Selling Guide

Published June 5, 2018

A4-2-01: Financial Statements and Reports (01/31/2017)

This topic contains information on financial statements and reports, including:

Financial Reporting Requirements

The seller/servicer must demonstrate its financial adequacy to Fannie Mae. To demonstrate financial adequacy, Fannie Mae requires the seller/servicer to submit its audited annual financial statements and the Authorization for Verification of Credit and Business References (Form 1001), within 90 days after the end of the seller/servicer’s fiscal year. Form 1001 is used to identify the presence of any new principal officers, partners, or owners (either direct or indirect) of a 5% or more interest in the seller/servicer. The audited annual financial statements and the executed Form 1001 may be sent either electronically or via hard copy to Fannie Mae’s Lender Eligibility and Compliance Unit. (See E-1-03, List of Contacts).

In addition, Fannie Mae may, at any time, require the seller/servicer to submit unaudited financial statements, audited financial statements other than the annual statements (if reasonably available), or any other financial information that Fannie Mae considers necessary and reasonable. Fannie Mae also has the right to require more frequent and more detailed financial reporting from a seller/servicer so that it can better monitor the continuing eligibility of the seller/servicer or additional financial requirements imposed by Fannie Mae on the seller/servicer. A seller/servicer’s failure to timely provide the additional financial reporting upon Fannie Mae’s request may result in Fannie Mae declaring a breach of the Lender Contract.

Financial Statement Requirements

Financial statements must be prepared under Generally Accepted Accounting Principles (GAAP), must include the opinion of an independent public accountant, and must be comparative with the previous year’s reports.

If the seller/servicer’s financial statements are consolidated with those of its parent or holding company, they must contain sufficient detail to enable Fannie Mae to review the seller/servicer’s financial data separately from that of the other companies.

Financial statements must include the following:

  • a balance sheet,

  • an income statement,

  • a statement of retained earnings,

  • a statement of additional paid-in capital,

  • a statement of changes in financial position, and

  • all related notes.

A seller/servicer that is a state- or federally-supervised depository institution may submit its latest published financial statements if audited statements are not available every year, provided the seller/servicer submits a written certification that it does not get yearly audited statements and that the published statements are identical to those submitted to its supervising authority. A balance sheet, income statement, and statement of changes in financial position must also be submitted if they are not included in the published statements.

A seller/servicer that is not a supervised depository institution, but is a HUD-approved mortgagee, may submit a copy of the annual financial audit report required by HUD instead of sending separate financial statements.

Submission of Special Financial Reports

A seller/servicer that is a mortgage banker (including one that is a subsidiary of a federally supervised depository institution), housing finance agency, or real estate investment trust must submit a Mortgage Bankers’ Financial Reporting Form (Form 1002) following the end of each calendar quarter.

The seller/servicer must submit this information within 30 days for the March 31, June 30, and September 30 reports and within 60 days for the December 31 report.

Each report should include only the financial data related to the quarterly reporting period for which the report is being submitted.

A seller/servicer that operates under an accounting cycle other than the standard calendar quarterly cycle does not need to change its methodology, but it needs to be sure that the information submitted with each reporting period includes data for only the quarter required for that specific report.

Incomplete, inaccurate, or late submissions may affect a seller/servicer’s ability to conduct business with Fannie Mae. Should extenuating circumstances prevent a seller/servicer from filing on time, it must provide timely notification to Fannie Mae.

Because the information on this form will be used by Fannie Mae, Freddie Mac, Ginnie Mae, and the Mortgage Bankers' Association, the seller/servicer must submit its data electronically, as specified in the form.

Failure to Submit Required Financial Reports

Untimely submission of financial statements, as well as untimely submissions of the Forms 1001,Form 1002, and Form 582 as referenced in this Chapter, constitutes an inadequate verification of the seller/servicer’s ability to meet Fannie Mae’s financial and eligibility requirements. Therefore, if a seller/servicer fails to timely submit required financial reports and information, one or more of the following may occur:

  • Fannie Mae may suspend the seller/servicer’s privileges for selling or servicing mortgages or terminate the Lender Contract if Fannie Mae does not receive the requested financial reports and information when they are due.

  • Fannie Mae may exercise any other available and appropriate remedy, including charging a compensatory fee of $1,000 per month until Fannie Mae receives the requested reports.

  • Fannie Mae may also require seller/servicers to provide special reports related to financial information about their operations.

Related Announcements

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

Announcements Issue Date
Announcement SEL-2017–01 January 31, 2017
Announcement SEL-2014–06 May 27, 2014
Announcement 08–23 September 16, 2008