How does Freddie Mac handle student loans?

 Loan Guidelines, Residential Mortgage  Comments Off on How does Freddie Mac handle student loans?
Mar 112015

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By G. Steven Bray

A few weeks ago, we examined the positive changes Fannie Mae and USDA made to their loan guidelines concerning the treatment of student loans. For deferred loans, both dropped the payment we must count when qualifying you for a mortgage from 2% to 1% of the loan balance.

But what about Freddie Mac? If the credit report doesn’t show the loan payment, Freddie says we can use 1.5% of the loan balance or ask the loan servicer to provide the payment. The guidelines don’t address the issue of graduated or income-based repayment plans, which don’t fully amortize the student loan based on the current payment. These plans may have payments less than 1.5% of the balance (or even 1% of the balance). I suspect Freddie will address this inconsistency soon.