
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 4606.3 — Mortgage
    requirements.
  coverage_tier: operative
obligations:
- id: fhlmc-4606.3-full
  canonical_id: fhlmc-4606.3-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 4606.3 — Mortgage
    requirements
  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 4606.3 — Mortgage
      requirements
    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: '4606.3: Mortgage requirements (05/06/26) This section contains
      requirements related to: ■ Mortgages used to finance eligible improvements ■
      Mortgages used to pay an Existing Debt (a) Mortgages used to finance eligible
      improvements When the Mortgage proceeds are used to finance eligible improvements
      completed after the Note Date: 1. Use of proceeds: The maximum amount of the
      proceeds that may be used for the purchase, installation, repair or upgrade
      of eligible improvements is limited to 15% of the “as completed” appraised value
      of the Mortgaged Premises Freddie Mac Single-Family Seller/Servicer Guide Chapter
      4606 As of 05/06/26 Page 4606-5 2. Mortgage file documentation: The Seller/Servicer
      must obtain and retain in the Mortgage file copies of all invoices and/or receipts,
      as applicable, related to the cost of the eligible improvements 3. Completion
      escrow account: On the Note Date, funds sufficient to cover the cost of the
      eligible improvements must be deposited into a completion escrow account. The
      Seller and the Borrower must execute a written escrow agreement detailing how
      the funds will be managed and disbursed. A copy of the escrow agreement must
      be retained in the Mortgage file. A contingency reserve is not required. 4.
      Completion escrow account disbursements: Funds in the completion escrow account
      may be used to reimburse the Borrower for the cost of materials purchased to
      complete the eligible improvements. The Seller/Servicer may not reimburse the
      Borrower for any self-performed labor. After all eligible disbursements have
      been made, any remaining funds must be applied: ■ If the Mortgage is delinquent,
      in accordance with the application of payment requirements in the Note and Security
      Instrument ■ If the Mortgage is not delinquent, to reduce the UPB 5. Appraisal:
      The Seller/Servicer must obtain an interior and exterior inspection appraisal
      with an “as completed” appraised value of the Mortgaged Premises, subject to
      all eligible improvements being completed. See Section 5601.4 for additional
      appraisal requirements. 6. Completion report: After completion of all eligible
      improvements, the Seller/Servicer must have the appraiser: ■ Inspect the Mortgaged
      Premises to verify the eligible improvements have been completed, and ■ Provide
      the Seller/Servicer with a completion report that includes photographs of the
      completed improvements. The Seller/Servicer must retain the completion report
      in the Mortgage file. 7. Completion deadline: All eligible improvements must
      be completed no more than 180 days after the Note Date. If the eligible improvements
      are not completed by the required completion date, the Seller/Servicer must
      notify Freddie Mac quality control pursuant to the reporting requirements in
      Section 3402.3(b). 8. Energy report: An energy report meeting the energy report
      requirements in Section 4606.4 may be required Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4606 As of 05/06/26 Page 4606-6 (b) Mortgages used to pay an Existing
      Debt When the Mortgage proceeds are used to pay an Existing Debt: 1. Use of
      proceeds: The maximum payment towards an Existing Debt is limited to 15% of
      the appraised value of the Mortgaged Premises 2. Remaining Existing Debt: Any
      remaining balance of the Existing Debt must be included in the calculation of
      the monthly debt payment-to-income ratio. If the remaining balance is reamortized,
      the Seller/Servicer must obtain and retain in the Mortgage file sufficient documentation
      evidencing the new payment, including a copy of the new promissory note, if
      applicable. 3. Settlement/Closing Disclosure Statement requirements: The Settlement/Closing
      Disclosure Statement must reflect that the proceeds were paid directly to the
      holder of the Existing Debt. The total amount of proceeds disbursed to the Borrower
      at closing must not exceed the maximum amount allowed pursuant to the “no cash-out”
      refinance Mortgage requirements in Section 4301.4. 4. Mortgage file documentation:
      The Mortgage file must include documentation (e.g., invoices, receipts) of the
      eligible improvements completed before the Note Date and their costs 5. Appraisal:
      An interior and exterior inspection appraisal is required. The appraisal must
      reflect all eligible improvements that were made. See Section 5601.4 for additional
      appraisal requirements. Note: See Sections 4301.4 and 4301.8 for payoff of PACE
      obligation requirements.'
  judgment: false
