- Selling Guide /
- Part B: Origination Through Closing /
- Subpart B4: Underwriting Property /
- Chapter B4-1: Property Assessment and Valuation /
- Section B4-1.3: Appraisal Report Assessment /
- B4-1.3-12, Quality Assurance
B4-1.3-12, Quality Assurance (06/03/2020)
- Changes to the Appraised Value
- Guidance on Addressing Appraisal Deficiencies
- Lender Requirements
- Fannie Mae’s Referrals to State Appraiser Boards
- Refusal to Accept Appraisals from Specific Appraisers
Changes to the Appraised Value
The lender is responsible for confirming that appraisal reports are complete and that any changes to the reports are made by the appraiser that originally completed the report. If the lender has concerns with any aspect of the appraisal that result in questions about the reliability of the opinion of market value, the lender must attempt to resolve its concerns with the appraiser that originally prepared the report. If the lender is unable to resolve its concerns with the appraiser, the lender must obtain a replacement report prior to making a final underwriting decision on the loan. Any request for a change in the opinion of market value must be based on material and substantive issues and must not be made solely on the basis that the opinion of market value as indicated in the appraisal report does not support the proposed loan amount. For information concerning the process lenders must follow to address a change of the opinion of market value, see Guidance on Addressing Appraisal Deficiencies in this topic.
Lenders must pay particular attention and institute extra due diligence for those loans in which the appraised value is believed to be excessive or when the value of the property has experienced significant appreciation in a short time period since the prior sale. Fannie Mae believes that one of the best ways lenders can reduce the risk associated with excessive values or rapid appreciation is by receiving accurate appraisals from knowledgeable, experienced appraisers.
Guidance on Addressing Appraisal Deficiencies
If the lender considers an appraisal deficient, the lender has the following options for addressing the deficiencies:
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contacting the appraiser to address deficiencies contained in the appraisal report,
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obtaining a desk review or a field review of the original appraisal, or
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obtaining a new appraisal of the subject property.
The lender can return the appraisal report to the appraiser that completed the assignment, identify the deficiencies found, and provide justification for requesting correction of the deficiencies the lender believes make the report unreliable.
If the lender is unable to obtain a revised appraisal that adequately addresses its concerns, a desk or field review of the report may be obtained. The review must be completed in accordance with the USPAP. Because the Scope of Work for either type of review allows for a change of the opinion of market value for something other than a mathematical error, the appraiser completing the appraisal review must
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be licensed or certified in the state in which the property is located,
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have access to the appropriate data sources, and
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possess the knowledge and experience to appraise the subject property with respect to both the specific property type and geographical location.
The lender may forego either type of review and obtain a new appraisal. When a new appraisal is obtained, the lender must document the deficiencies that are the basis for ordering the new appraisal and adhere to a policy of selecting the most reliable appraisal, rather than the appraisal that states the highest value. The lender must either document the resolution of the noted deficiencies in the original appraisal or detail the reasons for relying on a second opinion of market value.
Lender Requirements
A lender must continually evaluate the quality of the appraiser’s work through the normal review process of all appraisal reports, as well as through the spot-check field review or desk review of appraisals as part of its quality assurance system. For detailed requirements, see D1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data CollectionD1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data Collection.
Fannie Mae’s Referrals to State Appraiser Boards
Fannie Mae conducts different levels of due diligence for quality control purposes and may refer unacceptable appraisal reports to state appraiser licensing or regulatory boards for investigation.
Fannie Mae’s objectives in referring appraisal reports to state appraiser licensing or regulatory boards are
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to emphasize continuing efforts to maintain the quality of appraisals,
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to protect Fannie Mae’s interest,
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to improve the quality of mortgages delivered to Fannie Mae by identifying appraisers that have performed appraisals of a sufficiently poor quality as to impair the security interests,
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to help the industry enhance the quality of appraisals by identifying and referring appraisals that are not adequately supported or credible, and
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to help enforce professional standards.
Note: Fannie Mae’s decision to make such referrals does not affect the lender’s responsibility for managing the property valuation and appraisal review process.
Refusal to Accept Appraisals from Specific Appraisers
Fannie Mae may refuse to accept appraisals prepared by specific appraisers, or Fannie Mae may notify a lender that appraisals prepared by a given appraiser are no longer accepted. When a lender is notified that appraisals from specific appraisers are no longer accepted, the lender is prohibited from delivering mortgages to Fannie Mae secured by properties appraised by that individual immediately following its receipt of Fannie Mae’s notice.
The table below provides references to recently issued Announcements that are related to this topic.
Announcements | Issue Date |
---|---|
Announcement SEL-2020-03 | June 03, 2020 |
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Part A Doing Business with Fannie Mae
- Subpart A1, Approval Qualification
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Subpart A2, Lender Contract
- Chapter A2-1, Contractual Obligations for Sellers/Servicers
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Chapter A2-2, Contractual Representations and Warranties
- A2-2-01, Representations and Warranties Overview
- A2-2-02, Delivery Information and Delivery-Option Specific Representations and Warranties
- A2-2-03, Document Warranties
- A2-2-04, Limited Waiver and Enforcement Relief of Representations and Warranties
- A2-2-05, Invalidation of Limited Waiver of Representations and Warranties
- A2-2-06, Representations and Warranties on Property Value
- A2-2-07, Life-of-Loan Representations and Warranties
- Chapter A2-3, Lender Breach of Contract
- Chapter A2-4, Loan Files and Records
- Chapter A2-5, Fannie Mae Trade Name and Trademarks
- Subpart A3, Getting Started With Fannie Mae
- Subpart A4, Maintaining Seller/Servicer Eligibility
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Part B Origination Through Closing
- Subpart B1, Loan Application Package
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Subpart B2, Eligibility
- Chapter B2-1, Mortgage Eligibility
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Chapter B2-2, Borrower Eligibility
- B2-2-01, General Borrower Eligibility Requirements
- B2-2-02, Non–U.S. Citizen Borrower Eligibility Requirements
- B2-2-03, Multiple Financed Properties for the Same Borrower
- B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction
- B2-2-05, Inter Vivos Revocable Trusts
- B2-2-06, Homeownership Education and Housing Counseling
- -01, First-Generation Homebuyer Loans
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Chapter B2-3, Property Eligibility
- B2-3-01, General Property Eligibility
- B2-3-02, Special Property Eligibility and Underwriting Considerations: Factory-Built Housing
- B2-3-03, Special Property Eligibility and Underwriting Considerations: Leasehold Estates
- B2-3-04, Special Property Eligibility Considerations
- B2-3-05, Properties Affected by a Disaster
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Subpart B3, Underwriting Borrowers
- Chapter B3-1, Manual Underwriting
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Chapter B3-2, Desktop Underwriter (DU)
- B3-2-01, General Information on DU
- B3-2-02, DU Validation Service
- B3-2-03, Risk Factors Evaluated by DU
- B3-2-04, DU Documentation Requirements
- B3-2-05, Approve/Eligible Recommendations
- B3-2-06, Approve/Ineligible Recommendations
- B3-2-07, Refer with Caution Recommendations
- B3-2-08, Out of Scope Recommendations
- B3-2-09, Erroneous Credit Report Data
- B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report
- B3-2-11, DU Underwriting Findings Report
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Chapter B3-3, Income Assessment
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Section B3-3.1, Employment and Other Sources of Income
- B3-3.1-01, General Income Information
- B3-3.1-02, Standards for Employment Documentation
- B3-3.1-03, Base Pay (Salary or Hourly), Bonus, and Overtime Income
- B3-3.1-04, Commission Income
- B3-3.1-05, Secondary Employment Income (Second Job and Multiple Jobs) and Seasonal Income
- B3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C
- B3-3.1-07, Verbal Verification of Employment
- B3-3.1-08, Rental Income
- B3-3.1-09, Other Sources of Income
- B3-3.1-10, Income Calculator
- Section B3-3.2, Self-Employment Income
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Section B3-3.3, Self-Employment Documentation Requirements for an Individual
- B3-3.3-01, General Information on Analyzing Individual Tax Returns
- B3-3.3-02, Income Reported on IRS Form 1040
- B3-3.3-03, Income or Loss Reported on IRS Form 1040, Schedule C
- B3-3.3-04, Income or Loss Reported on IRS Form 1040, Schedule D
- B3-3.3-05, Income or Loss Reported on IRS Form 1040, Schedule E
- B3-3.3-06, Income or Loss Reported on IRS Form 1040, Schedule F
- B3-3.3-07, Income or Loss Reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1
- Section B3-3.4, Self-Employment Documentation Requirements for a Business
- Section B3-3.5, DU Requirements for Income Assessment
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Section B3-3.1, Employment and Other Sources of Income
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Chapter B3-4, Asset Assessment
- Section B3-4.1, General Asset Requirements
- Section B3-4.2, Verification of Depository Assets
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Section B3-4.3, Verification of Non-Depository Assets
- B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds
- B3-4.3-02, Trust Accounts
- B3-4.3-03, Retirement Accounts
- B3-4.3-04, Personal Gifts
- B3-4.3-05, Gifts of Equity
- B3-4.3-06, Grants and Lender Contributions
- B3-4.3-07, Disaster Relief Grants or Loans
- B3-4.3-08, Employer Assistance
- B3-4.3-09, Earnest Money Deposit
- B3-4.3-10, Anticipated Sales Proceeds
- B3-4.3-11, Trade Equity
- B3-4.3-12, Rent Credit for Option to Purchase
- B3-4.3-13, Sweat Equity
- B3-4.3-14, Bridge/Swing Loans
- B3-4.3-15, Borrowed Funds Secured by an Asset
- B3-4.3-16, Credit Card Financing and Reward Points
- B3-4.3-17, Personal Unsecured Loans
- B3-4.3-18, Sale of Personal Assets
- B3-4.3-19, Cash Value of Life Insurance
- B3-4.3-20, Anticipated Savings and Cash-on-Hand
- B3-4.3-21, Borrower's Earned Real Estate Commission
- Section B3-4.4, DU Requirements for Asset Assessment
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Chapter B3-5, Credit Assessment
- Section B3-5.1, Credit Scores
- Section B3-5.2, Credit Reports
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Section B3-5.3, Traditional Credit History
- B3-5.3-01, Number and Age of Accounts
- B3-5.3-02, Payment History
- B3-5.3-03, Previous Mortgage Payment History
- B3-5.3-04, Inquiries: Recent Attempts to Obtain New Credit
- B3-5.3-05, Credit Utilization
- B3-5.3-06, Authorized Users of Credit
- B3-5.3-07, Significant Derogatory Credit Events — Waiting Periods and Re-establishing Credit
- B3-5.3-08, Extenuating Circumstances for Derogatory Credit
- B3-5.3-09, DU Credit Report Analysis
- Section B3-5.4, Nontraditional Credit History
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Chapter B3-6, Liability Assessment
- B3-6-01, General Information on Liabilities
- B3-6-02, Debt-to-Income Ratios
- B3-6-03, Monthly Housing Expense for the Subject Property
- B3-6-04, Qualifying Payment Requirements
- B3-6-05, Monthly Debt Obligations
- B3-6-06, Qualifying Impact of Other Real Estate Owned
- B3-6-07, Debts Paid Off At or Prior to Closing
- B3-6-08, DU: Requirements for Liability Assessment
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Subpart B4, Underwriting Property
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Chapter B4-1, Property Assessment and Valuation
- Section B4-1.1, General Appraisal Requirements
- Section B4-1.2, Documentation Standards
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Section B4-1.3, Appraisal Report Assessment
- B4-1.3-01, Review of the Appraisal Report
- B4-1.3-02, Subject and Contract Sections of the Appraisal Report
- B4-1.3-03, Neighborhood Section of the Appraisal Report
- B4-1.3-04, Site Section of the Appraisal Report
- B4-1.3-05, Improvements Section of the Appraisal Report
- B4-1.3-06, Property Condition and Quality of Construction of the Improvements
- B4-1.3-07, Sales Comparison Approach Section of the Appraisal Report
- B4-1.3-08, Comparable Sales
- B4-1.3-09, Adjustments to Comparable Sales
- B4-1.3-10, Cost and Income Approach to Value
- B4-1.3-11, Valuation Analysis and Reconciliation
- B4-1.3-12, Appraisal Quality Matters
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Section B4-1.4, Special Appraisal and Other Valuation Considerations
- B4-1.4-01, Factory-Built Housing: Manufactured Housing
- B4-1.4-02, Factory-Built Housing: Modular, Prefabricated, Panelized, or Sectional Housing
- B4-1.4-03, Condo Appraisal Requirements
- B4-1.4-04, Co-op Appraisal Requirements
- B4-1.4-05, Leasehold Interests Appraisal Requirements
- B4-1.4-06, Community Land Trust Appraisal Requirements
- B4-1.4-07, Mixed-Use Property Appraisal Requirements
- B4-1.4-08, Environmental Hazards Appraisal Requirements
- B4-1.4-09, Special Assessment or Community Facilities Districts Appraisal Requirements
- B4-1.4-10, Value Acceptance (Appraisal Waiver)
- B4-1.4-11, Value Acceptance + Property Data
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Chapter B4-2, Project Standards
- Section B4-2.1, General Project Standards
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Section B4-2.2, Project Eligibility
- B4-2.2-01, Limited Review Process
- B4-2.2-02, Full Review Process
- B4-2.2-03, Full Review: Additional Eligibility Requirements for Units in New and Newly Converted Condo Projects
- B4-2.2-04, Geographic-Specific Condo Project Considerations
- B4-2.2-05, FHA-Approved Condo Review Eligibility
- B4-2.2-06, Project Eligibility Review Service (PERS)
- B4-2.2-07, Projects with Special Considerations and Project Eligibility Waivers
- Section B4-2.3, PUD and Co-op Eligibility Requirements
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Chapter B4-1, Property Assessment and Valuation
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Subpart B5, Unique Eligibility and Underwriting Considerations
- Chapter B5-1, High-Balance Mortgage Loans
- Chapter B5-2, Manufactured Housing
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Chapter B5-3, Construction and Energy Financing
- Section B5-3.1, Conversion of Construction-to-Permanent Financing
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Section B5-3.2, HomeStyle Renovation Mortgage
- B5-3.2-01, HomeStyle Renovation Mortgages
- B5-3.2-02, HomeStyle Renovation Mortgages: Loan and Borrower Eligibility
- B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations
- B5-3.2-04, HomeStyle Renovation Mortgages: Costs and Escrow Accounts
- B5-3.2-05, HomeStyle Renovation Mortgages: Completion Certification
- B5-3.2-06, HomeStyle Renovation: Renovation Contract, Renovation Loan Agreement, and Lien Waiver
- Section B5-3.3, HomeStyle Energy Mortgages
- Section B5-3.4, Property Assessed Clean Energy Loans
- Chapter B5-4, Property-Specific Products
- Chapter B5-5, Community Seconds, Loans with Resale Restrictions, and Shared Equity Transactions
- Chapter B5-6, HomeReady Mortgage
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Chapter B5-7, High Loan-to-Value Refinance Option
- B5-7-01, High LTV Refinance Loan and Borrower Eligibility
- B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan
- B5-7-03, High LTV Refinance Alternative Qualification Path
- B5-7-04, High LTV Refinance Representations and Warranties
- B5-7-05, High LTV Refinance Pricing, Mortgage Insurance, and Special Feature Codes
- Subpart B6, Government Programs Eligibility and Underwriting Requirements
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Subpart B7, Insurance
- Chapter B7-1, Mortgage Insurance/Loan Guaranty
- Chapter B7-2, Title Insurance
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Chapter B7-3, Property and Flood Insurance
- B7-3-01, General Property Insurance Requirements for All Property Types
- B7-3-02, Property Insurance Requirements for One-to Four-Unit Properties
- B7-3-03, Master Property Insurance Requirements for Project Developments
- B7-3-04, Individual Property Insurance Requirements for a Unit in a Project Development
- B7-3-05, Additional Insurance Requirements
- B7-3-06, Flood Insurance Requirements for All Property Types
- B7-3-07, Evidence of Property Insurance
- B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements
- Chapter B7-4, Liability and Fidelity/Crime Insurance Requirements for Project Developments
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Subpart B8, Closing: Legal Documents
- Chapter B8-1, General Information on Legal Documents
- Chapter B8-2, Security Instruments
- Chapter B8-3, Notes
- Chapter B8-4, Riders and Addenda
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Chapter B8-5, Special-Purpose Legal Documents
- B8-5-01, General Information on Special-Purpose Legal Documents
- B8-5-02, Inter Vivos Revocable Trust Mortgage Documentation and Signature Requirements
- B8-5-03, HomeStyle Renovation Mortgage Documentation Requirements
- B8-5-04, Sample Legal Documents
- B8-5-05, Requirements for Use of a Power of Attorney
- Chapter B8-6, Mortgage Assignments
- Chapter B8-7, Mortgage Electronic Registration System (MERS)
- Chapter B8-8, Sale of eMortgages to Fannie Mae
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Part C Selling, Securitizing, and Delivering Loans
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Subpart C1, General Information on Execution Options and Loan Delivery
- Chapter C1-1, Execution Options Overview
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Chapter C1-2, Loan Delivery Overview
- C1-2-01, General Information on Delivering Loan Data and Documents
- C1-2-02, Loan Data and Documentation Delivery Requirements
- C1-2-03, Ownership of Mortgage Loans Prior to Purchase or Securitization and Third-Party Security Interests
- C1-2-04, Delivering eMortgages to Fannie Mae
- C1-2-05, Bailee Letters
- Chapter C1-3, Loan Remittance Types Overview
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Subpart C2, Whole Loan Transactions
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Chapter C2-1, Mandatory and Best Efforts Commitments to Sell Whole Loans
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Section C2-1.1, Mandatory Commitments to Sell Whole Loans
- C2-1.1-01, Mandatory Commitment Process
- C2-1.1-02, General Information about Mandatory Commitment Pricing and Fees
- C2-1.1-03, Mandatory Commitment Terms, Amounts, Periods and Other Requirements
- C2-1.1-04, Mandatory Commitment Extensions and Pair-Offs
- C2-1.1-05, Servicing Fees
- C2-1.1-06, Accrued Interest Payments for Regularly Amortizing Mortgages
- C2-1.1-07, Standard ARM and Converted ARM Resale Commitments
- Section C2-1.2, Best Efforts Commitments to Sell Whole Loans
- Section C2-1.3, Servicing Execution Tool to Sell Whole Loans
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Section C2-1.1, Mandatory Commitments to Sell Whole Loans
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Chapter C2-2, Whole Loan Deliveries to and Purchasing by Fannie Mae
- C2-2-01, General Requirements for Good Delivery of Whole Loans
- C2-2-02, Documentation Requirements for Whole Loan Deliveries
- C2-2-03, General Information on Whole Loan Purchasing Policies
- C2-2-04, Timing of Distribution of Whole Loan Purchase Proceeds
- C2-2-05, Whole Loan Purchasing Process
- C2-2-06, Authorization to Transfer Funds
- C2-2-07, Purchase Payee Codes
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Chapter C2-1, Mandatory and Best Efforts Commitments to Sell Whole Loans
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Subpart C3, Mortgage-Backed Securities (MBS)
- Chapter C3-1, MBS Program Overview
- Chapter C3-2, MBS Securitization Process
- Chapter C3-3, MBS Guaranty Fees and Guaranty Fee Buyups and Buydowns
- Chapter C3-4, Pooling Loans into Fixed-Rate MBS
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Chapter C3-5, Pooling Loans into ARM MBS
- C3-5-01, Creating Weighted-Average ARM MBS
- C3-5-02, Calculating the Weighted-Average Pool Accrual Rates for ARM Flex Pools Using a Fixed MBS Margin
- C3-5-03, Calculating the Weighted-Average Pool Accrual Rates for ARM Flex Pools Using a Weighted-Average MBS Margin
- C3-5-04, Pooling ARMs with a Conversion Option
- C3-5-05, Commingling ARMs in MBS
- Chapter C3-6, Pooling Loans into Fannie Majors
- Chapter C3-7, Delivering and Trading MBS
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Subpart C1, General Information on Execution Options and Loan Delivery
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Part D Ensuring Quality Control (QC)
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Subpart D1, Lender QC Process
- Chapter D1-1, Lender Quality Control Process
- Chapter D1-2, Lender Prefunding QC Mortgage Review
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Chapter D1-3, Lender Post-Closing QC Mortgage Review
- D1-3-01, Lender Post-Closing Quality Control Review Process
- D1-3-02, Lender Post-Closing Quality Control Review of Approval Conditions, Underwriting Decisions, and Documentation
- D1-3-03, Lender Post-Closing Quality Control Review of Data Integrity
- D1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data Collection
- D1-3-05, Lender Post-Closing Quality Control Review of Closing Documents
- D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention, and Audit
- Subpart D2, Fannie Mae QC Process
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Subpart D1, Lender QC Process
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Part E Quick Reference Materials
- Chapter E-1, Selling Guide Resources
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Chapter E-2, Exhibits
- E-2-01, Required Custodial Documents
- E-2-02, Suggested Format for Phase I Environmental Hazard Assessments
- E-2-03, Revocable Trust Rider (Sample Language)
- E-2-04, Signature Requirements for Mortgages to Inter Vivos Revocable Trusts
- E-2-05, Servicing Marketplace — Mortgage Loan Servicing Purchase and Sale Agreement
- E-2-07, Correcting Errors in eNotes
- E-2-08, Description of eNote Header, Footer, and eNote Clause
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Chapter E-3, Acronyms and Glossary of Defined Terms
- E-3-01, Acronyms and Glossary of Defined Terms: A
- E-3-02, Acronyms and Glossary of Defined Terms: B
- E-3-03, Acronyms and Glossary of Defined Terms: C
- E-3-04, Acronyms and Glossary of Defined Terms: D
- E-3-05, Acronyms and Glossary of Defined Terms: E
- E-3-06, Acronyms and Glossary of Defined Terms: F
- E-3-07, Acronyms and Glossary of Defined Terms: G
- E-3-08, Acronyms and Glossary of Defined Terms: H
- E-3-09, Acronyms and Glossary of Defined Terms: I
- E-3-10, Acronyms and Glossary of Defined Terms: J
- E-3-11, Acronyms and Glossary of Defined Terms: K
- E-3-12, Acronyms and Glossary of Defined Terms: L
- E-3-13, Acronyms and Glossary of Defined Terms: M
- E-3-14, Acronyms and Glossary of Defined Terms: N
- E-3-15, Acronyms and Glossary of Defined Terms: O
- E-3-16, Acronyms and Glossary of Defined Terms: P
- E-3-17, Acronyms and Glossary of Defined Terms: Q
- E-3-18, Acronyms and Glossary of Defined Terms: R
- E-3-19, Acronyms and Glossary of Defined Terms: S
- E-3-20, Acronyms and Glossary of Defined Terms: T
- E-3-21, Acronyms and Glossary of Defined Terms: U
- E-3-22, Acronyms and Glossary of Defined Terms: V
- E-3-23, Acronyms and Glossary of Defined Terms: W
- E-3-24, Acronyms and Glossary of Defined Terms: X
- E-3-25, Acronyms and Glossary of Defined Terms: Y
- E-3-26, Acronyms and Glossary of Defined Terms: Z