Selling Guide

Published October 2, 2018

General Eligibility Requirements for Loans Pooled into MBS

All mortgages pooled into MBS must be secured by a first or subordinate lien and must represent the entire right, title, and interest in the mortgage note and the related security instrument, unless the MBS commitment expressly indicates otherwise.

As of the issue date of the MBS, the mortgages in the related MBS pool may not be delinquent by more than the monthly installment of principal and interest that is due on the issue date (including the period beginning on the second day of the month preceding the issue date and ending on the issue date). For example, if the first payment date is November 1, and if the issue date of the MBS is January 1, then, in order to be eligible for purchase by Fannie Mae, the November and December payments must have been paid, and the only payment that may be delinquent (due) would be for the period December 2 through January 1.

In addition,

  • if the mortgage is one year or less from the first payment date to the pool issue date, the borrower cannot have any 30–day delinquencies since origination; and

  • if the current borrower assumed the mortgage and has owned the property for one year or less, the borrower must have no 30-day delinquencies since purchasing the property.

See B2-1.4-02, Mortgage Loan Eligibility, for the requirements concerning seasoned mortgages.

Nonstandard Loans

“Nonstandard loans” (or loans with nonstandard characteristics) may be pooled into MBS, but depending on the concentration in the pool, may only be pooled as negotiated rather than standard transactions.

Nonstandard loans are:

  • co-op share loans,

  • relocation loans (defined below),

  • loans with significant interest rate buydowns, and

  • high-balance loans.

In a TBA MBS pool, nonstandard loans are each limited to 10% of the issue date UPB of a TBA MBS pool. If loans with more than one of the nonstandard characteristics are included in the same TBA MBS pool, the sum of the issue date UPB of two or more of the loans with nonstandard characteristics may not exceed 15% of the total issue date UPB of the pool. The 15% cumulative limitation, however, does not apply to high-balance loans.

For pools with greater than 10% concentrations of high-balance mortgage loans, see the Pool Prefix Glossary for the applicable pool prefixes. High-balance loans may be delivered into existing MBS commitments and may use the same base guaranty fee as those used for the lender’s standard conforming mortgage loans.

Lenders may deliver loans with the nonstandard characteristics described above into Fannie Majors TBA-eligible MBS pools. For Fannie Majors requirements, see C3-6-01, Parameters for Pooling Loans Into Fannie Majors.

For the purposes of TBA pooling parameters, relocation loans are loans made under a relocation lending agreement between the lender and the employer (or its agent). A loan that involves an employee relocation that is not subject to a relocation lending agreement between the lender and the employer (or its agent) is not considered a relocation loan for TBA pooling purposes, and as such, the pooling limitations and SFC 013 delivery requirement are not applicable.

Examples

The issue date UPB of loans with significant interest rate buydowns and the issue date UPB of co-op share loans individually may not exceed 10% of the total issue date UPB of the TBA MBS, and together may not exceed 15% of the total TBA MBS. However, while the issue date UPB of high-balance loans and the issue date UPB of co-op share loans individually may not exceed 10% of the total issue date UPB of the TBA MBS, together they may exceed 15% of the total TBA MBS because high-balance loans are not subject to the 15% limitation.

Identifying Nonstandard Loans at Delivery

As a reminder, nonstandard loans must be identified at delivery with the following:

  • relocation loans – SFC 013

  • loans with significant interest rate buydowns – SFC 014

  • high-balance loans – SFC 808

  • co-op share loans – the Legal Structure in Loan Delivery is “cooperative.”

Amortization Schedule Requirements for MBS Loans

For mortgages pooled into MBS, the first payment date must be no later than two months from the final disbursement date of the loan proceeds. In the case of a single-close construction-to-permanent loan, the two month period begins at the time of the conversion to permanent financing.

The following table provides an example of this requirement.

If the final disbursement date occurs in... Then the first payment date must be no later than...
January March
February April
November January

Fannie Mae’s standard pooling option allows lenders to include in an MBS pool only those mortgages for which the first payment date is no later than the first day of the month that immediately follows the issue date of the related MBS. The pool issue date is the first day of the month in which securities backed by the MBS pool are issued. For seasoned loans, the first payment date must be at least 12 months prior to the pool’s issue date. Seasoned loans can be commingled in pools with unseasoned loans but must comply with the maturity parameters specified in C3-4-02, Commingling Fixed-Rate Mortgages in MBS.

In addition, the mortgage’s amortization schedule must not provide for any period during which principal has been disbursed and is outstanding, but interest is not accruing.

However, if the lender has selected the “same month pooling” option, the mortgage may begin to amortize on the first day of the month that is two months after the issue date of the securities, with the initial remittance to Fannie Mae being an “interest-only” remittance, because the borrower will not have made his or her first payment at the time of the initial remittance.

A negotiated contract is needed to pool loans for which the borrower’s monthly payment is due on a day other than first of the month (“odd due dates”).

Age of Loan Requirements for Loans Pooled into MBS

Lenders may pool current or seasoned loans into a single-lender MBS. Fannie Mae has no minimum seasoning requirement for conventional mortgages included in single pool transactions. However, conventional mortgages included in Fannie Majors transactions must not have been originated more than 12 months prior to the issue date of the related securities. In addition, for certain Fannie Majors securities identified on the Fannie Majors page, conventional mortgages may not have been originated more than two months prior to the issue date of the related securities.

If a pool of adjustable-rate mortgages will have amortized by more than 12 monthly payments as of the issue date of the pool, the terms of a negotiated contract will specify whether the loans will be treated as current or seasoned. The key determinants are the length of the interest rate adjustment intervals and whether interest rate or payment adjustments will have occurred by the pool’s issue date.

For a converted ARM (which is a fixed-rate mortgage that was once an ARM until the borrower exercised an option to convert it to a fixed rate), the 12-month period is measured from the date of conversion to the issue date month of the related pool.

To sell seasoned mortgages under an MBS execution, lenders must have an MBS commitment that permits delivery of seasoned mortgages. For information on pricing and parameters, contact the Capital Markets Pricing and Sales Desk (see E-1-03, List of Contacts).

Interest Rate Requirements for Loans Pooled into MBS

Mortgages with different annual rates of interest can be included in the same MBS pool, as long as those rates fall within the minimum and maximum spreads Fannie Mae allows between the mortgage interest rates and the pass-through rate for the MBS pool.

For most fixed-rate mortgages that are pooled, the minimum allowable interest rate is 25 basis points (.25%) above the pool’s pass-through rate and the maximum allowable interest rate is 250 basis points (2.50%) above the pool’s pass-through rate. For fixed-rate pools allowing minimum servicing fee less than 25 basis points, the minimum allowable interest rate is 225 basis points (2.25%) above the pool’s pass-through rate.

Generally, for ARMs that are pooled, the minimum allowable interest rate is the sum of the lowest guaranty fee (after all applicable adjustments have been made, including buyups and buydowns) and the lender’s minimum servicing fee, which must include renewal premiums for lender-purchased mortgage insurance, if applicable. The maximum allowable interest rate is 100 basis points (1%) over the minimum allowable interest rate. Lenders must comply with the allowable minimum and maximum interest rates for each MBS ARM structure. For example, the minimum and maximum interest rates are different for uniform hybrid ARM MBS versus other ARM structures.

Servicer Requirements for Loans Pooled into MBS

All mortgages in a single MBS pool must be serviced by the same entity. If a lender plans to deliver several pools for inclusion in a multiple pool (Fannie Majors), a single pool may only be serviced by a single entity when multiple pools make up the Major. Further, that entity (regardless of whether it is the lender delivering the pools or a third party) must be servicing mortgages in the multiple pool that have the same remittance cycle as the mortgages that are being delivered (or for which servicing is being assigned).

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-2018-06 August 07, 2018
Announcement SEL-2016–09 December 06, 2016
Announcement SEL-2016–08 October 24, 2016
Announcement SEL-2016–02 February 23, 2016
Announcement SEL-2014–11 August 26, 2014
Announcement SEL-2011–11 October 25, 2011
Announcement SEL-2011–06 July 26, 2011
Announcement SEL-2010–16 December 1, 2010
Announcement 09-29 September 22, 2009
Announcement 09-08R June 8, 2009
Announcement 08-36 December 18, 2008