B5-5.3-02, Shared Equity Transactions: General Requirements (12/13/2023)
- General Requirements
- Rights to Insurance Settlements and Condemnation Proceeds
- Notification to Third Parties
General Requirements
The following table describes general requirements for shared equity transactions.
Criteria | Community Land Trusts | Income and Resale Price Restrictions |
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Required legal documentation |
The lender must review the community land trust's ground lease to confirm that it is based upon either the Grounded Solutions Network 2011 CLT Network Model Ground Lease or the Institute for Community Economics (ICE) Model Ground Lease, both of which are available on the Grounded Solutions Network website. If the ground lease is not based on either of these model leases, the lender must obtain Fannie Mae's approval of the ground lease by contacting their Fannie Mae Account Team. The term of the estate created by the ground lease must extend for at least five years beyond the maturity date of the loan that is delivered to Fannie Mae. Any additional terms added to these model ground leases, other than those required by applicable law, may not override the rights of the consumer provided under the model ground leases. |
The lender must review the resale restrictions to confirm compliance with this topic. The terms of the resale restrictions can be found in an existing recorded legal agreement or in the legal documentation to be recorded in connection with the borrower's purchase of the property. Examples of such legal agreements:
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Resale restriction requirements |
The community land trust ground lease must include restrictions to limit future property buyers to those with specified income levels and limit the maximum sales price of the property. The resale restrictions in the ground lease must terminate automatically upon foreclosure (or the expiration of any applicable redemption period) of the leasehold mortgage, or acceptance of a deed-in-lieu for foreclosure. After any resale restrictions have been terminated, they may not be automatically reinstated for subsequent buyers of the property. |
The resale restriction terms must limit future property buyers to those with specified income levels and limit the maximum sales price of the property. If the resale restrictions terminate automatically upon foreclosure (or the expiration of any applicable redemption period), or acceptance of a deed-in-lieu of foreclosure, the provider is not entitled to obtain any proceeds from future sale(s) or transfer(s) of the property after foreclosure or acceptance of a deed-in-lieu. After any resale restrictions have been terminated, they may not be automatically reinstated for subsequent buyers of the property. If the resale restrictions survive foreclosure or a deed-in-lieu of foreclosure, the provider is not entitled to obtain any proceeds from the initial sale or transfer of the property after foreclosure, or from the foreclosing mortgage holder who obtained the property at foreclosure or from a deed-in-lieu of foreclosure. |
Additional requirements for properties subject to private transfer fees |
For shared equity loans secured by properties subject to private transfer fee covenants and with note dates on or after July 1, 2023, the recorded instrument containing the private transfer fee covenant must
Grounded Solutions Network publishes the 2011 National Community Land Trust Network (NCLTN) Model Ground Lease, the Institute for Community Economics (ICE) Model Ground Lease, and the 2021 Model Declaration of Affordability Covenants with Refinance and Resale Restriction and Purchase Option ("Model Forms"). These Model Forms contain provisions that, if included in the recorded instrument for the property, will satisfy the above requirements. Special Feature Codes Lenders must report SFC 181 when delivering shared equity loans with a private transfer fee covenant. Shared equity loans secured by properties without private transfer fee covenants are not subject to the above requirements. For more information on private transfer fee covenants, see Private Transfer Fee Covenants in . |
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Certified Shared Equity Program List |
Lenders may choose to use the Certified Shared Equity Program List as an alternative to conducting their own review of the above requirements. This flexibility only applies to loans involving programs on the list that use one of the Model Forms (Shared Eq - Model Forms tab). These programs comply with the criteria for required legal documentation, resale restriction requirements, and additional requirements for properties subject to private transfer fees described above. Programs on the Shared Eq - Model Forms tab also meet eligible shared equity provider requirements in .When utilizing this flexibility, lenders must review the ground lease or deed restricted legal agreement for the subject property to confirm that it is associated with a program included on the Shared Eq - Model Forms tab, and the Model Form specified on the list is being used at the time of the transaction. Additionally, if the property is subject to a private transfer fee, the lender must verify that the term of the ground lease or deed restricted legal agreement will apply for at least 30 years after recordation.
Special Feature Codes Lenders must report SFC 792 when delivering a loan in connection with a program on the list and report all other applicable SFCs required for shared equity transactions. |
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Required riders and amendments |
Lenders must ensure that any loan secured by a community land trust property and delivered to Fannie Mae is supported by the appropriate leasehold interest documents, including the community land trust ground lease and the Community Land Trust Ground Lease Rider ( ). Form 2100 must be executed by the borrower and the ground lessor and recorded along with the ground lease. This form was developed for use with either the Grounded Solutions Network 2011 CLT Network Model Ground Lease or the ICE Model Ground Lease. The form
The land records for the subject property must include adoption of the terms and conditions that are incorporated in this ground lease rider. Fannie Mae's written approval is required if is modified or is not executed. |
Lenders must ensure that any loan secured by a property with income and resale price restrictions that is purchased by Fannie Mae is accompanied by the Shared Equity Amendment ( ). The Amendment must be executed by the shared equity provider (and any other parties to the instrument that created the resale restrictions), the borrower, and the lender, and must be recorded. Form 2200 assures consistent standards for all loans secured by properties with income and resale price restrictions that are delivered to Fannie Mae.Fannie Mae's written approval is required if is modified or is not executed.
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Rights to Insurance Settlements and Condemnation Proceeds
Fannie Mae must have first claim to insurance settlements and condemnation proceeds.
Notification to Third Parties
The terms of the shared equity legal agreement (as modified by
or , as applicable) may require the servicer to notify an interested third party, such as the shared equity provider or its designee, when the borrower defaults on the loan or in the event of foreclosure. In this case, the servicer must ensure proper notification is provided, as required by the terms of the legal agreement.Regardless of any third-party notification requirements, the servicer is still responsible for adhering to Fannie Mae's established timeframes for completing routine foreclosure. Any third-party notifications required in addition to the required statutory notifications must not impair the servicer's ability to foreclose.
The table below provides references to recently issued Announcements that are related to this topic.
Announcements | Issue Date |
December 13, 2023 | |
May 03, 2023 |