Selling Guide

Published April 1, 2020

The Selling Guide is organized into parts that reflect how lenders generally categorize various aspects of their business relationship with Fannie Mae. To begin browsing, select from any of the sections below. You may also download the entire Selling Guide in PDF format.

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When can lenders begin delivering SOFR ARMs?

Secured Overnight Financing Rate (SOFR) ARMs 

As a follow-up to LL-2020-01 that introduced several new SOFR ARM plans, we have updated the Selling Guide and Standard ARM Plan Matrix to include information about the SOFR index, new ARM Plan numbers, and individual plan specifications. All our existing, conventional ARM requirements will apply to SOFR ARMs. The following table reiterates many of those existing policies and provides some additional details, including when we will begin accepting deliveries of SOFR ARM loans. We will update our Guide to remove reference to the indexes and associated ARM Plan numbers being retired in a future publication. 

Fannie Mae will begin to accept deliveries of SOFR ARM products as of Aug. 3, 2020.

  • Whole loan and MBS pricing and deliveries will begin on Aug. 3, 2020.
  • Lenders may begin delivery of whole loans on this date and delivery of loans in MBS with issue dates beginning Aug. 1, 2020.

 

SOFR ARM Requirements

SOFR ARM Plans

ARM Plan 4926: 3/6 mos

ARM Plan 4927: 5/6 mos

ARM Plan 4928: 7/6 mos

ARM Plan 4929: 10/6 mos

Borrower disclosure requirements

Lenders must provide borrowers with disclosure requirements in compliance with all applicable laws. Refer to the Selling Guide for existing disclosure requirements related to below-market interest rates, conversion options, and assumptions, etc.

Eligible loan terms – LTV, CLTV, HCLTV ratios; occupancy; loan purpose, property type, product type, etc.

All existing ARM eligibility requirements apply - refer to the  Eligibility Matrix.

Temporary interest rate buydowns

Standard policies apply.

Underwriting

Lenders may begin accepting loan applications at their discretion. SOFR ARMs can be underwritten manually or with Desktop Underwriter® (DU®). Loan casefiles must be submitted to DU using the applicable generic ARM plan:

  • FM GENERIC, 3 YR
  • FM GENERIC, 5 YR
  • FM GENERIC, 7 YR
  • FM GENERIC, 10 YR

Note: Lenders are not required to submit the SOFR index to DU.

Index

30-Day Average of the SOFR index as published by the Federal Reserve Bank of New York.

Maximum margin

300 basis points (standard ARM policy)

Minimum interest rate

The loan interest rate may never decrease to less than the ARM’s margin, regardless of any downward interest rate cap.)

Conversion options

The SOFR ARM plans do not have conversion options.

Assumability

  • ARM Plan 4926 is assumable for the life of the loan.
  • Plans 4927, 4928, and 4929 are due on sale during the initial fixed-rate period and assumable thereafter.

Uniform notes and riders

Refer to the Standard ARM Plan Matrix for the applicable SOFR uniform note and rider. The new documents are published on our Legal Documents webpage.

Whole Loan and MBS Pricing and Delivery

Whole loan and MBS pricing and deliveries will begin on Aug. 3, 2020. Lenders may begin delivery of whole loans on this date and delivery of loans in MBS with issue dates beginning Aug. 1, 2020.

MBS Pooling Policy

All existing pooling policies will apply to SOFR ARMs in MBS.

Loan-level price adjustments (LLPA)

The standard ARM LLPAs apply for loans with LTVs greater than 90.00%

Uniform Mortgage Data Program (UMDP)

See the UMDP announcement issued Mar. 10, 2020 for a description of impacts to UMDP datasets and necessary system changes.

 

Related Articles

B2-1.2-01, Loan-to-Value (LTV) Ratios (03/29/2016)

IntroductionThis topic contains information on LTV ratios, including: Calculation of the LTV Ratio  Sales Price and Appraised Value Used by DU ...

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B2-1.2-02, Combined Loan-to-Value (CLTV) Ratios (12/04/2018)

IntroductionThis topic contains information on CLTV ratios, including: Calculation of the CLTV Ratio  Loan-Level Price Adjustments  Calculation...

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B2-1.2-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios (02/23/2016)

IntroductionThis topic contains information on HCLTV ratios, including: Calculation of the HCLTV Ratio  Permanently Modified HELOCs  ...

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