In mortgage there are many types of loans
from those that are considered “safe” and often called qualified mortgages
to those that are considered “risky” often called non-qualified mortgages. HOME exclusively uses qualified mortgages. In addition, these loans are conforming
meaning they can be sold to Fannie Mae, Freddie Mac and other institutions affiliated with the US Government. A discussion of mortgage types is beyond the scope of this document but the protocol has a smart contract that only
allows mortgages that are qualified mortgages i.e. they are approved to be sold to Fannie Mae or Freddie Mac. The US Federal government is the largest buyer of qualified mortgages. They hold approximately $3 Trillion of qualified mortgages in the U.S. Federal reserves.
Below is a summary of the guidelines for those mortgages (link to the full requirements here):
*Note: There is one exception allowed by the protocol which are SMARTLOCs which are underwritten to qualified mortgages guidelines except they are second liens.
To summarize, the only types of mortgages allowed in the pool of mortgages backing HOME are underwritten to Fannie Mae qualified mortgage guidelines except for SMARTLOCs where the only difference is the lien type. In addition, SMARTLOCs are only allowed into the pool if both the 1st and 2nd lien can be combined and underwritten to qualified mortgage guidelines and sold to Fannie Mae or Freddie Mac in the future.