Freddie Mac gearing up to launch new renovation mortgage
Freddie Mac plans to introduce a mortgage this month that will simultaneously finance the purchase price of the home and improvements that will be completed after closing with a single loan.
"Lenders familiar with our construction conversion and renovation mortgages know that our current offerings provide permanent financing that replaces interim financing in either a single-close or two-closing transaction, but the construction or renovation must be completed prior to the delivery of the mortgage. CHOICERenovation will allow lenders to sell loans to Freddie Mac where the borrower uses the loan proceeds to pay for renovations completed after loan closing," the government-sponsored enterprise said in a report posted on its website Thursday.
Freddie will provide more details about the new loan's criteria when it adds it to its guide for mortgage sellers and servicers later this month. Lenders will need to apply for eligibility to offer the product.
Aging inventory has been a concern that new forms of renovation financing could help address, Freddie Mac Senior Vice President Danny Gardner told attendees at the Mortgage Bankers Association's National Secondary Market Conference last month.
"There's a lot of housing stock that's in the marketplace and it's not moving through the cycle because it needs some modernization and updating. Statistically, about 80% of the available stock in the country today is greater than 20 years old and 40% of it is more than 50 years old. So we've got a quite a bit of aging inventory out there and we're trying to find some ways to address that," Gardner said, citing data from the Joint Center for Housing Studies at Harvard University.
Home improvement spending is starting to increase at a more gradual pace, but it is likely to remain stable or higher in most areas, according to a recent forecast by the center.