When it comes to cash refinancing for special purposes, it is important to understand how the guidelines differ between Fannie Mae and Freddy MAC, especially if you deal with an acquisition due to a divorce, separation, or ownership change.
What is special purpose fulfillment?
When one co-owner purchases a co-owner of another property, cash refinancing is usually used for special purpose. This is very common:
- Divorce or legal separation
- Partnership disbanded
- Family acquisition or acquisition
Unlike standard cash refinancing, borrowers do not receive cash for general use. The funds will waive ownership of the other party.
Fannie Mae’s Guidelines
Fannie Mae allows for more flexibility in ownership and living arrangements:
- All owners must jointly own the property for at least 12 months unless the ownership change is caused by a divorce, legal settlement or similar life event.
- No occupancy restrictions – Owners do not have to live in property
- No attribute type limitations – suitable for a wide range of attributes
This is usually the preferred route when the owners are not fully living in a home or dealing with an investment property.
Freddie Mac Guide
In this case, Freddie Mac’s rules are even more restrictive:
- In the past 12 months
- The transaction must meet the definition of the occupant’s real acquisition
If all co-owners have not yet used the home as their primary residence for at least one year, then Freddie Mac will not allow cash for special purpose.
What do two institutions need
Despite the differences, Fannie Mae and Freddie Mac
- Can’t return cash to the remaining borrowers
- Written letter of intent must outline the reasons for the acquisition
- The specific terms of the agreement between the parties must be clearly documented
These safeguards are appropriate to ensure that refinancing has a special purpose and are not used for unlimited cash access.
How we help
As a mortgage broker, you can access Fannie Mae and Freddie Mac loan channels, us able:
- Evaluate which agent is best for your unique scenario
- Connect you with wholesale lenders for faster approval and better terms
- Guide you through the documentation you need to comply with the agent guidelines
touch us To understand how special purpose cash finance works in your situation, and which institution’s guide is best suited to your needs.
