source:
  type: guide
  id: fhlmc-4301.5
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 4301.5 — Cash-out
    refinance Mortgages
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 4301.5 — Cash-out
    refinance Mortgages.
  coverage_tier: operative
obligations:
- id: fhlmc-4301.5-full
  canonical_id: fhlmc-4301.5-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 4301.5 — Cash-out
    refinance Mortgages
  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 4301.5 — Cash-out
      refinance Mortgages
    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: '4301.5: Cash-out refinance Mortgages (02/04/26) A cash-out refinance
      Mortgage is a Mortgage for which there are no specific restrictions on the use
      of the proceeds. This section contains requirements related to: ■ Occupancy
      requirement for Primary Residences ■ Six-month ownership requirement for the
      Mortgaged Premises ■ Cash-out refinance Mortgage paying off a First Lien Mortgage
      ■ Cash-out refinance Mortgage on a property owned free and clear ■ Credit Fees
      (a) Occupancy requirement for Primary Residences For a cash-out refinance Mortgage
      secured by a Primary Residence, all Borrowers must occupy the Mortgaged Premises.
      (b) Six-month ownership requirement for the Mortgaged Premises For all cash-out
      refinance Mortgages, at least one Borrower must have been on title to the Mortgaged
      Premises for at least six months prior to the Note Date or as follows: ■ Leasehold
      estates: When the property is a leasehold estate, at least one Borrower must
      have been lessee on the ground lease or lease agreement of the subject leasehold
      estate for at least six months ■ Cooperative Unit: When the property is a Cooperative
      Unit, at least one Borrower must have held Cooperative Shares corresponding
      to the Cooperative Unit that is the subject of the Cooperative Share Loan for
      at least six months ■ Title held by limited liability company (LLC) or limited
      partnership (LP): When title to the property is held by an LLC or LP, the time
      the property was titled in the name of the LLC or LP may be included in the
      six-month requirement provided: ❑ At least one Borrower must have been the majority
      owner or had control of the LLC or LP since the date the property was acquired
      by the LLC or LP, and ❑ Title must be transferred from the LLC or LP into the
      Borrower’s name on or before the Note Date Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4301 As of 02/04/26 Page 4301-8 Note: Special purpose cash-out
      refinance Mortgages must comply with the ownership requirement for the Mortgaged
      Premises in Section 4301.6. Exception: If none of the Borrowers have been on
      title to the Mortgaged Premises for at least six months prior to the Note Date
      of the cash-out refinance Mortgage, the requirement(s) in the following table
      must be met and documented in the Mortgage file: Exceptions to the six-months
      on title requirement Scenario Requirements Inheritance or legal award At least
      one Borrower on the refinance Mortgage inherited or was legally awarded the
      Mortgaged Premises in accordance with a final judgment or decision from a legal
      body (e.g., court, jury, judge or arbitrator) such as in a case of divorce,
      separation or dissolution of a domestic partnership Delayed financing For delayed
      financing, all of the following requirements must be met: ■ The Settlement/Closing
      Disclosure Statement or an alternative form required by law from the purchase
      transaction must reflect that no financing secured by the subject property was
      used to purchase the subject property. A recorded trustee’s deed or equivalent
      documentation may be used when a Settlement/Closing Disclosure Statement or
      an alternative form required by law was not used for the purchase transaction.
      ■ The preliminary title report for the refinance transaction must reflect the
      Borrower as the owner of the subject property and must reflect that there are
      no liens on the property ■ The source of funds used to purchase the subject
      property must be fully documented ■ If funds were borrowed to purchase the subject
      property: ❑ Cash-out proceeds must be used to pay off or pay down the borrowed
      funds, as reflected on the Settlement/Closing Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4301 As of 02/04/26 Page 4301-9 Disclosure Statement for the refinance
      transaction ❑ Additional cash-out is permitted only when all borrowed funds
      are paid in full ❑ The payment on any remaining outstanding balance of the borrowed
      funds must be included in the debt payment-to-income ratio as described in Section
      5401.2 ■ The amount of the refinance Mortgage must not exceed the sum of the
      original purchase price and related Closing Costs as documented by the Settlement/Closing
      Disclosure Statement or an alternative form required by law for the purchase
      transaction, less any gift funds used to purchase the subject property. A recorded
      trustee’s deed or equivalent documentation may be used when a Settlement/Closing
      Disclosure Statement or an alternative form required by law was not used for
      the purchase transaction. ■ There must have been no affiliation or relationship
      between the buyer and seller of the purchase transaction (c) Cash-out refinance
      Mortgage paying off a First Lien Mortgage When a cash-out refinance Mortgage
      is used to pay off an existing First Lien Mortgage, the following requirements
      apply: ■ A cash-out refinance Mortgage must meet the Borrower requirements in
      Section 4301.2 ■ When proceeds of a cash-out refinance Mortgage are used to
      pay off a First Lien Mortgage, the First Lien Mortgage being refinanced must
      be seasoned for at least 12 months (i.e., at least 12 months must have passed
      between the Note Date of the Mortgage being refinanced and the Note Date of
      the cash-out refinance Mortgage), as documented in the Mortgage file (e.g.,
      on the credit report or title commitment) Exceptions: The 12-month seasoning
      requirement for the Mortgage being refinanced does not apply when: ■ The cash-out
      refinance Mortgage is a special purpose cash-out refinance Mortgage that meets
      the requirements in Section 4301.6, Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4301 As of 02/04/26 Page 4301-10 ■ The First Lien Mortgage being
      refinanced is a Home Equity Line of Credit (HELOC), ■ The cash-out refinance
      Mortgage is a Construction to Permanent Mortgage or Renovation Mortgage, or
      ■ The purpose of the cash-out refinance Mortgage is to convert the Manufactured
      Home to legally classified real property under applicable State law (d) Cash-out
      refinance Mortgage on a property owned free and clear A Mortgage placed on a
      property previously owned free and clear by the Borrower is considered a cash-out
      refinance Mortgage. Exceptions: ■ CHOICERenovation® Mortgages when proceeds
      are used only to finance the eligible renovations, as described in Section 4607.6,
      are considered “no cash-out” refinance Mortgages. See Section 4607.4(b) for
      additional information regarding the use of proceeds. ■ GreenCHOICE Mortgages®
      are considered “no cash-out” refinance Mortgages when proceeds are used only
      to finance eligible improvements, as described in Section 4606.1(b), and must
      comply with all other requirements (e) Credit Fees The Seller must refer to
      Exhibit 19, Credit Fees, for Credit Fees related to certain cash-out refinance
      Mortgages. Credit Fees are paid in accordance with the Credit Fee provisions
      stated in Chapter 6303. Freddie Mac Single-Family Seller/Servicer Guide Chapter
      4301 As of 02/04/26 Page 4301-11 4301.6: Special purpose cash-out refinance
      Mortgages (06/04/25) A special purpose cash-out refinance Mortgage is a cash-out
      refinance Mortgage where the owner of a property uses the proceeds to buy out
      the equity of a co-owner. A special purpose cash-out refinance Mortgage must
      meet the loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit (HELOC)
      TLTV (HTLTV) ratio requirements for cash-out refinance Mortgages in: ■ Section
      5703.8(a) for Mortgages secured by a Manufactured Home ■ Section 4203.1(b) for
      all other Mortgages A special purpose cash-out refinance Mortgage must meet
      all requirements of the Guide that apply to cash-out refinance Mortgages, except
      as specifically modified below. This section contains requirements related to:
      ■ Allowable uses of proceeds from a special purpose cash-out refinance Mortgage
      ■ Special Borrower requirements ■ Documentation requirements ■ Credit Fees (a)
      Allowable uses of proceeds from a special purpose cash-out refinance Mortgage
      The loan amount of a special purpose cash-out refinance Mortgage is limited
      to amounts used to buy out the equity of the co-owner, which may include: ■
      Paying off the first Mortgage, regardless of age ■ Paying off junior liens secured
      by the Mortgaged Premises. Note: The Borrower is not required to satisfy outstanding
      junior liens secured by the Mortgaged Premises if the requirements of Section
      4204.1 for Mortgages with secondary financing and/or Section 4204.2 for Affordable
      Seconds®, are met. ■ Paying related Closing Costs (b) Special Borrower requirements
      The following requirements must be met: Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4301 As of 02/04/26 Page 4301-12 ■ The Borrower and the co-owner
      receiving the buy-out proceeds must have jointly owned the property for a minimum
      of 12 months prior to the initial loan application. (Parties who inherited an
      interest in the property are exempt from this requirement.) ■ The Borrower and
      the co-owner receiving the buy-out proceeds must provide evidence that they
      occupied the subject property as their Primary Residence. (Parties who inherited
      an interest in the property are exempt from this requirement.) ■ The Borrower
      and the co-owner receiving the buy-out proceeds must provide a written agreement,
      signed by all parties, stating the property transfer terms of the property transfer
      and disposition of the refinance proceeds ■ The Borrower who retains sole ownership
      of the property may not receive any of the proceeds from the refinance transaction
      (c) Documentation requirements The Seller must retain the following in the Mortgage
      file: ■ Documentation evidencing that the Borrower and the co-owner jointly
      occupied the Mortgaged Premises as their Primary Residence, if applicable ■
      A copy of the written agreement stating the terms of property transfer and the
      disposition of the refinance proceeds (d) Credit Fees The Seller must refer
      to Exhibit 19, Credit Fees, for Credit Fees related to special purpose cash-out
      refinance Mortgages. Credit Fees are paid in accordance with the Credit Fee
      provisions stated in Chapter 6303. Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4301 As of 02/04/26 Page 4301-13 4301.7: Texas Equity Section
      50(a)(6) Mortgages (11/19/25) This section contains requirements related to:
      ■ General requirements for Texas Equity Section 50(a)(6) ■ Eligible Mortgages
      ■ Refinances of Texas Equity Section 50(a)(6) Mortgages ■ Mortgaged Premises;
      appraisal; fair market value ■ Loan-to-value (LTV) and total LTV (TLTV) ratios
      ■ Eligibility to sell and service Texas Equity Section 50(a)(6) Mortgages ■
      Texas Equity Uniform Instruments and other documents ■ Special representations
      and warranties ■ Specific remedies ■ Related provisions (a) General requirements
      for Texas Equity Section 50(a)(6) The generally accepted commercial terms used
      to describe Mortgages originated under Article XVI of the Texas Constitution
      (“cash-out refinance”, “rate-term refinance”) may not correspond to the meaning
      given the same or comparable terms when used in Chapter 4301. Sellers must understand
      the distinctions between Freddie Mac’s refinance definitions in Chapter 4301
      and the provisions of Section 50(a)(6) and are responsible for determining:
      ■ When Section 50(a)(6) applies, regardless of the definitions of cash-out and
      “no cash out” refinance transactions used in Chapter 4301 ■ Whether the proposed
      refinance of a Mortgage secured by the Borrower’s homestead in the State of
      Texas is a Mortgage that must be originated pursuant to Section 50(a)(6) of
      Article XVI of the Texas Constitution (b) Eligible Mortgages A Texas Equity
      Section 50(a)(6) Mortgage must be: Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4301 As of 02/04/26 Page 4301-14 ■ A conventional First Lien Mortgage
      that is a: ❑ Fixed-rate Mortgage, or ❑ 3/6-Month, 5/6-Month, 7/6-Month or 10/6-Month
      ARM ■ A cash-out refinance Mortgage as described in Section 4301.5 or a “no
      cash-out” refinance Mortgage as described in Section 4301.4, depending on the
      applicable facts A Texas Equity Section 50(a)(6) Mortgage may not be a special
      purpose cash-out refinance Mortgage. (c) Refinances of Texas Equity Section
      50(a)(6) Mortgages Sellers may refinance a Texas Equity Section 50(a)(6) Mortgage
      into: ■ Another Texas Equity Section 50(a)(6) Mortgage, or ■ A refinance Mortgage
      permitted by Section 50(a)(4) of Article XVI of the Texas Constitution (a “Section
      50(a)(4) Mortgage”) Note: Section 50(a)(4) Mortgages used to pay off a Texas
      Equity Section 50(a)(6) Mortgage and meeting all applicable Texas Constitutional
      requirements are not subject to the requirements of this section and are eligible
      for sale to Freddie Mac as “no cash-out” refinance Mortgages, provided all requirements
      of Section 4301.4 are met. (d) Mortgaged Premises; appraisal; fair market value
      Each Mortgage must be secured by a Mortgaged Premises that is: ■ A 1-unit Primary
      Residence, ■ Located in the State of Texas, and ■ The Borrower’s homestead A
      Living Trust that meets the eligibility requirements of Section 5103.5 may be
      a Borrower for a Texas Equity Section 50(a)(6) Mortgage if the Living Trust
      also meets the requirements for a “qualifying trust” under Texas law for purposes
      of owning residential property that qualifies for the homestead exemption. The
      Seller must provide an appraisal that: ■ Meets Freddie Mac requirements, and
      Freddie Mac Single-Family Seller/Servicer Guide Chapter 4301 As of 02/04/26
      Page 4301-15 ■ Complies with Section 50(a)(6)(Q)(ix) and Section 50(h) of Article
      XVI of the Texas Constitution To meet the requirements for acknowledgment of
      fair market value, the Seller must: ■ Along with the owner of the homestead,
      execute a written acknowledgment of the “fair market value” of the homestead
      property as of the date the extension of credit is made ■ Attach the appraisal
      report to the acknowledgment (e) LTV and TLTV ratios The maximum LTV and TLTV
      ratios for Texas Equity Section 50(a)(6) Mortgages must not exceed 80% and must
      be lower if necessary to comply with the LTV/TLTV ratio requirements of Sections
      4203.1(b) and 4301.4 for “no cash out” and cash out refinances, as applicable.
      (f) Eligibility to sell and service Texas Equity Section 50(a)(6) Mortgages
      Unless otherwise notified in writing, Sellers are eligible to deliver Texas
      Equity Section 50(a)(6) Mortgages. The Servicer must be eligible to service
      Texas Equity Section 50(a)(6) Mortgages in accordance with Section 8104.1(a)
      and related Servicing provisions. (g) Texas Equity Uniform Instruments and other
      documents Texas Equity Section 50(a)(6) Mortgages must be originated using the
      most recent version of the following special Fannie Mae/Freddie Mac Texas Home
      Equity Uniform Instruments: Texas Equity Uniform Instruments and other required
      forms Instrument type Required forms Note ■ Texas Home Equity Note (Fixed Rate
      - First Lien) - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3244.1 ■ Texas
      Home Equity Fixed/Adjustable Rate Note – 30-day Average SOFR (First Lien) Form
      3442.44 Security Instrument Texas Home Equity Security Instrument (First Lien)
      - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3044.1 Rider Texas Home Equity
      Fixed/Adjustable Rate Rider – 30-day Average SOFR (First Lien) Form 3142.44
      Freddie Mac Single-Family Seller/Servicer Guide Chapter 4301 As of 02/04/26
      Page 4301-16 Seller may access the Fannie Mae/Freddie Mac Texas Home Equity
      Uniform Instruments at https://sf.freddiemac.com/tools-learning/uniform-instruments/overview.
      The Seller must prepare, obtain and/or provide any and all other documentation
      that the Seller determines is necessary to originate Texas Equity Section 50(a)(6)
      Mortgages in compliance with all applicable laws. (h) Special representations
      and warranties Seller represents and warrants that: 1. Neither the Seller nor
      its Correspondents or Mortgage Brokers have been found by any federal regulatory
      agency to have engaged in the practice of refusing to make loans because the
      applicants for the loans reside in a certain area or the property proposed to
      secure the loans is located in a certain area 2. All refinance Mortgages that
      fall within the provisions of Section 50(a)(6) of the Article XVI of the Texas
      Constitution have been originated as Texas Equity Section 50(a)(6) Mortgages
      and comply with Section 50(a)(6) of Article XVI and related provisions of the
      Texas Constitution, as amended, and all other applicable laws. Note: Freddie
      Mac recommends that the Seller obtain advice from Texas legal counsel that confirms
      that the Seller’s lending and servicing policies, procedures and practices are
      in compliance with Section 50(a)(6) of Article XVI of the Texas Constitution,
      all other applicable Texas Constitutional provisions, statutes, court decisions,
      regulations and rules and applicable State and federal law. 3. The estate or
      interest in the Mortgaged Premises is vested in the Borrower. There is no defect
      in the Borrower’s title to the Mortgaged Premises. 4. The Mortgage is a valid
      and enforceable First Lien on the Mortgaged Premises Borrower Affidavit Texas
      Home Equity Affidavit and Agreement (First Lien) - Fannie Mae/Freddie Mac UNIFORM
      INSTRUMENT Form 3185. The affidavit must be recorded together with the Security
      Instrument and any applicable riders. Condominium Rider Texas Home Equity Condominium
      Rider - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3140.44, if the property
      is a Condominium Unit Planned Unit Development (PUD) Rider Texas Home Equity
      Planned Unit Development Rider - Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form
      3150.44, if the property is in a PUD Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4301 As of 02/04/26 Page 4301-17 (i) Specific remedies Any action
      taken, or not taken, in connection with the origination of a Texas Equity Section
      50(a)(6) Mortgage that results in any of the following (even if such action
      is a result of lender’s effort to cure a failure to comply with the provision
      of the Section 50(a)(6)) is a breach of the representations and warranties in
      this Section 4301.7, and Freddie Mac shall be entitled to any of the remedies
      stated in Section 3601.1, including the right to require the Seller to repurchase
      the Mortgage immediately upon Freddie Mac’s request, at a price determined in
      accordance with Section 3602.2(c): ■ A forfeiture of any principal or interest
      due under the Mortgage ■ The invalidation of the Mortgage as a First Lien ■
      The abatement of accrual of interest and the Borrower’s obligations under the
      Mortgage ■ A reduction in the principal amount of the Mortgage ■ Any modification
      of the amount, interest rate, term or other provision of the Mortgage (j) Related
      provisions In addition to the requirements in this section, other requirements
      related to Texas Equity Section 50(a)(6) Mortgages are described in the following
      Guide provisions: Additional requirements related to Texas Equity Section 50(a)(6)
      Mortgages Topic Guide provisions Refinance Mortgages Chapter 4301 Title insurance
      Sections 4702.1, 4702.3 and 4702.5 Delivery requirements Section 6302.16 Special
      Servicing Sections 8104.1(a), 8201.1 and 9206.2(d) 4301.8: Refinance of Mortgages
      secured by properties subject to an energy retrofit loan (09/04/24) For the
      purposes of the Guide, a Property Assessed Clean Energy (PACE) or PACE-like
      obligation (either referred to as a “PACE obligation”) refers to any energy
      retrofit loan that is: ■ Used to finance energy efficiency improvements, and
      Freddie Mac Single-Family Seller/Servicer Guide Chapter 4301 As of 02/04/26
      Page 4301-18 ■ Repaid through a property tax assessment For the “no cash-out”
      refinance of Mortgages secured by properties subject to PACE obligations that
      result in or provide for First Lien priority and where the PACE obligations
      are paid off with the Mortgage proceeds, the following requirements apply: ■
      The new refinance Mortgage must be originated in accordance with the requirements
      of Section 4301.4 for “no cash-out” refinance Mortgages ■ The Mortgage being
      refinanced must be owned in whole or in part or securitized by Freddie Mac ■
      The PACE obligation must be paid in full ■ The Mortgage file must include evidence
      that the obligation being paid off is a PACE obligation that results in or provides
      for First Lien priority ■ The Seller must deliver ULDD Data Point Investor Feature
      Identifier valid value “H61” when delivering a Freddie Mac-owned “no cash-out”
      refinance Mortgage used to pay a PACE obligation. See Section 6302.16(b)(ii)
      for more information. For the cash-out refinance of Mortgages secured by properties
      subject to PACE obligations and where the PACE obligations are paid off with
      the Mortgage proceeds, the following requirements apply: ■ The new refinance
      Mortgage must be originated in accordance with the requirements of Section 4301.5
      for cash-out refinance Mortgages ■ If the PACE obligation results in or provides
      First Lien priority, the PACE obligation must be paid in full with the Mortgage
      proceeds Mortgages secured by properties that are energy efficient and are also
      subject to PACE obligations may be eligible for purchase under the provisions
      of Chapter 4606 for GreenCHOICE Mortgages®. Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 4302 As of 04/12/26 Page 4302-1 Chapter 4302: Refi Possible® Mortgages
      4302.1: Purchase of Refi Possible® Mortgages (08/30/21) Refi Possible® is a
      “no cash-out” refinance offering for low-income Borrowers originated in accordance
      with the Guide and this chapter.'
  judgment: false
