The employer assistance may be in the form of:
a direct, fully repayable second mortgage or unsecured loan,
a forgivable second mortgage or unsecured loan, or
a deferred-payment second mortgage or unsecured loan.
A borrower of a mortgage loan secured by a principal residence may use funds provided by an employer to fund all or part of the down payment or closing costs subject to the minimum borrower contribution requirements below. Employer assistance can also be used for financial reserves for all types of assistance with the exception of unsecured loans (which may only be used for the down payment and closing costs). Employer assistance funds are not allowed on a second home or an investment property.
Funds must come directly from the employer, including through an employer-affiliated credit union.
When employer assistance is extended as a secured second mortgage, the transaction may be structured as a Community Seconds (see B5-5.1-02, Community Seconds Loan Eligibility) or it must satisfy Fannie Mae's eligibility criteria for mortgages that are subject to subordinate financing (see B2-1.1-04, Subordinate Financing).
If the secured second mortgage or unsecured loan does not require regular payments of either principal and interest or interest only, the lender does not need to calculate an equivalent payment for consideration as part of the borrower’s monthly debt. If regular payments are required for the secured second mortgage, the payments must be included in the calculation of the debt-to-income ratio.
The following table describes the minimum borrower contribution requirements for transactions that contain employer assistance.
|LTV, CLTV, or HCLTV Ratio||Minimum Borrower Contribution Requirement from Borrower’s Own Funds|
|80% or less||One- to four-unit principal residence||A minimum borrower contribution from the borrower’s own funds is not required. All funds needed to complete the transaction can come from employer assistance.|
|Greater than 80%||One-unit principal residence||A minimum borrower contribution from the borrower’s own funds is not required. All funds needed to complete the transaction can come from employer assistance.|
|Two- to four-unit principal residence||
The borrower must make a 5% minimum borrower contribution from his or her own funds. After the minimum borrower contribution has been met, employer assistance can be used to supplement the down payment, closing costs, and reserves (except for unsecured loans, which may not be applied to reserves).
See B5-6-03, HomeReady Mortgage Underwriting Methods and Requirements, for HomeReady mortgage minimum borrower contribution and down payment requirements.
The lender must document:
that the program is an established company program, not just an accommodation developed for an individual employee.
the dollar amount of the employer’s assistance.
an unsecured loan from an employer with an award letter or legal agreement from the note holder and must disclose the terms and conditions of the loan.
the terms of any other employee assistance being offered to the borrower (such as relocation benefits or gifts).
that the borrower received the employer assistance funds directly from the employer (or through the employer-affiliated credit union).
The table below provides references to the Announcements that have been issued that are related to this topic.