The guaranty fee cannot be bought up more than 0.25% (25 basis points) nor bought down to a number less than zero.
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.
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.
The table below provides references to the Announcements that have been issued that are related to this topic.