Freddie Mac Single-Family Seller/Servicer Guide 5601.3 — Eligibility of a property with incomplete improvements
Freddie Mac Single-Family Seller/Servicer Guide section 5601.3 — Eligibility of a property with incomplete improvements. Full verbatim section text, substring-verified against snapshot 5869ee9e606cd4ae.
Verbatim regulatory text
Verbatim provisions from Freddie Mac Single-Family Seller/Servicer Guide 5601.3 — Eligibility of a property with incomplete improvements — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
Freddie Mac Single-Family Seller/Servicer Guide 5601.3 — Eligibility of a property with incomplete improvements (part 1 of 2)
Refer to Bulletin 2025-7, which announced the policy requirements for Uniform Appraisal Dataset (UAD) 3.6. Sellers may submit to the Uniform Collateral Data Portal® appraisal reports that use UAD 3.6 before the mandatory effective November 2, 2026 version of this section. This section contains requirements related to: ■ Eligible properties ■ Requirements for Mortgages with Settlement Dates prior to the completion of the incomplete improvements See Section 4606.3(a) for requirements for GreenCHOICE Mortgages® with Settlement Dates prior to the completion of eligible improvements. See Section 4607.1(a) for requirements for CHOICERenovation® Mortgages with Settlement Dates prior to the completion of eligible renovations. (a) Eligible properties Freddie Mac will purchase an eligible Mortgage secured by a property prior to the completion of improvements when the requirements of this Section 5601.3 are met and the Seller reasonably determines the incomplete improvements (i.e., incomplete item(s) and/or repair(s)) cannot be completed (e.g., inclement weather or temporary shortages of building materials). The Mortgage must be: ■ Secured by a newly built or constructed site-built home, ■ Secured by an existing site-built home, or ■ Secured by a Manufactured Home that meets the general requirements in Section 5703.2 and the property eligibility requirements for Manufactured Homes in Section 5703.3(a) (b) Requirements for Mortgages with Settlement Dates prior to the completion of improvements Mortgages with Settlement Dates prior to the completion of improvements are eligible for sale to Freddie Mac when the requirements in the table below are met: Requirements for Mortgages with Settlement Dates prior to the completion of improvements Topic Requirement Appraisal report or PDR When an appraisal report has been obtained, it must be completed subject to: ■ Completion, or ■ Repairs or alterations When a PDR has been obtained, it must identify: ■ Incomplete construction or renovation(s), or ■ Deficiencies consistent with a C5 condition rating Cost to complete incomplete The appraiser or a disinterested (but relevant) party Requirements for Mortgages with Settlement Dates prior to the completion of improvements Topic Requirement improvements must provide a cost to complete the incomplete improvement(s). Example: A contractor who provides an estimate to install or repair interior walls is a disinterested (but relevant) party. A relevant party may also include a representative of a home improvement store or an independent contractor who performs the services needed to complete the improvements or repairs. Maximum permitted incomplete improvement cost When an appraisal report has been obtained, the cost to complete the incomplete item(s) or repair(s) must not exceed 10% of the “as completed” value of the Mortgaged Premises. When a PDR has been obtained, the cost to complete the incomplete item(s) or repair(s) must not exceed 10% of the purchase price or estimated value of the Mortgaged Premises, as applicable. Property condition rating The incomplete improvements must not be consistent with a C6 condition rating (e.g., active roof leak(s), damaged or failing foundation). Completion escrow account The Seller must establish a completion escrow account for the incomplete item(s) or repair(s). 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. Completion deadline The incomplete item(s) or repair(s) must be completed no more than 365 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). Verification of completion After the Settlement Date and upon completion of all of the incomplete item(s) and repair(s), the Seller/Servicer must obtain documentation verifying completion and retain it in the Mortgage Requirements for Mortgages with Settlement Dates prior to the completion of improvements Topic Requirement file. See Section 5605.8 for requirements for verifying completion. Mortgage insurance The mortgage insurance must be maintained in compliance with the master policy and applicable guides of the selected MI. Title The title to the Mortgaged Premises must not be impaired or adversely affected by the delayed completion of all improvements, repairs or renovations. Third parties may perform certain functions identified in the table above as obligations or requirements of the Seller or the Servicer. However, the Seller remains responsible for compliance with these and all other requirements of the Purchase Documents. See Section 4201.8 for more details on Wholesale Home Mortgages.
Freddie Mac Single-Family Seller/Servicer Guide 5601.3 — Eligibility of a property with incomplete improvements (part 2 of 2)
■ Eligible properties ■ Requirements for Mortgages with Settlement Dates prior to the completion of the incomplete improvements See Section 4606.3(a) for requirements for GreenCHOICE Mortgages® with Settlement Dates prior to the completion of eligible improvements. See Section 4607.1(a) for requirements for CHOICERenovation® Mortgages with Settlement Dates prior to the completion of eligible renovations. (a) Eligible properties Freddie Mac will purchase an eligible Mortgage secured by a property prior to the completion of improvements when the requirements of this Section 5601.3 are met and the Seller reasonably determines the incomplete improvements (i.e., incomplete item(s) and/or repair(s)) cannot be completed (e.g., inclement weather or temporary shortages of building materials). The Mortgage must be: ■ Secured by a newly built or constructed site-built home, ■ Secured by an existing site-built home, or ■ Secured by a Manufactured Home that meets the general requirements in Section 5703.2 and the property eligibility requirements for Manufactured Homes in Section 5703.3(a) (b) Requirements for Mortgages with Settlement Dates prior to the completion of improvements Mortgages with Settlement Dates prior to the completion of improvements are eligible for sale to Freddie Mac when the requirements in the table below are met: Requirements for Mortgages with Settlement Dates prior to the completion of improvements Topic Requirement Appraisal report or PDR When an appraisal report has been obtained, it must be completed subject to: ■ Completion, or ■ Repairs or alterations When a PDR has been obtained, it must identify: ■ Incomplete construction or renovation(s), or ■ Deficiencies consistent with a C5 condition rating Cost to complete incomplete improvements The appraiser or a disinterested (but relevant) party must provide a cost to complete the incomplete improvement(s). Example: A contractor who provides an estimate to install or repair interior walls is a disinterested (but relevant) party. A relevant party may also include a representative of a home improvement store or an independent contractor who performs the services needed to complete the improvements or repairs. Maximum permitted incomplete improvement cost When an appraisal report has been obtained, the cost to complete the incomplete item(s) or repair(s) must not exceed 10% of the “as completed” value Requirements for Mortgages with Settlement Dates prior to the completion of improvements Topic Requirement of the Mortgaged Premises. When a PDR has been obtained, the cost to complete the incomplete item(s) or repair(s) must not exceed 10% of the purchase price or estimated value of the Mortgaged Premises, as applicable. Property condition rating The incomplete improvements must not be consistent with a C6 condition rating (e.g., active roof leak(s), damaged or failing foundation). Completion escrow account The Seller must establish a completion escrow account for the incomplete item(s) or repair(s). 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. Completion deadline The incomplete item(s) or repair(s) must be completed no more than 365 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). Verification of completion After the Settlement Date and upon completion of all of the incomplete item(s) and repair(s), the Seller/Servicer must obtain documentation verifying completion and retain it in the Mortgage file. See Section 5605.9 for requirements for verifying completion. Mortgage insurance The mortgage insurance must be maintained in compliance with the master policy and applicable guides of the selected MI. Title The title to the Mortgaged Premises must not be impaired or adversely affected by the delayed completion of all improvements, repairs or renovations. Third parties may perform certain functions identified in the table above as obligations or requirements of the Seller or the Servicer. However, the Seller remains responsible for compliance with these and all other requirements of the Purchase Documents. See Section 4201.8 for more details on Wholesale Home Mortgages.
Operationalizing Freddie Mac Single-Family Seller/Servicer Guide 5601.3 — Eligibility of a property with incomplete improvements
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