Selling Guide

Published June 02, 2021

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Is a housing finance agency an acceptable source for a Community Second?

Community Seconds Mortgage Terms/Proceeds

A Community Seconds mortgage may be funded by a federal agency, municipality, state, county, state or local housing finance agency, nonprofit organization, a regional Federal Home Loan Bank under one of its affordable housing programs, or an employer (see B3-4.3-08, Employer Assistance, for additional information).

It may not be funded by the property seller or any other interested party to the transaction; however, a lender may fund a Community Seconds mortgage that an employer guarantees as part of its affordable housing program.

The Community Seconds financing must be subordinate to the mortgage purchased by Fannie Mae.

A borrower of a mortgage loan secured by a principal residence may use funds received from a Community Seconds mortgage to fund all or part of the down payment provided the Community Seconds is not funded in any way through the first lien mortgage, such as premium pricing. Additionally, Community Seconds proceeds may fund closing costs, renovations to the property (including energy-related improvements), or a permanent interest rate buydown. Community Seconds are not allowed on co-op share loans, second homes, or investment properties.

See B5-6-02, HomeReady Mortgage Underwriting Methods and Requirements for additional information about HomeReady mortgage minimum borrower contribution and down payment requirements. 

For additional information, see B5-5.1-02, Community Seconds Loan Eligibility.

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