Life-of-Loan Exclusions: Fannie Mae Charter Act Matters
The lender is responsible for representations and warranties for the life of the loan for compliance with Fannie Mae's Charter Act. In accordance with its Charter Act requirements, a mortgage loan (or any participation interest therein) must meet all of the following requirements to be eligible for sale to Fannie Mae:
- be secured by property that is residential in nature. Properties that are not residential include, but are not limited to, vacant land, property primarily used for agricultural or commercial purposes, or units located in condo or co-op hotels;
- be secured by a property located within the 50 states of the United States of America, the District of Columbia, or any territory or possession of the United States;
- be secured by a property with four or fewer units, unless sold through Fannie Mae’s multifamily mortgage business;
- have an original principal balance not greater than the applicable maximum loan limit in effect at the time of Fannie Mae’s acquisition; and
- have a loan-to-value (LTV) ratio of 80% or less of the security property’s value at the time Fannie Mae acquires the loan or, if the mortgage has an LTV ratio in excess of 80%, the mortgage
- has mortgage insurance on the portion of the mortgage in excess of 80% of the property's value, provided by a mortgage insurer approved under Fannie Mae’s Qualified Mortgage Insurer Approval Requirements;
- was sold with recourse for such period and under such circumstances as Fannie Mae may require; or
- was sold on a participation basis when the lender retains a minimum 10% interest.
An example of a breach of Charter Act requirements is a mortgage loan secured by a property that consists of a principal residence and a dairy farm, resulting in the property having significant nonresidential use.
For additional information, see A2-2-07, Life-of-Loan Representations and Warranties.