Selling Guide

Published April 07, 2021

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A2-1-02, Nature of Mortgage Transaction (02/27/2018)

Introduction

This topic contains information on mortgage transaction requirements.


Delivery Methods

Sellers may sell loans to Fannie Mae using either of the two following delivery methods.

  • As whole loans - the seller sells the loans to Fannie Mae and receives cash proceeds in the amount of the purchase price, with the loans to be retained by Fannie Mae in its porftolio or to be included later in MBS pools formed by Fannie Mae.

  • As MBS loans - the sellers sells the loans which are conveyed to an MBS trust under the terms of the Fannie Mae MBS program and the seller (or its designee) receives mortgage pass-through certificates representing interests in the loans as the purchase price for the loans.

The term “delivery” refers to the delivery of whole loans to Fannie Mae and into MBS pools. In cases where specific requirements apply to one type of transaction, the delivery method is specified. The term “loan” means “mortgage loan” and includes participation interests in loans unless specified otherwise. The glossary defines terms used in connection with Fannie Mae requirements in the Selling Guide.


True Sale

Both Fannie Mae and the seller intend that every sale of loans to be the seller’s true, absolute, and unconditional sale to Fannie Mae of the loans. However, if a court or other appropriate forum holds the loans are still the seller’s property, then Fannie Mae and the seller intend that the transaction be deemed to be:

  • a pledge by the seller to secure a debt or other obligation owed to Fannie Mae for all related loans, and

  • a grant by the seller to Fannie Mae of a first priority perfected security interest in the loans.

Accordingly, for each loan delivery, the seller grants Fannie Mae a security interest in all of the seller’s right, title, and interest in the loans sold to Fannie Mae. Such security interest secures the seller’s performance of all of its obligations to Fannie Mae pertaining to that loan or the contract under which it is sold to or serviced for Fannie Mae.

If the seller breaches its obligations to Fannie Mae, Fannie Mae may,

  • without a binding election of remedies, use the remedies provided by applicable law to the holder of a security interest; or

  • extinguish all equitable, legal, and other right, title, or interest of the seller in the pledged security and take such property as its property.

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