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C2-2-03, General Information on Whole Loan Purchasing Policies (05/04/2022)

This topic includes information on the conditions under which Fannie Mae will fund the purchase of a loan delivered in fulfillment of a whole loan commitment, including:

Whole Loan Funding Requirements

Fannie Mae will send the proceeds from the whole loan sale via a wire transfer into the lender’s designated account on the "Purchased and Funded" date (as reflected in Loan Delivery) if:

  • the designated payee code is valid;

  • the loan is eligible for purchase; and

  • the document custodian received a complete, accurate mortgage document submission package and loan delivery data by the applicable cutoff times.

Fannie Mae will direct the wire transfer to either:

  • the account(s) and depository institution(s) the lender designates, or

  • the lender itself (if it is able to receive wire transfers through the Fedwire system).

To avoid delays in purchasing and funding, Fannie Mae accepts delivery of any mortgage up to 45 days from the due date of the reported last paid installment.

Warehouse Lender’s Release of Interest in the Property

When Fannie Mae purchases a mortgage, the mortgage seller represents and warrants that title to the mortgage note is free and clear of any security interest, lien, pledge, or other encumbrance, which means that any interest held by a warehouse lender must be released no later than the date Fannie Mae acquires the note.

To ensure that this is always the case, Fannie Mae has established delivery procedures to cover those instances in which the document custodian either:

  • receives with the mortgage delivery documents a bailee letter notifying it of a warehouse lender’s security interest, or

  • is otherwise aware that a warehouse lender is claiming an interest of any kind in the mortgage notes being delivered.

This process is intended solely to ensure the correctness of the selling representations and warranties a mortgage seller makes to Fannie Mae (and not to benefit any third party). These procedures are outlined in C1-2-05, Bailee LettersC1-2-05, Bailee Letters. Also see C1-2-03, Ownership of Mortgage Loans Prior to Purchase or Securitization and Third-Party Security InterestsC1-2-03, Ownership of Mortgage Loans Prior to Purchase or Securitization and Third-Party Security Interests, for additional information.

Fannie Mae also has established operational procedures that can be used to reduce instances of conflicting delivery instructions for pledged mortgages. See C1-1-01, Execution OptionsC1-1-01, Execution Options.

Procedures Related to the Secure Transfer of Funds

Each lender is responsible for establishing and maintaining controls and procedures that ensure the confidentiality of all transfer instructions and payee codes and the integrity of its communications with Fannie Mae.

The lender agrees to be bound by any transfer instructions issued in its name and sent to Fannie Mae, whether or not they were authorized.

A lender is solely liable for transfers that are initiated (either directly or indirectly) as the result of a breach in its security arrangements or as the result of its failure to give Fannie Mae timely notice of an error, omission, or irregularity in establishing payee arrangements. The lender is fully responsible for notifying the Fannie Mae Asset Acquisitions by telephone and submitting written confirmation of the call to Fannie Mae within 24 hours of the breach. Fannie Mae will do everything possible to suspend operations until a correction is sent, including removing all payee codes on record for the lender and issuing new codes based on instructions the lender provides in accordance with Fannie Mae standard procedures.

The lender is advised that these procedures will not be used to detect an error in the transmission or content of a transfer of funds to the lender’s designated bank or an error in processing a request to set up a payee code for use in transferring funds.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SEL-2022-04 May 04, 2022
Announcement SEL-2019-04 May 01, 2019