Under the direction of the Federal Housing Finance Agency (“FHFA”), Fannie Mae and Freddie Mac (the “GSEs”) announced an aligned definition of “First-Generation Homebuyer Mortgage” and related requirements meant to establish an industry standard for this classification of homebuyers in the conventional mortgage market. The GSEs state that the definition was created with the aim of fostering growth, adoption, and greater utilization of first-generation programs to help increase homeownership rates and close gaps for historically underserved consumers.
The GSEs define a first-generation homebuyer mortgage as one in which each one of the borrowers must meet the following requirements:
- Is purchasing the mortgaged property
- Will reside in the mortgaged property as a primary residence
- Has had no ownership interest (sole or joint) in another property in the three years preceding the note date of the purchase
- One of the following must also apply:
- borrower has aged out of foster care;
- borrower is emancipated;
- borrower’s parents have not had an ownership interest (sole or joint) in a property in the three years preceding the note date of the purchase
Freddie Mac announced the new definition in Bulletin 2024-B and also in Bulletin 2024-07. The Seller/Servicer Guide Glossary has been updated with the First-Generation Homebuyer Mortgage definition and Section 6302.52 has been added to the Seller/Servicer guide with delivery requirements. Freddie Mac also published a First-Generation Homebuyer Fact Sheet to provide additional background information and answers to frequently asked questions. Fannie Mae first introduced the new definition in its Equitable Housing Finance Plan and again in Selling Guide announcement (SEL-2024-03).
It is currently optional for lenders to identify a loan as a first-generation homebuyer loan upon delivery to Fannie Mae or Freddie Mac. If a lender chooses this option, the loan must be delivered with identifying information. Fannie Mae requires the loan to be delivered with Special Feature Code 886. Freddie Mac requires a lender to deliver ULDD Date Point Investor Feature Identifier with the valid value of "K09".
The GSEs also announced a requirement for a new form, First-Generation Homebuyer Certification (Form 1109). All loans delivered as a first-generation homebuyer mortgage must include this form completed by each borrower. In signing the First-Generation Homebuyer Certification, each borrower attests that they meet the definition criteria provided on the form. Borrowers must also provide the names and addresses of their parents, when applicable. However, the Freddie Mac First-Generation Homebuyer Fact Sheet clarifies that lenders are not required to verify parental information provided by the borrower.
The form states that the information provided by the borrower is being collected to “help ensure that the housing needs of communities and neighborhoods, especially traditionally underserved communities, are being fulfilled” and that the information “will be used to assist in developing programs that may benefit first-generation homebuyers.”
DocMagic currently has the First-Generation Homebuyer Certification (Form ID: 1109.MSC) available upon request. The form will be available to select from the Forms List for conventional loans beginning on July 11, 2024.
If you have additional questions, please contact DocMagic’s Compliance Department.
