Selling Guide

Published December 4, 2018

C3-5-01: Creating Stated-Structure ARM MBS (12/06/2016)

This topic provides information on creating stated-structure ARM MBS, including:

General Information on Stated-Structure ARM MBS

Stated-structure ARM MBS provide uniform accruals of interest to the holders of these securities. Lenders may deliver stated-structure ARM MBS only as single pool transactions (however, some ARM plans allow ARMs to be included in a multiple pool). The original term of an ARM included in a stated-structure ARM MBS must be no more than 30 years.

The standard ARM plans that appear on the Standard ARM Plan Matrix can be delivered as a stated-structure ARM MBS; however, different ARM plans cannot be commingled in the same pool.

For information on using stated-structure pooling for ARMs or to discuss the types of negotiated ARM plans that can be included in stated-structure ARM MBS, lenders should contact their Fannie Mae customer account team.

Interest Rate Change Date and Payment Change Date

The loan must accrue interest in arrears and have a payment due date of the first day of the month.

The next interest rate change date and payment change date that occur after the issue date of the pool must be the same for all loans in a stated-structure ARM MBS pool.

To enable the grouping of loans originated on different dates so that the first interest rate changes will begin accruing (and the resulting payment changes will become due) at the same time, lenders can establish a first interest rate adjustment interval for each ARM in the pool that differs from the standard adjustment interval.

Each interest rate adjustment interval after the first must reflect the interval that is standard for the particular ARM plan.

For more information on standard ARM plans, see the Standard ARM Plan Matrix.

Pool Accrual Rates Established On the Issue Date

The pool accrual rate that is established on the issue date must be based on the loan interest rates that are in effect (and accrue) during the issue date month.

If … Then …
The ARMs in the pool have interest rate changes that occur on the issue date, Lenders must report on their delivery schedules the loan interest rate and payment amounts that are due on the first day of the month following the issue date.

Stated-Structure Convertible ARM MBS

The table below explains what a lender must do when a borrower converts an ARM that is in a stated-structure convertible ARM MBS pool to a fixed-rate mortgage.

If … Then …
The borrower elects to exercise his or her conversion option under an ARM plan that allows for conversion to a fixed-rate loan, Lender must repurchase the loan from the ARM MBS pool.
Lenders delivered a convertible ARM, Lender must have selected one of the following post-conversion disposition options:
  • a “market rate” option allows lenders to determine whether they want to redeliver the converted loan to Fannie Mae; or

  • a “take-out” option requires that the loan be redelivered to Fannie Mae. (The take-out option is not available for ARM Plans 650, 652, 661, 721, 751, 1437, 2722, 2724, 2726, and 2728 or for any convertible ARM that has lender-purchased mortgage insurance).

    Only loans that have the same post-conversion disposition option can be included in any given ARM MBS pool.

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcement Issue Date
Announcement SEL-2016–09 December 06, 2016
Announcement SEL-2014–11 August 26, 2014
Announcement SEL-2011–09 August 30, 2011