Freddie Mac Single-Family Seller/Servicer Guide 5501.7 — Lender contributions

Freddie Mac Single-Family Seller/Servicer Guide 5501.7 — Lender contributions

Effective 2025-09-03 · Freddie Mac's stamp for this section

This section contains information related to: ■ Lender credit: definition and requirements ■ Lender incentive: definition and requirements (a) Lender credit: definition and requirements Lender credit is a contribution by the originating lender toward the Borrower’s Closing Costs. Lender credit must meet all of the following requirements: ■ The amount of lender credit must: ❑ Be derived from an increase in the interest rate (i.e., premium pricing), or ❑ Be funded directly by the lender ■ Lender credit must not require repayment ■ Third party funds must not be used to provide a lender credit ■ Lender credit may only be used as a credit towards the Borrower’s Closing Costs. In the event the lender credit exceeds the amount of the Borrower’s Closing Costs, the following requirements apply: ❑ The lender credit must be reduced so it does not exceed the amount of the Borrower’s Closing Costs, or ❑ The amount of the lender credit that exceeds the Borrower’s Closing Costs must be applied as a principal curtailment to the Mortgage and must be clearly reflected on the Settlement/Closing Disclosure Statement. (See Section 6302.32 for delivery requirements for Mortgages with principal curtailments.) ■ Lender credit derived from an increase in the interest rate (i.e., premium pricing) must not be used as a credit towards funding a temporary subsidy buydown plan on a “no cashout” refinance Mortgage (b) Lender incentive: definition and requirements A lender incentive is a cash or a cash-like contribution (e.g., a gift card), or other item of value that is: ■ Provided by the originating lender to the Borrower, directly or through a third party, and ■ Not a lender credit toward the Borrower’s Closing Costs Mortgages with lender incentives, as described above, are eligible for sale to Freddie Mac if they meet the following requirements, regardless of whether the incentive is provided before, on or after the Note Date: ■ No repayment of the incentive may be required ■ The cost or value of the incentive must not be funded through the Mortgage transaction (e.g., premium pricing) ■ The incentive must not be considered when qualifying the Borrower (e.g., as a source of funds for closing or reserves) ■ The lender incentive must be treated as a sales concession as described in Section 5501.6(c) if the originating lender is, or is affiliated with, an interested party to the transaction Note: A lender incentive is not considered cash out to the Borrower and does not have to be included in the calculation of the Mortgage proceeds, including the calculation of cash back to the Borrower.

Source: Freddie Mac Single-Family Seller/Servicer Guide 5501.7 — Lender contributions · source URL · snapshot 4c94f67729042dd6