Selling Guide

Published December 16, 2020

For best results, pose your search like a question.

Guide Resources

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

Visit Selling and Servicing Guide Communications and Forms

Customers Recommend Ask Poli

AskPoli

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

Launch Ask Poli  

Download PDF Guide

You can also download the printable 1,200+ page PDF, which include links.

Download Now

B3-4.3-11, Trade Equity (12/16/2020)

Introduction

This topic contains information on trade equity, including:


Trade Equity

Trade equity is an acceptable source of funds to supplement the borrower’s minimum borrower contribution provided the following requirements are met:

  • The seller’s equity contribution for the traded property must be a true-value consideration supported by a current appraisal.

  • The borrower must make the minimum required contribution from his or her own funds unless:

    • the LTV or CLTV ratio is less than or equal to 80%; or

These requirements apply to all transactions that involve property trades, including those that are evidenced by two separate contracts that have the buyer and the seller on one contract reversing roles on the second contract.

Note: Trade equity is entered in the loan application as a credit to the transaction, which will reduce the borrower’s required funds to close.


Calculating the Equity Contribution

The equity contribution is determined by subtracting the outstanding mortgage balance of the property being traded, plus any transfer costs, from the lesser of either the property’s appraised value or the trade-in value agreed to by both parties.

For trade equity requirements for manufactured housing, see Section B5–2–03, Manufactured Housing Underwriting Requirements.


Documentation Requirements

For real property, the transfer deed must be recorded.

In addition, lenders must obtain the following:

  • A search of the land records to verify the ownership of the property and to determine whether there are any existing liens on the property.

  • Proof of title transfer and satisfaction of any existing mortgage liens for which the borrower was liable.

Have You Tried Ask Poli?

Poli knows. Just ask.

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

Try Ask Poli

Related Articles


AskPoli

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

X
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.