Selling Guide

Published December 4, 2019

C3-3-03: Buying Up and Buying Down the Guaranty Fee for MBS (05/01/2019)

This topic contains information on buying up and buying down the guaranty fee for MBS, including:

Guaranty Fee Buyup Maximums and Buydown Minimums for Fixed-Rate Mortgages

The guaranty fee cannot be bought up more than 0.25% (25 basis points) nor bought down to a number less than zero.

Eligibility Requirements for ARM Guaranty Fee Buyups and Buydowns

A lender may buy up or buy down the guaranty fee remittance for MBS pools consisting of adjustable-rate mortgages (ARMs) originated under any standard ARM plan, as long as the mortgages meet the following eligibility criteria:

  • The guaranty fee rate may be bought up or bought down in increments of 0.0001% (one one-hundredth of a basis point).

  • Any buyup or buydown of the guaranty fee remittance rate for adjustable-rate MBS pools must be calculated on the reduced guaranty fee remittance rate that applies to this type of remittance cycle.

Guaranty Fee Buyup Maximums and Buydown Minimums for ARMs

The weighted-average coupon of the pooled mortgages must not exceed the following limits:

  • 1.000% (100 basis points) higher than the accrual rate (the pass-through rate) for the pool as of the issue date for mortgages originated under most ARM plans; or

  • 0.875% (87.5 basis points for mortgages originated under ARM plans that have initial fixed-rate periods of 3, 5, 7, or 10 years).

The recommended maximum allowable interest rate is 100 basis points (1%) over the minimum allowable interest rate.

Additionally, for all ARM plans, the guaranty fee buyup is limited to 0.25% (25 basis points). The guaranty fee cannot be bought down to a number less than zero.

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-2019-04 May 01, 2019
Announcement SEL-2014–10 July 29, 2014
Announcement SEL-2012–10 October 2, 2012
Announcement SEL-2012–02 February 28, 2012
Announcement SEL-2011–11 October 25, 2011