Introduction
This topic provides information about whole loan mandatory commitments to deliver ARM loans to Fannie Mae, including:
- Standard ARM Mandatory Commitments
- Minimum Commitment Amount for Converted ARM Resale Commitments
- Process for Converting an ARM within an MBS to a Fixed-Rate Mortgage
- Commitment Timing, Pricing and Compensatory Fees for Converted ARM Resale Commitments
Standard ARM Mandatory Commitments
Lenders may take down mandatory whole loan commitments to deliver a variety of ARMs to Fannie Mae. Fannie Mae will purchase ARMs with varying initial fixed rate periods and indices.
See the Standard ARM Plan Matrix for parameters for ARM loans eligible for sale to Fannie Mae, including the initial fixed interest rate period, interest rate adjustment frequency, indices, and cap structure. Fannie Mae’s standard ARM program does not permit the purchase of ARMs with caps (“floors”) (other than the ARM’s margin) on the lifetime decreases to the life of the loan. The margin for each ARM delivered must include the same servicing fee specified in the commitment.
For additional information, see the Standard ARM Plan Matrix.
Minimum Commitment Amount for Converted ARM Resale Commitments
Converted ARM Resale mandatory commitments are used by lenders to redeliver ARMs that were originally in an MBS pool and have been converted to fixed-rate whole loans.
Lenders must agree to deliver an amount (total UPB) equal to the outstanding balance of the mortgage to be delivered under the commitment. If the lender is delivering multiple mortgages with the same interest rate after conversion, the amount must equal the combined UPB of those mortgages.
Process for Converting an ARM within an MBS to a Fixed-Rate Mortgage
ARM loans with a conversion option are eligible for conversion to fixed-rate mortgages. When a borrower chooses to convert an ARM currently in an MBS pool, the lender must follow these steps.
| Step | Process for Converting the Mortgage |
|---|---|
| 1. | Contact Fannie Mae to repurchase the mortgage from the MBS pool before interest begins accruing at the new fixed rate. |
| 2. | Redeliver the mortgage to Fannie Mae as a whole loan (A/A remittance only), if the lender specified a take-out post-conversion disposition option when it originally delivered the ARM. |
| 3. | Continue any recourse or credit enhancement that initially applied to the mortgage unless the lender and Fannie Mae agree otherwise. |
| 4. | Obtain a Converted ARM Resale commitment number from Fannie Mae. |
For additional information concerning the redelivery of ARMs under both the take-out and market rate options, see C3-5-04, Pooling ARMs with a Conversion Option.
Commitment Timing, Pricing and Compensatory Fees for Converted ARM Resale Commitments
See the table below for information on the relationship between the timing of the commitment and the pricing and fees Fannie Mae may charge.
| Date Of Commitment Request | Price |
|---|---|
| On or before the 16th day of the month in which the conversion rate is requested. | Par. |
| After the 16th day of the month in which the conversion rate is requested. | Fannie Mae may discount the price the lender receives by
|