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FREDDIE MAC OPTIGO®
Index Lock
Our Index Lock option allows Borrowers to lock the Treasury index and the spread1 at any time after the loan is under application with the Seller—providing an enhanced level of risk mitigation against interest rate volatility and market grid movements. If one or more of the assumptions in the quote sheet changes—such as changes in the terms of the loan, the type of property, borrower, or certain loan document modifications—the quote will be adjusted based on the pricing grid in effect as of the date of the quote.
BENEFITS
Allows borrowers to mitigate market risk, reduce loan coupon volatility and avoid potential proceed cuts by locking the Treasury index anytime (at quote or during underwriting) with less documentation and faster execution than our traditional lock processes.
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ELIGIBILITY
Index Lock is available to existing borrowers that have had a loan purchased for securitization by Freddie Mac within the 24 months.
Parameters of the Index Lock include:
- Up to $150 million.
- Single asset (non-transferable); pools are eligible with approval.
- Securitized loans – acquisitions or refinances.
- The Index Lock Agreement will require Index Lock to occur before quote sheet expiration, i.e., 5 business days from quote issuance.
- Index lock periods:
– The lock period for most loans is 60 days after the expiration of the quote.
– The lock period for Seniors Housing (SH) and Manufactured Housing Community (MHC) loans is 75 days after quote expiration.
– The lock period for Targeted Affordable Housing is 90 days after quote expiration. - Borrower must elect standard delivery or early rate-lock at time of Index Lock.
- Standard application fee (10 bps); 2% good faith deposit (Seller/Servicer retained).
- Plus/minus 5% proceeds variance without triggering breakage; proceeds greater than 105%of the index-locked UPB will be locked at the current Treasury index creating a blended rate.
- Not a commitment or credit approval.
Index Lock
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WHAT IS BEING LOCKED?
Treasury yield only; Freddie Mac spread is quoted at Index Lock, which will not be subject to market grid movements, but will adjust based on changes in loan terms, property, borrower or certain loan document modifications or other transaction specific items not fully reflected in the quote based on the pricing grid in effect as of the quote date; Freddie Mac spread and servicing spread are determined at full rate-lock.
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ELIGIBLE BORROWERS
Borrowers in good standing that have closed a securitized loan within 24 months.
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ELIGIBLE LOANS
- Loans to be securitized.
- Acquisition or refinance loans.
- Fixed-rate loans.
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MAXIMUM LOAN AMOUNT
$150,000,000.
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WHICH LOAN TERMS ARE DETERMINED PRIOR TO LOCK?
Term of the loan and loan amount (loan amount is subject to change).
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EST. TIME FOR CREDIT APPROVAL
N/A.
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GOOD FAITH DEPOSIT (GFD)
2%.
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DURATION OF LOCK
- 60 days after quote expiration date for most loans.
- 75 days after quote expiration for Seniors Housing and MHC loans.
- 90 days after quote expiration for TAH loans.
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EXPOSURE TO SPONSOR UPON BREACH/BREAKAGE
Fixed-rate: Standard breakage formula, subject to a 0.5% minimum and 2.0% maximum of the rate-locked mortgage amount.
Early Rate-Lock (ERL)
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WHAT IS BEING LOCKED?
Interest rate for a fixed-rate loan or the gross spread for a floating-rate loan.
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ELIGIBLE BORROWERS
Standard underwriting requirements.
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ELIGIBLE LOANS
- Loans to be securitized or held in portfolio.
- Acquisition or refinance loans.
- Fixed- or floating-rate loans.
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MAXIMUM LOAN AMOUNT
No maximum.
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WHICH LOAN TERMS ARE DETERMINED PRIOR TO LOCK?
Most material loan terms (loan amount is subject to change).
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EST. TIME FOR CREDIT APPROVAL
2 to 5 business days.
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GOOD FAITH DEPOSIT (GFD)
2% (retained by Seller).
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DURATION OF LOCK
Varying durations, typically ranging from 60 days to 120 days until Freddie Mac purchase.
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EXPOSURE TO SPONSOR UPON BREACH/BREAKAGE
- Fixed-rate: Standard breakage formula, subject to a 0.5% minimum and 2.0% maximum of the rate-locked mortgage amount.
- Floating-rate: 2.0%.
Standard Delivery
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WHAT IS BEING LOCKED?
Interest rate for a fixed-rate loan or the gross spread for a floating-rate loan.
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ELIGIBLE BORROWERS
Standard underwriting requirements.
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ELIGIBLE LOANS
- Loans to be securitized or held in portfolio.
- Acquisition or refinance loans.
- Fixed- or floating-rate loans.
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MAXIMUM LOAN AMOUNT
No maximum.
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WHICH LOAN TERMS ARE DETERMINED PRIOR TO LOCK?
All loan terms.
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EST. TIME FOR CREDIT APPROVAL
2 to 3 weeks.
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GOOD FAITH DEPOSIT (GFD)
Not required.
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DURATION OF LOCK
Typically 45 days until Freddie Mac purchase.
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EXPOSURE TO SPONSOR UPON BREACH/BREAKAGE
- Fixed-rate: Standard breakage formula, subject to a 0.5% minimum and 2.0% maximum of the rate-locked mortgage amount.
- Floating-rate: 2.0%.
1If the quoted Treasury floor, if applicable, is triggered at the time of index lock, the spread will be increased by a corresponding amount.
In its prequalifying review, Lument will attempt to estimate both the loan amount and the fees and costs associated with the transaction. Actual loan amounts and actual fees and expenses may vary from the prequalifying estimates. A prequalifying estimate is not a commitment to make a loan.