Fannie Mae Announces Selling Guide Updates
by: Michelle Peters
On January 17, 2013 Fannie Mae announced Selling Guide updates that will affect the guidelines regarding: Selling Government Mortgage Loans to Fannie Mae, Refunding Borrowers for Overpayment of Fees and Charges, New Principal Curtailment Policy and InterVivos Revocable Trusts. All updates included in the announcement were effective immediately, unless otherwise stated; the announcement was made in Fannie Mae’s Selling Guide Announcement SEL-2013-01.
Changes to Selling Government Mortgage Loans to Fannie Mae:
Fannie Mae is allowing for the delivery of government mortgage loans to be eligible on a negotiated basis only. Lenders that currently sell these types of mortgages (FHA Insured, HUD guaranteed, VA guaranteed and RD guaranteed) to Fannie Mae and have a Master Agreement in place should contact their customer account team in order to determine continued eligibility. If a lender does not currently have a Master Agreement or a designated customer account team, they should contact Fannie Mae with any questions regarding their account and/or to establish eligibility.
These changes will allow Fannie Mae to better monitor their acquisition of government-insured and government-guaranteed mortgage loans. Topic updates within the Selling Guide: A2-4-01 Master Agreement Overview, B5-1.1-01 High-Balance Mortgage Loan Eligibility and Underwriting (Government Mortgage Loans), B6-1-01 General Government Mortgage Loan Requirements (Lender Eligibility) and E-3-07 Glossary of Fannie Mae Terms: G.
The effective date of these changes is May 1, 2013.
Changes to Refunding Borrowers for Overpayment of Fees and Charges:
Fannie Mae has clarified the following: For purchase transactions, currently general requirements allow for proceeds to be given to the borrower as cash back when reimbursing the borrower’s overpayment of fees. With the update, reimbursement may also include refunds required in order to comply with certain federal laws or regulations. For limited cash-out refinance transactions, the Seller Guide has been updated to allow the lender to refund the borrower for the overpayment of fees and charges due to federal or state laws or regulations. This refund would not be included in the maximum cash back that is permitted on a limited cash-out transaction; the refund would be in addition to the maximum.
Refunds must be clearly identified on the HUD-1 Settlement Statement with the reason for refund noted. Supporting documentation must be included in the loan file. The clarifications to the Selling Guide topics are reflected in: B2-1.2-01 Purchase Transactions and B2-1.2-02 Limited Cash-Out Refinance Transactions and are effective immediately.
Changes to the Principal Curtailment Policy:
Fannie Mae has established a new policy regarding acceptable principal balance curtailments that may be made prior to delivery of a mortgage loan. Principal balance curtailments will be allowed for the following two reasons: To refund the overpayment of fees or charges paid by the borrower in accordance with applicable regulatory requirements; or, if the borrower receives cash back in a limited cash-out transaction that exceeds the maximum permitted amounts. Lenders must apply all curtailments prior to delivery of the loan to Fannie Mae. For curtailments made at closing, the HUD-1 Settlement statement must be clearly documented with the amount and the reason. For curtailments made after closing, the file must be documented with the amount and the reason and/or source of the curtailment.
This new selling guide topic can be found in section B2-1.4-05 Principal Curtailments and is effective immediately.
Changes to Inter Vivos Revocable Trusts:
Fannie Mae has clarified several points regarding the inter vivos revocable trust borrowers. It is now acceptable for an inter vivos revocable trust to be considered as an eligible borrower provided that the updated lender representations and warranties have been met. A new special feature code (SFC 168) has been established for delivery of loans made to inter vivos revocable trust borrowers. Additionally, on legal loan documents, the Selling Guide has eliminated the requirement of the trustee’s signature block to identify the beneficiary of the inter vivos revocable trust.
Updates to the inter vivos revocable trust topic within the Selling Guide can be found in B2-2-01 General Borrower Eligibility Requirements, B2-2-05 Inter Vivos Revocable Trusts, B5-4-02 Texas Section 50(a)(6) Mortgage Eligibility, B8-3-03 Signature Requirements for Notes, B8-5-02 Inter Vivos Revocable Trusts (Execution and Signature Requirements), E-2-05 Revocable Trust Rider, E-2-06 Signature Requirements for Mortgages to Inter Vivos Revocable Trusts.
Use of the new special feature code is effective for deliveries completed on or after May 1, 2013. Changes to the legal document requirements will be implemented for loans closed on or after August 1, 2013. All other clarifications to the Selling Guide are effective immediately.
Fannie Mae’s Selling Guide Announcement SEL-2013-01 can be viewed in its entirety in AllRegs.
About the Author:
Michelle is Assistant Vice President and manages Bankers Advisory quality control verifications processing, report delivery, information security and vendor management. She can be reached at michelle@bankersadvisory.com
Michelle oversees the mortgage information security, vendor management, and pre-funding services, and manages the QC processing department. She received her associate's degree at the New England College of Finance and is a BA candidate at Bentley University.
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