The Federal Housing Finance Agency (FHFA) announced its conditional approval for Freddie Mac to engage in a limited pilot to purchase certain single-family closed-end second mortgages. America’s Credit Unions Regulatory Advocacy Senior Counsel Amanda Smith wrote in support of the pilot in a May comment letter, noting it is in the public interest and advances Freddie Mac’s mission.

The conditional approval of a pilot for Freddie Mac purchases of second mortgages includes several limitations on the product, including:

• A maximum volume of $2.5 billion in purchases;
• A maximum duration of 18 months;
• A maximum loan amount of $78,277, corresponding to certain subordinate-lien loan thresholds in the CFPB’s definition of Qualified Mortgage;
• A minimum seasoning period of 24 months for the first mortgage; and
• Eligibility only for principal/primary residences.

FHFA will analyze the data on Freddie Mac’s purchases of second mortgages upon the program’s conclusion to determine whether the objectives of the pilot were met.

Any increase to the volume or extension of the duration of the pilot, or a conversion of the pilot to a programmatic activity, would be treated as a new product that is subject to public notice and comment and FHFA approval.