C2-1.1-02, General Information about Mandatory Commitment Pricing and Fees (06/07/2023)

As noted in  C1-1-01, Execution OptionsC1-1-01, Execution Options, when lenders commit to sell loans to Fannie Mae, Fannie Mae provides a “live” price, so named because prices move throughout the day, generally in tandem with the MBS market. Fannie Mae purchases regularly amortizing whole mortgages either at par (100% of the unpaid principal balance), at a discount, or at a premium, based on the type of mortgage being delivered and the pricing option specified in the whole loan commitment under which the mortgage is delivered.

For whole loans, the rate at which the lender must remit interest on the mortgages it sells to Fannie Mae via a mandatory commitment is the pass-through rate, defined as the difference between the gross note rate and the servicing fee. Lenders can choose a range of five consecutive pass-through rates in increments of 0.125% under the same mandatory commitment. When obtaining a commitment, lenders specify the minimum pass-through rate. The lender does not need to know the exact interest rate of the mortgages that will be delivered in fulfillment of the commitment as long as the pass-through rates fall within the selected range. The actual interest payments lenders will remit for regularly amortizing mortgages will depend on the remittance option selected by the lender.

Lenders obtain current pricing specific to their institution by accessing Fannie Mae’s whole loan committing application.

Access to both generic and lender-specific pricing information is available to approved Fannie Mae lenders and requires a valid user ID and password. For information on obtaining access to this information, lenders should contact their Fannie Mae customer account team or the Capital Markets Pricing and Sales Desk. 

Fannie Mae may charge up-front fees on commitments made to deliver adjustable-rate mortgages for which the lender has selected the scheduled/actual remittance option. See  C1-3-01, General Information on Remittance TypesC1-3-01, General Information on Remittance Types, for more information on this remittance type.

Fannie Mae may charge lenders for lender-requested and automatic extensions for mandatory commitments (“extensions”), delivering more than the maximum delivery amount of their commitment (“overdelivering”), repurchasing all or part of a commitment (“pairing-off”), or otherwise failing to satisfy mandatory commitment requirements. These fees, if charged, are drafted from the lender’s designated account the business day following the assessment. If cash is due to the lender under a cash back pair-off, the lender’s designated account will be credited the business day following the pair-off. See below for account requirements.

Extension fees are based on three factors:

• Amount to be extended, which equals the lender’s original commitment amount minus any deliveries as of the date of the extension, and, if the extension is a partial extension, minus any partial pair-off amount;

• Actual number of days by which the commitment expiration date is being extended. (Note that if the request is for a 20-day extension and the 20th day falls on a weekend or holiday, the contract will be extended to the next business day.); and

• Daily interest charge, which is based on the minimum pass-through rate posted on the original commitment.

For overdelivery and pair-off fees, including cash back pair-offs, whole loan prices captured at commitment and again at the time of the overdelivery or pair-off are used to determine if a fee will be charged or if cash back is due and, if so, the amount. All pair-off amounts (including cash back pair-offs) are calculated from the original commitment amount, not the low delivery tolerance.

A lender must designate a non-MBS P&I custodial account from which Fannie Mae can and will automatically draft and credit whole loan transaction and related fees that it owes, or is owed by, Fannie Mae. The bank instructions for the account must be established in the  Cash Remittance System (CRS).

Fannie Mae will draft or credit, as applicable, up-front commitment, extension, overdelivery, and pair-off fees from the lender’s designated account on the day following the request for the commitment, extension, overdelivery, or pair-off. Compensatory fees for failure to satisfy mandatory delivery requirements will be drafted from the designated account on the first Friday after the expiration of the commitment period and any additional time allowed to effect the delivery or a pair-off.

To ensure that funds related to borrower payments are not used to satisfy a lender’s corporate responsibility for the payment of fees or charges due Fannie Mae, a lender must make sure that its designated account will have sufficient funds on hand when Fannie Mae drafts it for the related fee. The lender must notify Fannie Mae immediately about changes to the status of its designated account to ensure Fannie Mae’s drafts are honored and protect the lender from being charged additional fees for late remittances.

For additional information on specific topics, see the resources noted below:

• For information on best efforts and mandatory commitments, see C2-1.2-02, Best Efforts Commitment Pricing, Periods, and FeesC2-1.2-02, Best Efforts Commitment Pricing, Periods, and Fees, and C2-1.1-04, Mandatory Commitment Extensions and Pair-OffsC2-1.1-04, Mandatory Commitment Extensions and Pair-Offs.

• For information on overdeliveries, see  C2-2-01, General Requirements for Good Delivery of Whole LoansC2-2-01, General Requirements for Good Delivery of Whole Loans.

• For information on compensatory fees associated with the delivery of ARMs in fulfillment of a Converted ARM Resale Commitment, see  C2-1.1-07, Standard ARM and Converted ARM Resale CommitmentsC2-1.1-07, Standard ARM and Converted ARM Resale Commitments.

• For information on LLPAs, see the Loan-Level Price Adjustment (LLPA) Matrix .