Selling Guide

Published June 3, 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.

View All Selling Policy Updates

Download PDF

Hint: Ask in a form of a question.

For best results, pose your search like a question.

B3-6-06, Qualifying Impact of Other Real Estate Owned (06/30/2015)

Introduction

This topic describes the qualifying impact of other real estate owned, including:

 

Qualifying Considerations

When the borrower owns mortgaged real estate, the status of the property determines how the existing property's PITIA must be considered in qualifying for the new mortgage transaction. If the mortgaged property owned by the borrower is

  • an existing investment property or a current principal residence converting to investment use, the borrower must be qualified in accordance with, but not limited to, the policies in topics B3-3.1-08, Rental Income, B3-4.1-01, Minimum Reserve Requirements, and, if applicable B2-2-03, Multiple Financed Properties for the Same Borrower;

  • an existing second home or a current principal residence converting to a second home, the PITIA of the second home must also be counted as part of the borrower's recurring monthly debt obligations; or

  • the borrower's current principal residence that is pending sale but will not close (with title transfer to the new owner) prior to the subject transaction, the lender must comply with the policies in this topic.

In conjunction with the policies in this topic, the lender must also comply with the policies in B2-2-03, Multiple Financed Properties for the Same Borrower, B3-3.1-08, Rental Income, and B3-4.1-01, Minimum Reserve Requirements, as applicable.

 

Mortgage Assumption

When a borrower sells a mortgaged property and the property purchaser assumes the outstanding mortgage debt without a release of liability, the borrower has a contingent liability.

The lender is not required to count this contingent liability (PITIA) as part of the borrower’s recurring monthly debt obligations if the lender verifies that the property purchaser has at least a 12-month history of making regular, timely payments for the mortgage. The lender can document this by obtaining

  • evidence of the transfer of ownership;

  • a copy of the formal, executed assumption agreement; and

  • a credit report indicating that consistent and timely payments were made for the assumed mortgage.

If the lender cannot document timely payments during the most recent 12-month period, the applicable mortgage payment must be counted as part of the borrower’s recurring monthly debt obligations.

 

Property Settlement Buyout

When a borrower’s interest in a property is bought out by another co-owner of the property, as often happens in a divorce settlement, but the lender does not release the borrower from liability under the mortgage, the borrower has a contingent liability.

If the lender obtains documentation to confirm the transfer of title to the property, this liability does not have to be considered as part of the borrower’s recurring monthly debt obligations.

 

Current Principal Residence Pending Sale

If the borrower's current principal residence is pending sale, but the transaction will not close with title transfer to the new owner prior to the subject transaction, and the borrower is purchasing a new principal residence, the current PITIA and the proposed PITIA must be used in qualifying the borrower for the new mortgage loan.

However, Fannie Mae will not require the current principal residence's PITIA to be used in qualifying the borrower as long as the following documentation is provided:

  • the executed sales contract for the current residence, and

  • confirmation that any financing contingencies have been cleared.

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

B3-6-01, General Information on Liabilities (02/05/2020)

IntroductionThis topic contains information on liabilities, including: General Information on Liabilities  Monthly Obligations Not Included in...

Read more

B3-6-02, Debt-to-Income Ratios (02/05/2020)

IntroductionThis topic contains information on the use of the debt-to-income (DTI) ratio, including: DTI Ratios  Maximum DTI Ratios  Exceptions...

Read more

B3-6-03, Monthly Housing Expense for the Subject Property (04/01/2020)

IntroductionThis topic contains information about the following: Monthly Housing Expense  Calculating Monthly Real Estate Tax Payment  ...

Read more

Have guide questions? Get answers to all of your policy questions, straight from the source.

Get Started
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.