Selling Guide

Published December 4, 2019

B2-1.3-04: Refinanced Balloon Mortgages (12/15/2015)

This topic contains information on refinanced balloon mortgages, including:

Refinanced Balloon Mortgages — Original Balloon Mortgage Owned by Fannie Mae

The table below provides the conditions under which the lender may redeliver a balloon mortgage loan previously owned or securitized by Fannie Mae after the conditional right to refinance has been executed.

Note: For any balloon mortgage that has reached the end of the balloon period and has been refinanced or modified by the lender, and that was not owned by Fannie Mae prior to the refinance or modification, refer to B2-1.4-02, Loan Eligibility, for eligibility and delivery requirements.

The balloon mortgage must have contained a conditional refinancing option that the borrower could exercise when the balloon maturity date was reached.
All of the requirements of the balloon documents that relate to the refinancing must be met.
The LTV ratio and CLTV ratio for the original balloon mortgage did not exceed 95%.
All eligibility requirements (with respect to mortgage interest rate, borrower payment history, property ownership, occupancy status, and lien status) at the time of the balloon maturity date must be met, as outlined in the Servicing Guide.
The new refinance mortgage must have a term of 23 years.
The new refinance mortgage must be closed on the special balloon refinancing documents Fannie Mae developed for use in certain states.
When a new refinance mortgage that was approved under one or more of Fannie Mae's eligibility criteria for approving a conditional refinance is included in an MBS pool, no more than one payment was 30 days late in the past 12 months.

A refinance mortgage that results from a borrower’s decision to exercise the refinance option of a Fannie Mae-owned or Fannie Mae-securitized balloon mortgage does not need to satisfy Fannie Mae eligibility criteria for mortgages that are more than one year old if the interest rate for the refinanced mortgage is not more than 5% higher than the interest rate for the balloon mortgage.

If the difference in the old and new interest rates is more than 5%, lenders must re-underwrite both the borrower and the property to ensure that eligibility criteria for seasoned mortgages (mortgages that are more than one year old) are satisfied.


Mortgage loans secured by investment properties will be subject to the applicable LLPA. Refer to the Servicing Guide for permissible changes in occupancy and to the Loan-Level Price Adjustment (LLPA) Matrix for applicable investment property LLPAs. No other LLPAs will be assessed for refinanced balloon mortgages.

MBS Eligibility

A balloon mortgage that has been refinanced into a 23-year fixed-rate loan may be included in an MBS pool using the TBA-eligible prefix CL, provided that all requirements related to the conditional right to refinance have been met.

Loan Delivery Data

All applicable loan delivery data must be provided at the time a refinanced balloon loan is redelivered to Fannie Mae. Refer to the Loan Delivery Data Requirements for a full list of data fields and additional information.

The table below highlights specific fields and identifies whether the delivery data should be provided based on the original balloon mortgage transaction, or must reflect the terms of the refinanced balloon after the conditional right to refinance has been executed.

Loan Delivery Field Name Source of the Delivery Data Upon Redelivery
Type of Amortization Refinanced balloon loan
Mortgage Type Refinanced balloon loan
Original Term Refinanced balloon loan
Note Rate Refinanced balloon loan
Original Loan Amount Refinanced balloon loan
Constant P&I Refinanced balloon loan
Maximum Term Refinanced balloon loan
Amortization Term Refinanced balloon loan
Original Note Rate Refinanced balloon loan
Monthly Housing Expense Original balloon loan
Monthly Debt Expense Original balloon loan
Monthly Income Original balloon loan
Appraisal Amount Original balloon loan
Date of Mortgage Note Original balloon loan
Borrower Credit Repository Source Indicator/Co-Borrower Credit Repository Source Indicator Original balloon loan
Borrower Credit Score Source/Co-Borrower Credit Score Source Original balloon loan
Borrower Credit Score/Co-Borrower Credit Score Original balloon loan
Appraisal Amount Original balloon loan
First Payment Date Refinanced balloon loan
Last Paid Installment Date Refinanced balloon loan
LTV Ratio Original balloon loan

The new refinance mortgage loan must also be delivered with Special Feature Codes 007 and 236 (in addition to any other special feature codes that may also be applicable to the transaction).

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-2015–13 December 15, 2015
Announcement SEL-2013–03 April 9, 2013
Announcement SEL-2012–06 June 26, 2012
Announcement SEL-2011–06 July 26, 2011
Announcement SEL-2010–06 April 30, 2010
Announcement SEL-2010–02 March 2, 2010
Announcement 09–32 October 30, 2009