Have Selling Questions? Ask Poli


Fannie Mae customers! Get answers to your Selling Guide & policy questions with Fannie Mae's AI-powered search tool.

Launch Ask Poli for Sellers  

Guide Resources

Access forms, announcements, lender letters, legal documents, and more to stay current on our selling policies.

View Resources  

B2-1.5-05, Principal Curtailments (11/03/2021)


This topic contains information on principal curtailments, including:


A principal curtailment is the application of funds that are used to reduce the unpaid principal balance of the mortgage loan. Fannie Mae permits certain curtailments prior to loan delivery provided that the delivery data reflects the curtailment as described below.

Acceptable Curtailments

Fannie Mae permits curtailments for the following reasons:

  • The lender may apply a curtailment to refund the overpayment of fees or charges paid by the borrower, in any amount, in accordance with applicable regulatory requirements.

  • If the borrower receives more cash back than is permitted for limited cash-out refinances, the lender can apply a curtailment to reduce the amount of cash back to the borrower to bring the loan into compliance with the maximum cash-back requirement. The maximum amount of the curtailment cannot exceed the lesser of $2,500 or 2% of the original loan amount for the subject loan. For example, if the borrower received $3,500 cash back at closing on a loan amount of $200,000, the lender could apply a $1,500 curtailment prior to delivery to Fannie Mae. This would result in “net cash back” to the borrower of $2,000, thus meeting Fannie Mae’s limited cash-out refinance requirement.

  • Fannie Mae also allows additional principal payments remitted by a borrower to prepay the mortgage loan as permitted by the loan documents. This includes curtailments applied to the principal balance to reduce the monthly mortgage payment. See B2-1.5-02, Loan Eligibility.

Lenders must apply these curtailments prior to delivery of the loan to Fannie Mae. Such curtailments may not be held until after whole loan delivery or for application in the month subsequent to issuance of an MBS. Curtailments received after loan delivery must be applied in accordance with the Servicing Guide.


If the curtailment is made at the time of closing, the amount must be clearly documented on the settlement statement. If the curtailment is applied after closing, but before delivery, the mortgage loan file (or servicing file) must be documented with the amount of the curtailment and the reason or source of the curtailment (for example, lender refund or borrower-initiated), and include any modification agreement used to reduce the monthly payment following the application of the curtailment.

Delivery Instructions

Refer to the Loan Modifications Job Aid for the delivery of loans impacted by a curtailment applied prior to the delivery of the loan to Fannie Mae.


Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SEL-2021-10 November 03, 2021


Have You Tried Ask Poli?

Poli knows. Just ask.

Ask Poli features exclusive Q&As and
more—plus official Selling & Servicing

Try Ask Poli

Related Articles


Customers Recommend Ask Poli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Guide Resources

For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

Having Issues with Seeing this Page Correctly?

Use Firefox or Chrome   How to do a hard refresh in Internet Explorer
We recommend that you use the latest version of FireFox or Chrome.

Download Firefox
Download Chrome
  A hard refresh will clear the browsers cache for a specific page and force the most recent version of a page.
    Hold the Ctrl key and press the F5 key.

Email Us
If you still have Technical Support questions, feel free to emailAsk_Poli@fanniemae.com.