Fannie Mae sometimes allows special-purpose alternative documents to be used in lieu of (or in addition to) the typical security instruments. These documents can be found on Special Purpose Documents. Authorized changes that must or may be made to those documents are set out in the instructions that accompany each document. These instruments must be supported by the appropriate mortgage riders, rider addenda, mortgage assignments, and, if applicable, other product-specific documentation (see B8-4, Riders and Addenda, and B8-6, Mortgage Assignments).
Fannie Mae offers several methods for lenders to document the refinancing of a regularly amortizing balloon mortgage that has a conditional refinance option:
the execution and recordation of a new security instrument and the execution of a new fixed-rate note;
the execution of a new fixed-rate note and the execution and recordation of a modification agreement that modifies the existing balloon security instrument to secure the new note (if that is permitted under state law), but does not modify both the balloon note and the security instrument; or
the execution and recordation of a Balloon Loan Refinancing Instrument, which combines into a single document the terms of a new fixed-rate note and a modification of the existing balloon mortgage (or deed of trust).
If a lender selects an alternative that requires the execution of a new mortgage and note, it must use Fannie Mae’s standard documents.
If the mortgage is secured by a New York property, Fannie Mae’s standard Consolidation, Extension and Modification Agreement (Form 3172)—which is commonly used to document refinance transactions in New York—may be used, provided the lender ensures that the use of this document for the refinancing of a balloon mortgage is enforceable and consistent with customary practice in that state.
A lender may not under any circumstances use Fannie Mae’s Loan Modification Agreement (Form 3179) to document the conditional refinancing of a balloon mortgage. There are 27 states—Arizona, Arkansas, California, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Missouri, Montana, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Wisconsin, and Wyoming—that permit the refinancing of a balloon mortgage with a conditional refinance option to be documented by a single document that combines the terms of a new fixed-rate note and a modification of the existing balloon mortgage security instrument. In these jurisdictions, a lender may use one of the state-specific versions of Fannie Mae’s Balloon Loan Refinancing Instrument (Form 3269). A lender that develops a Balloon Loan Refinancing Instrument for use in any other state must obtain approval from its lead Fannie Mae regional office (see E-1-03, List of Contacts) before using the document for a mortgage that is delivered to Fannie Mae.
The statutory provisions of New York permit refinance mortgages (and sometimes purchase money mortgages) to be documented by a consolidation, extension, and modification agreement (CEMA) that consolidates into one document the terms of prior notes and mortgages related to the security property and, if new funds are advanced, the terms of a new note and mortgage. In such instances (including those that may involve the refinancing of balloon mortgages that have a conditional refinance option), the consolidation must be documented on Fannie Mae’s standard Consolidation, Extension and Modification Agreement (Form 3172), along with any accompanying exhibits Fannie Mae may specify. If new funds are advanced, Fannie Mae’s standard security instrument must be used to document the new mortgage that is being consolidated with the prior mortgages.
The statutory provisions of Puerto Rico permit a mortgage transaction to be documented by a single instrument that combines the terms of a note and mortgage. This is referred to as a “direct” mortgage. Fannie Mae does not publish standard legal documents for direct mortgages; therefore, lenders must develop (or acquire) appropriate documentation for these mortgages consistent with the applicable Puerto Rico statutes. By delivering a direct mortgage to Fannie Mae, the lender must make the nonstandard document warranties. (See A2-2.1-02, Delivery Information and Delivery-Option Specific Representations and Warranties.)
Fannie Mae prefers lenders to use the standard Fannie Mae uniform instruments for manufactured home loans sold to it.
Loan documents are not acceptable if they:
state that the home is personal property or contain other words to that effect;
state that the parties do not intend to attach the home to a permanent foundation system on the land, or contain statements inconsistent with that intention;
unless required by law, provide that rights of holders in due course are waived, or with other words provide that an assignee note holder may be held liable for claims the borrower may have against other parties; or
include consumer finance paper (which combines the note and security instrument in a single document) or a retail installment sales contract.
The following list provides the requirements for the security instrument used for a manufactured home loan.
The property description section of the security instrument must include a comprehensive description of the manufactured home and the land. The description must include the serial or VIN number (or the serial number or VIN for each unit if the home is multi-width), make, model, size, and any other information that may be required by applicable law to definitively identify the home. The serial number is located on the HUD Data Plate located on the interior of the home, usually near the electrical box. In addition, the serial number is generally cold stamped on the frame front cross member of each transportable section.
Some jurisdictions may not allow any information in the property description section of the security instrument other than what is customary for other real property transactions. If this is the case, then an addendum may be used, which must be attached to the security instrument and included in the loan file.
The security instrument must state that the manufactured home is an improvement to the land and an immovable fixture, or must include similar language as may be required by applicable law to assure, to the greatest extent possible, that the manufactured home is treated as real property under applicable state law. If applicable law provides specific obligatory wording, such wording must be used.
The borrower(s) and any lender with a personal property security interest in the manufactured home must sign an Affidavit of Affixture that acknowledges their intent for the manufactured home to be permanently part of the real property that secures the mortgage free of any personal property security interest. It must also contain any specific language that may be required by applicable law.
The Affidavit must be signed by both the lender and the borrower(s), preferably recorded, and must be retained in the loan file.
Failure to include the Affidavit of Affixture in the loan file may result in the loan being ineligible for delivery to Fannie Mae.
If state law requires a Uniform Commercial Code (UCC) filing in order to perfect a security interest in a manufactured home, the lender must make such filing in any and all appropriate locations.
The table below provides references to the Announcements that have been issued that are related to this topic.