source:
  type: guide
  id: fhlmc-5102.2
  authority: Freddie Mac Single-Family Seller/Servicer Guide Section 5102.2 — Methods
    of underwriting
  description: Freddie Mac Single-Family Seller/Servicer Guide Section 5102.2 — Methods
    of underwriting.
  coverage_tier: operative
obligations:
- id: fhlmc-5102.2-full
  canonical_id: fhlmc-5102.2-full
  section: Freddie Mac Single-Family Seller/Servicer Guide Section 5102.2 — Methods
    of underwriting
  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 5102.2 — Methods
      of underwriting
    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: '5102.2: Methods of underwriting (03/01/26) The section contains
      information related to: ■ Loan Product Advisor® Mortgages ■ Manually Underwritten
      Mortgages (a) Loan Product Advisor Mortgages In many cases, submitting the Mortgage
      to Loan Product Advisor is the most effective way to assess Borrower creditworthiness
      and identify excessive layering of risk. Loan Product Advisor assesses the Mortgage
      based on the data submitted to Loan Product Advisor and provided by the consumer
      reporting agencies and returns a Risk Class of either Accept or Caution on the
      Feedback Certificate. Note: See Chapter 5101 for additional requirements for
      Loan Product Advisor Mortgages. (i) Accept Mortgages For Mortgages with a Risk
      Class of Accept on the Last Feedback Certificate, the Seller is eligible for
      relief from representations and warranties for creditworthiness and layering
      of risk when the requirements in Section 5101.2(a) are met. (ii) Caution Mortgages
      For Mortgages with a Risk Class of Caution on the Last Feedback Certificate
      to be eligible for sale to Freddie Mac, the Seller must manually underwrite
      the Mortgage in accordance with Section 5102.2(b) below. Freddie Mac Single-Family
      Seller/Servicer Guide Chapter 5102 As of 03/01/26 Page 5102-3 (b) Manually Underwritten
      Mortgages Manually Underwritten Mortgages are those for which the Seller evaluates
      the Mortgage information and data, makes the final determination regarding Borrower
      creditworthiness and layering of risk and complies with the requirements of
      this Section 5102.2(b). To be eligible for sale to Freddie Mac, manual underwriting
      is required for all Mortgages that did not receive a Risk Class of Accept on
      the Last Feedback Certificate, including Mortgages never submitted to Loan Product
      Advisor. (i) Borrower creditworthiness The Seller’s conclusion that the Borrower
      is creditworthy and has the ability to meet all current obligations, including
      the new Mortgage, must be based on the documentation included in the Mortgage
      file and described on Form 1077, Uniform Underwriting and Transmittal Summary,
      or another document in the Mortgage file. To determine that the Borrower is
      creditworthy, the Seller must manually underwrite the Mortgage as required in
      Topics 5100 through 5500 for the Mortgage to be eligible for sale to Freddie
      Mac. The Seller must determine that the Borrower has an acceptable credit reputation
      in accordance with requirements in Chapter 5202 and confirm that the Mortgage
      meets the minimum Indicator Score requirements, if applicable, stated in Exhibit
      25, Mortgages with Risk Class and/or Minimum Indicator Score Requirements. The
      Seller must determine the Borrower’s capacity to repay the Mortgage and other
      monthly obligations by analyzing file documentation for the following factors:
      ■ Stable monthly income. Note: The Freddie Mac Income Calculator may be used
      to assess the Borrower’s stable monthly income and will determine whether the
      Seller is eligible for relief from enforcement of certain income representations
      and warranties. The results are reflected on the Freddie Mac Income Calculator
      Certificate. For Freddie Mac Income Calculator requirements, see the following
      Guide sections: Income calculator requirements Topic Guide section(s) Automated
      income assessment for employed income Section 5303.4 Automated income assessment
      for self-employed income Section 5304.2 Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5102 As of 03/01/26 Page 5102-4 Automated income assessment for
      rental income from the subject 2- to 4-unit Primary Residence or non-subject
      investment property Section 5306.2 ■ Monthly housing expense-to-income ratio
      ■ Monthly debt payment-to-income (DTI) ratio ■ Reserves ■ Information about
      how the Borrower has paid obligations in the past For Non-Loan Product Advisor
      Mortgages, the Seller must presume the Borrower’s capacity to repay is not acceptable
      when all of the following apply: ■ The transaction is a cash-out refinance ■
      The monthly DTI ratio exceeds 42% ■ Any Borrower has an Underwriting Score less
      than 700 ■ The total loan-to-value (TLTV) ratio is greater than 75% A Borrower
      who increases debt and then periodically uses refinance or debt consolidation
      to reduce payments to a manageable level presents a higher degree of risk. The
      Seller should consider the Borrower’s short- and long-term capacity to repay
      the Mortgage. (ii) Layering of risk For all Manually Underwritten Mortgages,
      the Seller is responsible for determining that the Mortgage is eligible for
      sale to Freddie Mac by performing an assessment of layering of risk. Multiple
      characteristics that increase risk without sufficient risk-offsetting factors
      are likely to result in excessive risk layering. An offsetting factor does not
      need to be established for each risk factor if the overall risk is balanced.
      However, when multiple risk factors are present, more conservative underwriting
      is required to assess if the Mortgage is acceptable for sale to Freddie Mac.
      The following Mortgage characteristics may introduce an additional layer of
      risk that must be considered in evaluating capacity: ■ The payoff of a junior
      lien from the proceeds of a refinance Mortgage ■ A cash-out refinance Mortgage
      ■ A Borrower with low or no reserves Freddie Mac Single-Family Seller/Servicer
      Guide Chapter 5102 As of 03/01/26 Page 5102-5 The Seller must determine that
      each component (credit reputation, capacity and collateral) is acceptable and
      that the overall layering of risk is not excessive. A conclusion that the Mortgage
      is acceptable cannot be reached by looking only at a single underwriting component
      or by placing the most weight on a single component but may result from balancing
      the weakness of one component against the strength of the other two components.
      Example: A Mortgage where the Borrower has weak capacity may be found to be
      acceptable because of strong collateral and credit reputation, but a Mortgage
      where the Borrower has weak capacity and weak credit reputation is not acceptable
      because only collateral is strong. Even when each of the three components is
      acceptable, layered risk may make a Mortgage unacceptable. Mortgage characteristics
      (e.g., Mortgage Product, purpose of the Mortgage, property type) may add layers
      of risk that must be considered. The following table provides examples of Mortgage
      characteristics that increase risk. This list does not identify all possible
      risk factors or combinations of risks for the Mortgage, nor is it intended to
      imply that an individual characteristic is unacceptable. Read vertically, this
      table shows how risk may be layered within a component; read horizontally, it
      shows how risk may be layered across components. Examples of Mortgage characteristics
      that increase risk Credit reputation Capacity Collateral Adverse or derogatory
      credit information A housing payment-to- income ratio in excess of guidelines
      Low equity/Down Payment High balances-to- limits A DTI ratio in excess of guidelines
      Maximum financing High overall utilization of revolving credit A DTI ratio in
      excess of guidelines Cooperative Interest Credit history of short duration Cash-out
      refinance 2- to 4-unit property Freddie Mac Single-Family Seller/Servicer Guide
      Chapter 5102 As of 03/01/26 Page 5102-6 Examples of Mortgage characteristics
      that increase risk Credit reputation Capacity Collateral A significant change
      in the Borrower’s credit history No reserves Manufactured Home Several inquiries
      ARM Condominium Unit The Seller’s analysis of layering of risk must be documented
      in the Mortgage file and at a minimum include: ■ The identified risk factors
      ■ The identified risk offsetting factors ■ Documentation of the risk offsetting
      factors ■ A written conclusion that the Mortgage does not exhibit excessive
      layering of risks (iii) Additional requirements for Caution Mortgages For all
      Caution Mortgages, there is a strong indication that the layering of risk is
      excessive and that acceptability and compliance with Freddie Mac requirements
      is unlikely. The Seller must analyze all risk factors present in the Mortgage
      file, including those identified in the Feedback Certificate, and document satisfactory
      offsetting factors in the Mortgage file to ensure that the Mortgage is acceptable.
      The offsets used must provide information not considered by Loan Product Advisor.
      The Seller may not use information already considered by Loan Product Advisor
      to determine that the capacity is acceptable when the Feedback Certificate contains
      credit risk comments related to capacity. Factors not considered by Loan Product
      Advisor, such as the existence of verified income that is not included in the
      submission or energy savings from an energy-efficient property (see Section
      5401.1), may be used by the Seller in making a case that capacity is acceptable.
      The following factors must not be used by the Seller to conclude that excessive
      layering of risk is not present because Loan Product Advisor has already considered
      them: ■ Loan-to-value (LTV) or TLTV ratio below the maximum allowable financing
      Freddie Mac Single-Family Seller/Servicer Guide Chapter 5102 As of 03/01/26
      Page 5102-7 ■ Qualifying monthly housing expense-to-income ratio or monthly
      DTI ratio below Freddie Mac’s guidelines ■ The level of reserves ■ The type
      of Mortgage Product and/or offering ■ The type of property securing the Mortgage
      ■ FICO® score, or ■ Any combination of these factors The Seller must presume
      the Borrower’s capacity to repay is not acceptable when the Caution Mortgage
      is a cash-out refinance transaction and at least one credit risk message related
      to the monthly DTI ratio is returned on the Feedback Certificate. 5102.3: General
      requirements for verification documents (08/06/25) The section contains requirements
      related to: ■ Verification documents ■ Documents of foreign origin and documents
      in a foreign language (a) Verification documents (i) Verifications obtained
      directly by the originator Verification documents must meet all of the following
      requirements: ■ Standard verification forms, which include the following, must
      be sent directly from the originator to the Borrower’s employer, financial institution,
      creditor or landlord, and the completed verification must be returned directly
      to the originator: • Verification of employment (VOE) • Verification of deposit
      (VOD) • Direct verification of Tradelines and Noncredit Payment References,
      including Mortgage payment history and verification of rental payments Freddie
      Mac Single-Family Seller/Servicer Guide Chapter 5102 As of 03/01/26 Page 5102-8
      ■ Original documents must not contain any alterations, erasures, correction
      fluid or correction tape The Seller must retain legible copies of the originals,
      including verifications obtained electronically or via facsimile transmission,
      in the Mortgage file (ii) Verifications provided by the Borrower The Borrower
      may provide verification of income, employment and assets in the form of a photocopy
      (including a picture of a document), facsimile or electronic verification, which
      include online bank statements, investment account statements, employment and/or
      income statements. The copies must have been made by the originator or the Borrower
      directly from the originals. Copies provided by any other party, such as the
      real estate agent or builder, are not acceptable. If the Borrower has provided
      electronic verifications, photocopies or facsimiles of other verifications where
      the originator did not view and copy the original documents directly, the Seller
      is strongly encouraged to reverify the information through the quality control
      process. (b) Documents of foreign origin and documents in a foreign language
      All documents in the Mortgage file must be in English or translated into English
      in accordance with the requirements in Section 1201.9. All foreign currency
      amounts must be converted to U.S. dollars. See Section 5501.3 for requirements
      when the source of funds needed for Closing Costs is, or otherwise originates
      from, asset(s) located outside the United States and its territories.'
  judgment: false
