In Bulletin No. 2022-25, Freddie Mac announced a new seasoning requirement for cash-out refinance loans where the proceeds are being used to pay off a first-lien mortgage. In the instance that a cash-out refinance will pay off a first-lien mortgage, the first-lien mortgage being paid off must be seasoned for at least 12 months. The note date of the cash-out refinance mortgage must be at least 12 months pass the note date of the first-lien mortgage being refinanced.
The new seasoning requirement is effective for mortgages with settlement dates on or after March 7, 2023 and must be documented in the mortgage file by the credit report or title commitment.
There are exceptions to which the new seasoning requirement does not apply:
- Special purpose cash-out refinance mortgage where the owner of the property uses the proceeds of the refinance loan to buy out the equity of a co-owner, in accordance with requirement of Freddie Mac Single-Family Seller/Servicer Guide Section 4301.6, and
- First-lien mortgages being refinanced as a Home Equity Line of Credit (HELOC)
Freddie Mac Single-Family Seller Guide Section 4301.5 currently requires at least one of borrower to be on title for at least 6 months, with limited exceptions, for cash-out refinance loans. This requirement will still apply unless the refinance loan is paying off a first-lien mortgage. In that instance, the 12- month seasoning requirement must be met.
