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B2-ane.5-02, Loan Eligibility (11/03/2021)

Introduction

This topic contains information on mortgage loan eligibility requirements, including:

• Ability to Repay Loan Eligibility Requirements
• Acceptable Loan Terms
• HOEPA and State Higher-Priced Loans
• Bear upon of Special Assessments on Maximum Loan Corporeality
• Premium Pricing
• Private Transfer Fee Covenants
• Property Value for Loans Sold More than than Iv Months from Note Date
• Seasoned Loans
• Modified Loans
• Nonstandard Payment Drove Options

Power to Repay Loan Eligibility Requirements

The post-obit provisions employ to loans with awarding dates on or after January 10, 2014.

Note: Equally to any loan for which the original application was made earlier January 10, 2014, only which was assumed on or after January 10, 2014, and subsequently purchased or securitized past Fannie Mae, then, for eligibility purposes, the awarding date is considered to be the date on which Truth in Lending Act disclosure requirements were triggered with respect to such assumption.

ATR Covered Loans. An ATR Covered Loan is a loan subject to the TILA's ability to repay requirements under Regulation Z and is otherwise not an ATR Exempt Loan (divers below). An ATR Covered Loan must meet the post-obit requirements in addition to the other underwriting and eligibility requirements in the Selling Guide:

• have a loan term non exceeding 30 years (come across Acceptable Loan Terms below);

• be a fully amortizing loan, as defined in Regulation Z:

  • the loan must have regular periodic payments that are essentially equal that do non effect in an increase in the principal balance or allow the borrower to defer repayment of principal;

• take full points and fees as described below nether Points and Fees Limitations; and

• have an April-APOR spread as described below under Apr-APOR Spread Limitations.

The ATR Covered Loan requirements apply to acquisitions of newly originated loans (including government mortgage loans). These requirements do non apply to sure assumptions or modifications of existing Fannie Mae loans regardless of the dates on which the loans being assumed or modified were originally closed. Refer to the regulation for the applicable requirements.

ATR Exempt Loans. An ATR Exempt Loan is, with certain exceptions, a loan that either is not subject field to TILA or is exempt from the power to repay requirements in Regulation Z (12 CFR § 1026.43(a) or (d)). For purposes of determining whether a loan is an ATR Exempt Loan, lenders must follow the TILA and Regulation Z definitions.

Notation: The classification of certain transactions for TILA purposes and for eligibility and underwriting purposes by Fannie Mae do not always align. For case, Fannie Mae defines a four-unit property where the borrower occupies one of the units every bit a "principal residence." If under TILA such a loan is considered to be for commercial or business purposes, information technology volition be exempt from TILA and therefore considered an ATR Exempt Loan by Fannie Mae.

Fannie Mae purchases or securitizes ATR Exempt Loans equally long as such loans run into the other eligibility and underwriting requirements described in this Guide.

Points and Fees Limitations. For purposes of these requirements, "total points and fees" and "full loan amount" must be calculated in accord with Regulation Z (12 CFR § 1026.32).

• ATR Covered Loans: Total points and fees may not exceed 3% of the full loan amount or such unlike amount in accordance with the qualified mortgage provisions of Regulation Z (12 CFR § 1026.43(eastward)(iii)(i)). If a lender makes a cure payment in the amount and by the time required past 12 CFR § 1026.43(e)(3)(3), such loan satisfies this requirement.

• ATR Exempt Loans: Total points and fees may not exceed five% of the full loan amount. This decision may accept into account either of the following adjustments:

  • permitted reduction of full points and fees pursuant to 12 CFR § 1026.31(h); or

  • in the case of loans non field of study to TILA, restitution to the borrower of at least that portion of total points and fees that exceeded 5% at the time of loan closing.

APR-APOR Spread Limitations. Constructive for loans with applications dates on and afterward July 1, 2021, the Apr-APOR spread is the maximum divergence by which the loan's APR cannot exceed the APOR. (Note: Loans with application dates before July 1, 2021 provided the loans otherwise meet the Revised QM Rule.)

• ATR Covered Loans: The spread may not exceed 2.25% or a different amount as specified in the Revised General QM Rule, calculated in accordance with the provisions of that rule.

Note: For ARMs with initial stock-still periods of five years or less, the April must be calculated using the maximum interest rate that could apply during the beginning five years afterwards the first payment is due.

• ATR Exempt Loans: The spread may not exceed half-dozen.5% or more calculated in accordance with the Revised General QM rule.

Acceptable Loan Terms

Fannie Mae purchases or securitizes loans that have original terms up to 30 years. The term of a outset mortgage may not extend more than thirty years beyond the engagement that is 1 month prior to the engagement of the first payment. The minimum original term is 85 months, discipline to applicable committing and commitment requirements for whole loans and loans in MBS.

Exception: The only exception to these requirements is for single-endmost construction-to-permanent loans, which must have a loan term not exceeding 30 years after conversion to permanent financing (disregarding the construction period). Encounter B5-iii.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions.

HOEPA and State Higher-Priced Loans

A loan that is subject to the Home Ownership and Equity Protection Deed of 1994 (HOEPA), as described in Section 32 of Regulation Z, is not eligible for delivery to Fannie Mae.

In addition, Fannie Mae does non purchase or securitize loans that meet the definitions under the following laws of the state in which the holding is located ("state college-priced loans"), regardless of whether any provision of such state police is preempted by federal law with respect to a particular loan or for a particular originator:

Country	Loan Type	Description
Arkansas	High-cost dwelling loan	Loans delivered on or afterwards September 1, 2003 that meet the definition of "high-cost home loan" nether the Arkansas Home Loan Protection Deed (Ark. Code Ann. §§ 23-53-101 et seq.), notwithstanding the "safe harbor" linguistic communication contained in § 23-53-103(5)(B).
Georgia	Home Loan	Loans originated between Oct 1, 2002 and March 7, 2003 that are governed by the Georgia Fair Lending Human action (Ga. Lawmaking Ann. §§ 7-6A-1 et seq.).
Georgia	High-cost home loan	Loans delivered on or after January 1, 2003 that meet the definition of "high-cost domicile loan" under the Georgia Off-white Lending Act (Ga. Code Ann. §§ 7-6A-1 et seq.), every bit amended effective March 7, 2003.
Illinois	High take chances dwelling house loan	Loans delivered on or afterward January ane, 2004 that see the definition of "high risk home loan" under the Illinois High Gamble Dwelling Loan Deed (§ 815 Ill. Comp. Stat. 137/1 et seq.).
Indiana	Loftier cost dwelling house loan	Loans delivered on or later on Jan 1, 2005 that meet the definition of "high price habitation loan" under the Indiana Dwelling Loan Practices Act (Ind. Code Ann. §§ 24-9-1 et seq.), notwithstanding the "condom harbor" language contained in § 24-9-1-1.
Kentucky	Loftier-toll home loan	Loans delivered on or afterward September 1, 2003 that come across the definition of "loftier-cost home loan" nether the Kentucky high-cost home loan statute (Ky. Rev. Stat. § 360.100).
Maine	Loftier-rate, high-fee mortgage	Loans delivered on or after January 1, 2008 that encounter the definition of "high-rate, high-fee mortgage" under the Maine Consumer Credit Code – Truth in Lending (Me. Rev. Stat. Tit. 9-A §§ 8-101 et seq.).
Massachusetts	High-cost home mortgage loan	Loans delivered on or after November seven, 2004 that meet the definition of "loftier toll home mortgage loan" under the Massachusetts Predatory Home Loan Practices Act (Mass. Gen. Laws Ann. ch.183C).
New Jersey	Loftier-cost dwelling house loan	Loans delivered on or afterward November 27, 2003 that meet the definition of "high-cost dwelling house loan" under the New Jersey Dwelling house Buying Security Act of 2002 (Due north.J. Rev. Stat. §§ 46:10B-22 et seq.).
New Mexico	High-toll home loan	Loans delivered on or after January 1, 2004 that encounter the definition of "high-price abode loans" under the New Mexico Home Loan Protection Act (North.M. Stat. Ann. §§ 58-21A-one et seq.).
New York	High-cost domicile loan	Loans delivered on or subsequently Apr 1, 2003 that run into the definition of "high-toll home loan" under the New York Banking Police § 6-l.
New York	Subprime home loan	Loans delivered on or after September 1, 2008 that run across the definition of "subprime home loan" nether New York Banking Police § six-m.
Rhode Isle	High-cost home loan	Loans delivered on or afterwards December 31, 2006 that encounter the definition of "loftier-price abode loan" nether the Rhode Island Home Loan Protection Human activity (R.I. Gen. Laws §§ 34-25.2-one et seq.), even so the exemptions contained in § 34-25.ii-eleven of the Rhode Island police force.
Tennessee	High-cost home loan	Loans delivered on or after January 1, 2007 that meet the definition of "high-cost home loan" under the Tennessee Dwelling house Loan Protection Act (Tenn. Lawmaking Ann. §§ 45-20-101 et seq.), nonetheless the preemption provision contained in § 45-twenty-111 of the Tennessee law.

Touch of Special Assessments on Maximum Loan Corporeality

If special assessments take been levied against the property and they are not paid before or at closing, the maximum loan amount otherwise available must be reduced past the amount of the unpaid special assessments (unless sufficient deposits to pay them volition be nerveless as part of the loan payment).

If the security belongings may be bailiwick to liens for taxes and special assessments and the liens are not nevertheless due and payable, Fannie Mae does not consider these weather condition, restrictions, and encumbrances material and does not require a reduction in the maximum loan amount.

The lender must provide documentation to bear witness that the electric current installments of taxes and assessments (or future installments of special assessments that have been levied) - including those which may have been attached every bit prior liens, just which are not now in arrears - have been paid or that sufficient deposits are existence nerveless to pay them.

Private Transfer Fee Covenants

In accord with a regulation issued by the Federal Housing Finance Agency on March 16, 2012, and codification at 12 CFR Part 1228 (the "Private Transfer Fee Regulation"), Fannie Mae volition not purchase or securitize loans on backdrop encumbered by private transfer fee covenants if those covenants were created on or after February viii, 2011, unless permitted past the Private Transfer Fee Regulation.

The lender must establish policies and/or procedures to ensure that the loans it delivers to Fannie Mae, whether or not the loans were originated by the lender, are not secured by properties encumbered with a private transfer fee that is unacceptable under the Individual Transfer Fee Regulation. The policies and/or procedures will exist reviewed by Fannie Mae as part of the lender's operational review process.

Every bit with all other federal, state, and local laws, the lender (and any third-party originator it uses) must be aware of, and in full compliance with, the Individual Transfer Fee Regulation. (Refer to the Private Transfer Regulation for further particular concerning adequate and unacceptable private transfer fee covenants, also as the definitions of "private transfer fee" and "individual transfer fee covenant.")

Property Value for Loans Sold More than Four Months from Note Engagement

For loans that are more than four months onetime from the date of the note and loan to the date the loan is sold to Fannie Mae, the current value of the property cannot be less than the original value. If the lender is unable to warrant that the current value of the property is not less than the original value of the property, the loan is not eligible for delivery to Fannie Mae past the lender except on a negotiated basis. In these instances, the loan must exist submitted as part of a bulk transaction, which is subject to additional review by Fannie Mae to ensure the loan is eligible for sale.

Seasoned Loans

Seasoned loans are loans that are more than ane year onetime from the first payment appointment to:

• the loan purchase date for whole loans, or

• the puddle issue date for MBS loans.

Note: Fannie Mae restricts buy or securitization of seasoned ARM loans to those that are delivered as a negotiated transaction.

The table below provides the requirements for seasoned loans.

✓	Seasoned Loan Requirements
	Seasoned loans may non be included in Fannie Majors MBS pools. Run into Chapter C3–6, Pooling Loans into Fannie Majors.
	The lender's underwriting of the borrower's credit and the security property for a seasoned loan must encounter the electric current requirements set up out in this Guide.
	The borrower has not had a 30-solar day delinquency in the 12-month period that precedes the lender's delivery of the loan to Fannie Mae.
	If the electric current borrower assumed the loan and has owned the holding for less than 12 months, he or she must have had no xxx-day delinquency since purchasing the property.
	The borrower's ability to pay must not have changed adversely. Note: If the loan has been assumed, the new borrower'southward credit must be fully documented and underwritten in accordance with the same standards used for new loans, unless the transfer of ownership was one of the exempt transactions that legally prohibit a credit review. Run into the Servicing Guide for an explanation of exempt transactions.
	The current value of the property cannot be less than the original value. If the lender is unable to provide this warranty, the loan is not eligible for commitment to Fannie Mae by the lender except on a negotiated footing.
	The status of the championship to the property must not have been affected adversely.
	The loan must satisfy Fannie Mae'southward electric current applicable mortgage eligibility requirements.
	If the loan is secured by a unit in a condo, co-op, or PUD project, the projection must satisfy Fannie Mae's current applicable project eligibility requirements.
	If the loan was modified prior to delivery to Fannie Mae, it must be a modification that is eligible for delivery in accordance with the requirements of this Guide every bit described below nether Modified Loans.
	Except to the extent otherwise expressly permitted in the Selling Guide ( A2-3.2-01, Loan Repurchases and Make Whole Payments Requested by Fannie Mae), or the Servicing Guide with respect to the redelivery of loans to Fannie Mae, the loan beingness delivered cannot exist one that was required to be repurchased past a secondary market investor, government-sponsored enterprise, or private institutional investor other than Fannie Mae for any documentation, underwriting, holding valuation, or other deficiencies and/or issues with the holding (including project eligibility if the property is in a condo, co-op, or PUD project), borrower credit or other deficiencies or for any other reason.

Modified Loans

A modified loan is a loan that was legally modified after loan closing in a way that changed whatever of the loan terms or attributes reflected in the original notation. In general, loans with material modifications, such as changes to the original loan amount, interest charge per unit, last maturity, or production construction, are not eligible for commitment to Fannie Mae.

A loan whose note was corrected to upshot technical or typographical corrections is not considered to be a modified loan and is eligible for commitment.  All of the changes must correct errors in the executed documents, which reflect the terms of the original loan transaction. None of the changes can be the event of a subsequent modification or amendment to the original loan corporeality, involvement charge per unit, or other material loan term. The correction may non outcome in a change to, or create any inconsistencies with, other legal documents.

Fannie Mae permits the delivery of certain other modified loans based primarily on whether the loan was endemic or securitized by Fannie Mae prior to the modification, or the modification of the loan was washed in accordance with a standard product or is common and customary in a sure area.

The table below provides a comprehensive overview of Fannie Mae requirements applicable to the delivery of modified loans. If the loan is not eligible in accord with standard Selling Guide provisions, it may be eligible in accordance with a variance. Such variances may be discipline to boosted terms and weather condition.

Category of Modification	Endemic or Securitized by Fannie Mae Prior to or at Time of Modification?	Eligible for Delivery to Fannie Mae After Modification?	Selling Guide or Servicing Guide Reference
Converted Arms	Aye	Aye	Selling Guide: See B2-1.iv-03, Convertible ARMs, for convertible Arms that are redelivered to Fannie Mae afterwards their removal from an MBS puddle
	No	No	Due north/A
Maturing Airship with Conditional Correct to Refinance or Modify	No	No	N/A
Borrower Principal Curtailment and Recast Over Remaining Term	Yes	N/A — No redelivery required	Servicing Guide: Run across Chapter C-1, Processing Mortgage Loan Payments
	No	Yes	Selling Guide: Come across below and  B2-1.v-05, Principal Curtailments
Changes to Borrowers Due to Expiry, Marriage, or Other Allowable Property Transfers	Aye	N/A — No redelivery required	Servicing Guide: Meet Affiliate D1–4, Transfers of Ownership
	No	No	North/A
Single-Endmost Construction-to-Permanent Financing	No	Yes	Selling Guide: See B5-iii.1-02, Conversion of Construction-to-Permanent Financing: Single-Endmost Transactions
New York Consolidation, Extension, and Modification	No	Yes	Selling Guide: See B8-2-02, Special-Purpose Security Instruments
Modifications that Result in Material Changes to Loan Terms	No	No	Selling Guide: See Modified Loans, above

Borrower Principal Curtailment and Recast Over Remaining Term

Fannie Mae will buy a re-amortized loan following the application of a principal curtailment received from the borrower. The curtailment reduces the principal residuum and monthly mortgage payment over the remaining term of the loan. The following requirements must be met:

• The but changes to the original annotation terms are a corresponding reduction in the principal residuum and a re-amortized reduction to the monthly mortgage payment.
• The original annotation amount must comply with maximum loan limits in issue at the time of acquisition. See  B2-1.v-01, Loan Limits.
• When the loan was underwritten, the borrower was fully qualified based on the original note amount.
• The loan must be delivered with Special Feature Lawmaking 76.
• The lender must consummate an Agreement for Modification, Re-Amortization, or Extension of Mortgage (Form 181), in accordance with the requirements of the Servicing Guide, place a copy in the loan servicing file, and deliver the completed documents to the applicable document custodian in accordance with Selling Guide E-2-01, Required Custodial Documents.
• The delivery data must comply with the commitment instructions for principal curtailments.

See  B2-1.5-05, Principal Curtailments for additional requirements related to chief curtailments.

Nonstandard Payment Collection Options

A nonstandard payment collection option is a payment option that permits the borrower to brand loan payments on a schedule other than a monthly basis. If the nonstandard payment collection pick terms are included in the loan documents, then the loan is ineligible for delivery to Fannie Mae.

Lenders may offering nonstandard payment collection plans every bit office of a separate agreement; however, the loan is eligible for delivery to Fannie Mae but under the following conditions:

• the agreement must non affect the terms and conditions of the mortgage note, nor the reporting or remittance of payments to Fannie Mae;

• the understanding must be cancelable past the borrower without cost; and

• the loan must exist identifiable by the lender such that the information can be provided to Fannie Mae upon request.

Related Announcements

The table below provides references to the Announcements that accept been issued that are related to this topic.

Announcements	Consequence Date
Announcement SEL-2021-10	November 03, 2021
Announcement SEL-2021-08	September 01, 2021
Announcement SEL-2021-05	June 02, 2021
Announcement SEL-2020-07	December 16, 2020
Annunciation SEL-2020-05	September 02, 2020
Announcement SEL-2019-07	August 07, 2019
Annunciation SEL-2019-05	June 05, 2019
Declaration SEL-2017-ten	Dec nineteen, 2017
Announcement SEL-2016–05	June 28, 2016
Announcement SEL-2015–12	November 3, 2015
Announcement SEL-2015–07	June thirty, 2015
Annunciation SEL-2015–01	January 27, 2015
Declaration SEL-2014–16	Dec xvi, 2014
Announcement SEL-2014–12	September 30, 2014
Proclamation SEL-2014–eleven	August 26, 2014
Proclamation SEL-2014–03	April 15, 2014
Announcement SEL-2013–07	September 24, 2013
Declaration SEL-2013–06	August 20, 2013
Declaration SEL-2013–03	Apr nine, 2013
Announcement SEL-2012–06	June 26, 2012
Declaration SEL-2012–04	May 15, 2012
Announcement SEL-2011–06	July 26, 2011
Announcement SEL-2011–03	March 31, 2011
Announcement SEL-2011–01	Jan 27, 2011
Annunciation SEL-2010–x	August 12, 2010
Announcement SEL-2010–06	April thirty, 2010
Declaration 09-32	October thirty, 2009
Declaration 09-19	June viii, 2009

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Source: https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B2-Eligibility/Chapter-B2-1-Mortgage-Eligibility/Section-B2-1-5-Other-Loan-Attributes-and-Related-Policies/1032996881/B2-1-5-02-Loan-Eligibility-11-03-2021.htm

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