Selling Guide

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B2-3-04, Special Property Eligibility Considerations (02/23/2016)

Introduction

This topic contains information on Fannie Mae’s unique property eligibility requirements, including:


Multiple Parcels

The table below provides the requirements when the security property consists of more than one parcel of real estate.

Multiple Parcels Requirements
Each parcel must be conveyed in its entirety.
Parcels must be adjoined to the other, unless they comply with the following exception. Parcels that otherwise would be adjoined, but are divided by a road, are acceptable if the parcel without a residence is a non-buildable lot (for example, waterfront properties where the parcel without the residence provides access to the water). Evidence that the lot is non-buildable must be included in the loan file.
Each parcel must have the same basic zoning (for example, residential, agricultural).
The entire property may contain only one dwelling unit. Limited additional non-residential improvements, such as a garage, are acceptable. For example, the adjoining parcel may not have an additional dwelling unit. An improvement that has been built across lot lines is acceptable. For example, a home built across both parcels where the lot line runs under the home is acceptable.
The mortgage must be a valid first lien that covers each parcel.


Mixed-Use Properties

Fannie Mae purchases or securitizes mortgages that are secured by properties that have a business use in addition to their residential use, such as a property with space set aside for a day care facility, a beauty or barber shop, or a doctor’s office.

The following special eligibility criteria must be met:

  • The property must be a one-unit dwelling that the borrower occupies as a principal residence.

  • The borrower must be both the owner and the operator of the business.

  • The property must be primarily residential in nature.

  • The dwelling may not be modified in a manner that has an adverse impact on its marketability as a residential property.

See B4-1.4-07, Mixed-Use Property Appraisal Requirements, for appraisal considerations for mixed-use properties.


Hawaiian Lava Zones

Fannie Mae will only purchase or securitize mortgage loans secured by properties that are located within lava zones 3 through 9 on the island of Hawaii. Properties in lava zones 1 and 2 are not eligible due to the increased risk of property destruction from lava flows within these areas.

Hawaiian lava flow maps and other information are available online at the U.S. Geological Survey Hawaiian Volcano Observatory website.


Properties with Solar Panels

Fannie Mae will purchase or securitize a mortgage loan on a property with solar panels. If the property owner is the owner of the solar panels, standard eligibility requirements apply (for example, appraisal, insurance, and title).

If the solar panels are leased from or owned by a third party under a power purchase agreement or other similar arrangement, the following requirements apply (whether to the original agreement or as subsequently amended).

Requirements for Properties with Solar Panels that are Leased or Covered by a Power Purchase Agreement
The solar panels may not be included in the appraised value of the property.
The property must maintain access to an alternate source of electric power that meets community standards.
The monthly lease payment must be included in the debt-to-income (DTI) ratio calculation unless the lease is structured to
  • provide delivery of a specific amount of energy at a fixed payment during a given period, and

  • have a production guarantee that compensates the borrower on a prorated basis in the event the solar panels fail to meet the energy output required for in the lease for that period.

Payments under power purchase agreements where the payment is calculated solely based on the energy produced may be excluded from the DTI ratio.

The lease or power purchase agreement must indicate that
  • any damage that occurs as a result of installation, malfunction, manufacturing defect, or the removal of the solar panels is the responsibility of the owner of the equipment and the owner must be obligated to repair the damage and return the improvements to their original or prior condition (for example, sound and watertight conditions that are architecturally consistent with the home);

  • the owner of the solar panels agrees not to be named loss payee (or named insured) on the property owner’s property insurance policy covering the residential structure on which the panels are attached. As an alternative to this requirement, the lender may verify that the owner of the solar panels is not a named loss payee (or named insured) on the property owner’s property insurance policy; and

  • in the event of foreclosure, the lender or assignee has the discretion to

    • terminate the lease/agreement and require the third-party owner to remove the equipment;

    • become, without payment of any transfer or similar fee, the beneficiary of the borrower’s lease/agreement with the third party; or

    • enter into a new lease/agreement with the third party, under terms no less favorable than the prior owner.

Any exceptions to coverage on the title insurance policy for recorded instruments relating to the solar panels must comply with B7-2-05, Title Exceptions and Impediments.

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