B5-5.2-01, Loans With Resale Restrictions: General Information (05/03/2023)

Resale restrictions are a right in perpetuity or for a certain number of years, stated in the form of a restriction, easement, covenant, or condition in any deed, mortgage, ground lease, agreement, or other instrument executed by or on behalf of the owner of the land. The resale restrictions may limit the occupancy of all or part of the land to individuals meeting certain conditions, such as age (senior communities must comply with applicable law). When resale restrictions are included in a mortgage, the terms must comply with this Guide.

Note: This topic does not pertain to loans that are part of shared equity transactions, which have resale restrictions that limit both income eligibility and impose a maximum resale price. See Section B5-5.3, Shared Equity Transactions for additional information.

Fannie Mae will purchase loans that are subject to one or more of the following types of resale restrictions:

• income limits,
• age-related requirements,
• employment-related requirements,
• occupancy requirements, 
• first-time homebuyer requirements, and
• restrictions on group homes or homes that are principally used to serve residents with disabilities.

Some restrictions are likely to occur only in combination with others and it is permissible for more than one resale restriction to apply to a single loan.

Fannie Mae will purchase loans secured by properties subject to resale restrictions in the following circumstances:

• when the restrictions terminate automatically upon foreclosure (or the expiration of any applicable redemption period),
• upon the recordation of a deed-in-lieu of foreclosure, or
• when the resale restrictions survive foreclosure.

Note: If the resale restrictions survive foreclosure, the lender represents and warrants that the resale restrictions do not impair the servicer's ability to foreclose on the restricted property.

There are no restrictions on the length of the period in which the resale restrictions may remain in place on the property.

The source and terms of the resale restrictions must be included in the public land records so that they are readily identifiable in a routine title search.

The presence of resale restrictions must not impair Fannie Mae's legal rights to cure a default under the loan terms, to foreclose on the subject property, or to otherwise protect Fannie Mae's interests under the mortgage.

Fannie Mae must have first claim to insurance settlements and condemnation proceeds.