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What is required for the treatment of buydown funds?

Buydown Funds

The table below provides Fannie Mae requirements for treatment of buydown funds.

  Buydown accounts must be established and fully funded by the time the lender submits the mortgage to Fannie Mae for purchase or securitization.
  Funds for buydown accounts must be deposited into custodial bank accounts.

Note: Buydown funds cannot be included in accounts with the lender’s other corporate funds.

  The borrower’s only interest in buydown funds is to have them applied toward payments as they come due under the note.
  Buydown funds are not refundable unless the mortgage is paid off before all the funds have been applied.
  Buydown funds cannot be used to pay past-due payments.
  Buydown funds cannot be used to reduce the mortgage amount for purposes of determining the LTV ratio.

For additional information, see B2-1.4-04, Temporary Interest Rate Buydowns.

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