Selling GuideFannie Mae Single Family

January 27, 2015

Selling Guide: Fannie Mae Single FamilyPublished January 27, 2015

January 27, 2015

Fannie Mae Copyright Notice

(1) 2015 Fannie Mae. No part of this publication may be reproduced in any form or by anymeans without Fannie Maes prior written permission, except as may be provided herein orunless otherwise permitted by law. Limited permission to reproduce this publication in print inwhole or in part and limited permission to distribute electronically parts of this publication aregranted to Fannie Mae-approved lenders, servicers, and other mortgage finance professionals, forinternal business purposes only and strictly for their own use in originating mortgages, sellingmortgages to Fannie Mae, or servicing mortgages for Fannie Mae. Fannie Mae may revoke theselimited permissions by written notice to any or all Fannie Mae-approved users.

Trademarks are the property of their respective owners.

A full version of this publication is also available on the AllRegs website of MortgageResource Center, Inc., (MRC), which posts this publication under license from and with theexpress permission of Fannie Mae. MRC is the exclusive third-party electronic publisher ofthis publication. Fannie Mae makes no representation or warranty regarding any of the features,functionality, or other contents of the AllRegs website. If there should ever be a differencebetween this publication as it appears on the AllRegs website and the version published byFannie Mae, the difference is an error. In such event, the Fannie Mae version of this publicationshall be deemed the correct authoritative version. Material discrepancies between the twoversions, identified by Fannie Mae or otherwise brought to our attention, may be addressed byAnnouncement.

You acknowledge and agree (individually and on behalf of the entity for which you are accessingthis publication,You) that You may not make any claim against Fannie Mae for any errorsand that Fannie Mae shall not be liable to You for any losses or damages whatsoever resultingdirectly or indirectly from any errors.

January 27, 2015

Printed copies may not be the most current version. For the most current version, go to the online version athttps://www.fanniemae.com/singlefamily/originating-underwriting. i

Table of ContentsPreface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xviiiPart A, Doing Business with Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Subpart A1, Approval Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3A1-1, Application and Approval of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A1-1-01, Application and Approval of Lender (04/09/2013) . . . . . . . . . . . . . . . 4Subpart A2, Lender Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

A2-1, Contractual Obligations for Fannie MaeApproved Lenders . . . . . . . . . . . . . . 9A2-1-01, Contractual Obligations for Lenders (04/09/2013) . . . . . . . . . . . . . . . 9A2-1-02, Nature of Mortgage Transaction (04/01/2009) . . . . . . . . . . . . . . . . . . 12A2-1-03, Indemnification for Losses (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . 13

A2-2, Contractual Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 16A2-2-01, Contractual Representations and Warranties (07/29/2014) . . . . . . . . . 16A2-2.1, Additional Selling Representations and Warranties . . . . . . . . . . . . . . . 19

A2-2.1-01, Selling Representations and Warranties Overview(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19A2-2.1-02, Delivery Information and Delivery-Option SpecificRepresentations and Warranties (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . 19A2-2.1-03, Document Warranties (08/20/2013) . . . . . . . . . . . . . . . . . . . . 22A2-2.1-04, Limited Waiver of Contractual Warranties for MortgagesSubmitted to DU (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26A2-2.1-05, Invalidation of Limited Waiver of Representation andWarranties (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28A2-2.1-06, Life-of-Loan Representations and Warranties (12/16/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

A2-3, Lender Breach of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42A2-3.1, Lender Breach of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

A2-3.1-01, Lender Breach of Contract (04/09/2013) . . . . . . . . . . . . . . . . 43A2-3.1-02, Sanctions, Suspensions, and Terminations (04/09/2013) . . . . . 46

A2-3.2, Loan Repurchases and Make Whole Payments Requested by FannieMae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

A2-3.2-01, Loan Repurchases and Make Whole Payments Requested byFannie Mae (06/24/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49A2-3.2-02, Enforcement Relief for Breaches of Certain Representationsand Warranties Related to Underwriting and Eligibility (12/16/2014) . . . . 54A2-3.2-03, Additional Policies Related to Mortgage Loan Repurchases(06/24/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

A2-3.3, Compensatory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67A2-3.3-01, Compensatory Fees (07/30/2013) . . . . . . . . . . . . . . . . . . . . . . 67

A2-4, Master Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

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A2-4-01, Master Agreement Overview (09/30/2014) . . . . . . . . . . . . . . . . . . . . 70A2-4-02, Terms of a Master Agreement (04/01/2009) . . . . . . . . . . . . . . . . . . . 72A2-4-03, Variances and Special Provisions (06/24/2014) . . . . . . . . . . . . . . . . . 73A2-4-04, Breaches of a Master Agreement (04/09/2013) . . . . . . . . . . . . . . . . . 74

A2-5, Mortgage Files and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76A2-5.1, Establishment and Maintenance of Mortgage Files and Records . . . . . 77

A2-5.1-01, Overview of Mortgage Files and Records (04/09/2013) . . . . . 77A2-5.1-02, Individual Mortgage Loan Files (11/13/2012) . . . . . . . . . . . . . 78A2-5.1-03, Electronic Records, Signature, and Transactions(07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80A2-5.1-04, Lenders or Document Custodians Electronic TransactionsWith Third Parties (07/26/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

A2-5.2, Ownership, Retention, and Examination of Mortgage Files andRecords . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

A2-5.2-01, Ownership of Mortgage Loan Files and Records(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87A2-5.2-02, Access to Records (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . 88A2-5.2-03, Retention and Storage of Mortgage File Records(04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

A2-6, Fannie Mae Trade Name and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . 92A2-6-01, Fannie Mae Trade Name and Trademarks (04/01/2009) . . . . . . . . . . 92

Subpart A3, Getting Started With Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96A3-1, Fannie Maes Technology Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

A3-1-01, Fannie Maes Technology Products (04/01/2009) . . . . . . . . . . . . . . . 97A3-2, Compliance With Requirements and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

A3-2-01, Compliance With Laws (12/16/2014) . . . . . . . . . . . . . . . . . . . . . . . . 99A3-2-02, Responsible Lending Practices (12/16/2014) . . . . . . . . . . . . . . . . . . 103

A3-3, Third-Party Lending Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108A3-3-01, Outsourcing of Mortgage Processing and Third-Party Originations(08/26/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109A3-3-02, Concurrent Servicing Transfers (01/27/2015) . . . . . . . . . . . . . . . . . 112A3-3-03, Subservicing (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116A3-3-04, Document Custodians (08/26/2014) . . . . . . . . . . . . . . . . . . . . . . . . . 117A3-3-05, Custody of Mortgage Documents (09/27/2011) . . . . . . . . . . . . . . . . 124A3-3-06, Fannie Mae's Designated Document Custodian (06/28/2011) . . . . . 127A3-3.1, Other Document Custodians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

A3-3.1-01, Operational Requirements for all Document Custodians(09/30/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129A3-3.1-02, Document Custodian Reporting Requirements: Active andInactive Status (10/02/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

A3-3.2, Document Custodian Electronic Transactions . . . . . . . . . . . . . . . . . . 135

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A3-3.2-01, Document Custodian Electronic Transactions (04/01/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

A3-4, Lending Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137A3-4-01, Confidentiality of Information/Conflict of Interest Parameters(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137A3-4-02, Data Quality and Integrity (12/16/2014) . . . . . . . . . . . . . . . . . . . . . 138A3-4-03, Preventing, Detecting, and Reporting Mortgage Fraud (08/26/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

A3-5, Fidelity Bond and Errors and Omissions Coverage . . . . . . . . . . . . . . . . . . . 147A3-5-01, Fidelity Bond and Errors and Omissions Coverage Provisions(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147A3-5-02, Fidelity Bond Policy Requirements (04/01/2009) . . . . . . . . . . . . . . 149A3-5-03, Errors and Omissions Policy Requirements (03/02/2010) . . . . . . . . 150A3-5-04, Reporting Fidelity Bond and Errors and Omissions Events(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

Subpart A4, Maintaining Lender Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153A4-1, Maintaining Lender Eligibility: Overview . . . . . . . . . . . . . . . . . . . . . . . . . . 154

A4-1-01, Maintaining Lender Eligibility (09/24/2013) . . . . . . . . . . . . . . . . . . 154A4-2, Submission of Operational and Financial Information . . . . . . . . . . . . . . . . . 157

A4-2-01, Net Worth and Liquidity Requirements (01/27/2011) . . . . . . . . . . . 158A4-2-02, Financial Statements and Reports (05/27/2014) . . . . . . . . . . . . . . . . 161A4-2-03, Lender Record Information (Form 582) (04/15/2014) . . . . . . . . . . . 164

A4-3, Changes in the Lenders Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166A4-3-01, Report of Changes in the Lenders Organization (09/24/2013) . . . . 166

Part B, Origination Through Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168Subpart B1, Loan Application Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170

B1-1, Application Package Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171B1-1-01, Contents of the Application Package (12/16/2014) . . . . . . . . . . . . . 171B1-1-02, Blanket Authorization Form (04/01/2009) . . . . . . . . . . . . . . . . . . . . 174B1-1-03, Allowable Age of Credit Documents and Federal Income TaxReturns (11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Subpart B2, Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179B2-1, Mortgage Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

B2-1-01, Occupancy Types (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180B2-1.1, LTV, CLTV, HCLTV, and Subordinate Financing . . . . . . . . . . . . . . . 183

B2-1.1-01, Loan-to-Value (LTV) Ratios (09/24/2013) . . . . . . . . . . . . . . 183B2-1.1-02, Combined Loan-to-Value (CLTV) Ratios (03/31/2011) . . . . . 186B2-1.1-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios(10/02/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187B2-1.1-04, Subordinate Financing (08/20/2013) . . . . . . . . . . . . . . . . . . . 189

B2-1.2, Loan Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194

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B2-1.2-01, Purchase Transactions (01/27/2015) . . . . . . . . . . . . . . . . . . . 194B2-1.2-02, Limited Cash-Out Refinance Transactions (01/27/2015) . . . . 198B2-1.2-03, Cash-Out Refinance Transactions (05/27/2014) . . . . . . . . . . 205B2-1.2-04, Continuity of Obligation (05/27/2014) . . . . . . . . . . . . . . . . . 209B2-1.2-05, Prohibited Refinancing Practices (11/13/2012) . . . . . . . . . . . 212B2-1.2-06, Payoff of Installment Land Contract Requirements(11/13/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

B2-1.3, Loan Amortization Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216B2-1.3-01, Fixed-Rate Mortgages (08/20/2013) . . . . . . . . . . . . . . . . . . . 216B2-1.3-02, Adjustable-Rate Mortgages (ARMs) (08/26/2014) . . . . . . . . 218B2-1.3-03, Convertible ARMs (07/29/2014) . . . . . . . . . . . . . . . . . . . . . . 230B2-1.3-04, Refinanced Balloon Mortgages (04/09/2013) . . . . . . . . . . . . 234B2-1.3-05, Temporary Interest Rate Buydowns (07/29/2014) . . . . . . . . . 238

B2-1.4, Other Loan Attributes and Related Policies . . . . . . . . . . . . . . . . . . . . 243B2-1.4-01, Mortgage Loan Limits (03/31/2011) . . . . . . . . . . . . . . . . . . . 243B2-1.4-02, Mortgage Loan Eligibility (01/27/2015) . . . . . . . . . . . . . . . . 245B2-1.4-03, Legal Requirements (08/20/2013) . . . . . . . . . . . . . . . . . . . . . 258B2-1.4-04, Escrow Accounts (12/18/2012) . . . . . . . . . . . . . . . . . . . . . . . 259B2-1.4-05, Principal Curtailments (01/17/2013) . . . . . . . . . . . . . . . . . . . 261

B2-2, Borrower Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265B2-2-01, General Borrower Eligibility Requirements (01/17/2013) . . . . . . . . 265B2-2-02, NonU.S. Citizen Borrower Eligibility Requirements (03/02/2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268B2-2-03, Multiple Financed Properties for the Same Borrower (01/27/2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269B2-2-04, Guarantors, Co-Signers, or Non-Occupant Co-Borrowers(06/24/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276B2-2-05, Inter Vivos Revocable Trusts (01/17/2013) . . . . . . . . . . . . . . . . . . . 278B2-2-06, Home-buyer Education and Counseling (01/27/2015) . . . . . . . . . . . 282

B2-3, Property Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286B2-3-01, General Property Eligibility (04/15/2014) . . . . . . . . . . . . . . . . . . . . 287B2-3-02, Special Property Eligibility and Underwriting Considerations:Factory-Built Housing (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290B2-3-03, Special Property Eligibility and Underwriting Considerations:Leasehold Estates (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295B2-3-04, Special Property Eligibility Considerations (12/16/2014) . . . . . . . . 299B2-3-05, Properties Affected by a Disaster (04/15/2014) . . . . . . . . . . . . . . . . 303

Subpart B3, Underwriting Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305B3-1, Manual Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306

B3-1-01, Comprehensive Risk Assessment (08/20/2013) . . . . . . . . . . . . . . . . 306B3-2, Desktop Underwriter (DU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309

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B3-2-01, General Information on DU (01/27/2015) . . . . . . . . . . . . . . . . . . . . 310B3-2-02, Risk Factors Evaluated by DU (01/27/2015) . . . . . . . . . . . . . . . . . . 316B3-2-03, DU Documentation Requirements (06/26/2012) . . . . . . . . . . . . . . . 321B3-2-04, Approve/Eligible Recommendations (01/27/2015) . . . . . . . . . . . . . 323B3-2-05, Approve/Ineligible Recommendations (01/27/2015) . . . . . . . . . . . . 324B3-2-06, Refer with Caution (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . 325B3-2-07, Out of Scope Recommendations (04/01/2009) . . . . . . . . . . . . . . . . . 327B3-2-08, Erroneous Credit Report Data (01/27/2015) . . . . . . . . . . . . . . . . . . 327B3-2-09, Accuracy of DU Data, DU Tolerances, and Errors in the CreditReport (08/21/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329B3-2-10, DU Underwriting Findings Report (01/27/2015) . . . . . . . . . . . . . . . 333

B3-3, Income Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335B3-3.1, Employment and Other Sources of Income . . . . . . . . . . . . . . . . . . . . 336

B3-3.1-01, General Income Information (08/20/2013) . . . . . . . . . . . . . . 336B3-3.1-02, Standards for Employment Documentation (05/28/2013) . . . 342B3-3.1-03, Base Pay (Salary or Hourly), Bonus, and Overtime Income(05/15/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345B3-3.1-04, Commission Income (05/15/2012) . . . . . . . . . . . . . . . . . . . . 347B3-3.1-05, Secondary Employment Income (Second Job and MultipleJobs) and Seasonal Income (05/27/2014) . . . . . . . . . . . . . . . . . . . . . . . . 349B3-3.1-06, Requirements and Uses of IRS Form 4506-T (01/27/2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351B3-3.1-07, Verbal Verification of Employment (08/20/2013) . . . . . . . . . 353B3-3.1-08, Rental Income (11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . . . 357B3-3.1-09, Other Sources of Income (01/27/2015) . . . . . . . . . . . . . . . . . 366

B3-3.2, Self-Employment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/16/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386B3-3.2-02, Business Structures (12/16/2014) . . . . . . . . . . . . . . . . . . . . . 390B3-3.2-03, IRS Forms Quick Reference (09/30/2014) . . . . . . . . . . . . . . 395B3-3.2.1, Documentation Requirements for an Individual . . . . . . . . . . . 398B3-3.2.2, Documentation Requirements for a Business . . . . . . . . . . . . . 410

B3-3.3, DU Requirements for Income Assessment . . . . . . . . . . . . . . . . . . . . . 417B3-3.3-01, Income and Employment Documentation for DU(05/28/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417B3-3.3-02, Income From Rental Property in DU (01/27/2015) . . . . . . . . 423

B3-4, Asset Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427B3-4.1, General Asset Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428

B3-4.1-01, Minimum Reserve Requirements (09/24/2013) . . . . . . . . . . . 428B3-4.1-02, Interested Party Contributions (IPCs) (06/24/2014) . . . . . . . 433

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B3-4.1-03, Types of Interested Party Contributions (IPCs) (06/30/2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437

B3-4.2, Verification of Depository Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441B3-4.2-01, Verification of Deposits and Assets (09/30/2014) . . . . . . . . . 441B3-4.2-02, Depository Accounts (05/27/2014) . . . . . . . . . . . . . . . . . . . . 443B3-4.2-03, Individual Development Accounts (12/01/2010) . . . . . . . . . . 447B3-4.2-04, Pooled Savings (Community Savings Funds) (04/01/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449B3-4.2-05, Verification of Assets for Non-U.S. Citizen Borrowers(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450

B3-4.3, Verification of Non-Depository Assets . . . . . . . . . . . . . . . . . . . . . . . . 451B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds(10/30/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451B3-4.3-02, Trust Accounts (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . 452B3-4.3-03, Retirement Accounts (11/13/2012) . . . . . . . . . . . . . . . . . . . . 453B3-4.3-04, Personal Gifts (09/24/2013) . . . . . . . . . . . . . . . . . . . . . . . . . 454B3-4.3-05, Gifts of Equity (11/13/2012) . . . . . . . . . . . . . . . . . . . . . . . . . 457B3-4.3-06, Donations From Entities (06/24/2014) . . . . . . . . . . . . . . . . . 458B3-4.3-07, Disaster Relief Grants or Loans (04/01/2009) . . . . . . . . . . . . 460B3-4.3-08, Employer Assistance (09/24/2013) . . . . . . . . . . . . . . . . . . . . 461B3-4.3-09, Earnest Money Deposit (08/21/2012) . . . . . . . . . . . . . . . . . . 463B3-4.3-10, Anticipated Sales Proceeds (05/27/2014) . . . . . . . . . . . . . . . 465B3-4.3-11, Trade Equity (12/01/2010) . . . . . . . . . . . . . . . . . . . . . . . . . . 466B3-4.3-12, Rent Credit for Option to Purchase (04/01/2009) . . . . . . . . . 468B3-4.3-13, Sweat Equity (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . 469B3-4.3-14, Bridge/Swing Loans (04/01/2009) . . . . . . . . . . . . . . . . . . . . 469B3-4.3-15, Borrowed Funds Secured by an Asset (10/30/2009) . . . . . . . 470B3-4.3-16, Credit Card Financing (10/30/2009) . . . . . . . . . . . . . . . . . . . 471B3-4.3-17, Personal Unsecured Loans (09/20/2010) . . . . . . . . . . . . . . . . 472B3-4.3-18, Sale of Personal Assets (04/01/2009) . . . . . . . . . . . . . . . . . . 473B3-4.3-19, Cash Value of Life Insurance (05/27/2014) . . . . . . . . . . . . . . 474B3-4.3-20, Anticipated Savings and Cash-on-Hand (04/01/2009) . . . . . . 475

B3-4.4, DU Requirements for Asset Assessment . . . . . . . . . . . . . . . . . . . . . . 476B3-4.4-01, Asset Verification (06/24/2014) . . . . . . . . . . . . . . . . . . . . . . . 476B3-4.4-02, Documentation Requirements (09/24/2013) . . . . . . . . . . . . . 479

B3-5, Credit Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484B3-5.1, Credit Scores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485

B3-5.1-01, General Requirements for Credit Scores (08/20/2013) . . . . . 485B3-5.1-02, Determining the Representative Credit Score for a MortgageLoan (08/21/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489

B3-5.2, Credit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492

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B3-5.2-01, Requirements for Credit Reports (10/30/2009) . . . . . . . . . . . 492B3-5.2-02, Types of Credit Reports (09/20/2010) . . . . . . . . . . . . . . . . . . 496B3-5.2-03, Accuracy of Credit Information in a Credit Report(08/26/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499

B3-5.3, Traditional Credit History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501B3-5.3-01, Number and Age of Accounts (04/01/2009) . . . . . . . . . . . . . 501B3-5.3-02, Payment History (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . 501B3-5.3-03, Previous Mortgage Payment History (04/01/2009) . . . . . . . . 502B3-5.3-04, Inquiries: Recent Attempts to Obtain New Credit(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504B3-5.3-05, Credit Utilization (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . 504B3-5.3-06, Authorized Users of Credit (10/30/2009) . . . . . . . . . . . . . . . 505B3-5.3-07, Significant Derogatory Credit Events Waiting Periodsand Re-establishing Credit (07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . 507B3-5.3-08, Extenuating Circumstances for Derogatory Credit(12/16/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513B3-5.3-09, DU Credit Report Analysis (01/27/2015) . . . . . . . . . . . . . . . 515

B3-5.4, Nontraditional Credit History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526B3-5.4-01, Nontraditional Mortgage Credit Reports (08/21/2012) . . . . . 526B3-5.4-02, Types of Credit (Tiers I, II, and III) (10/30/2009) . . . . . . . . . 529B3-5.4-03, Verification and Documentation of Alternative Credit(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531

B3-6, Liability Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534B3-6-01, General Information on Liabilities (09/20/2010) . . . . . . . . . . . . . . . 534B3-6-02, Debt-to-Income Ratios (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . 536B3-6-03, Monthly Housing Expense (05/28/2013) . . . . . . . . . . . . . . . . . . . . . 540B3-6-04, Qualifying Payment Requirements (04/15/2014) . . . . . . . . . . . . . . . 542B3-6-05, Monthly Debt Obligations (12/16/2014) . . . . . . . . . . . . . . . . . . . . . 545B3-6-06, Qualifying Impact of Other Real Estate Owned (11/13/2012) . . . . . 551B3-6-07, Debts Paid Off At/Prior to Closing (07/29/2014) . . . . . . . . . . . . . . . 555B3-6-08, DU: Requirements for Liability Assessment (01/27/2015) . . . . . . . . 557

Subpart B4, Underwriting Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560B4-1, Appraisal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561

B4-1.1, General Appraisal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562B4-1.1-01, Definition of Market Value (04/15/2014) . . . . . . . . . . . . . . . 562B4-1.1-02, Lender Responsibilities (04/15/2014) . . . . . . . . . . . . . . . . . . 563B4-1.1-03, Appraiser Selection Criteria (04/15/2014) . . . . . . . . . . . . . . . 567B4-1.1-04, Unacceptable Appraisal Practices (04/15/2014) . . . . . . . . . . 570B4-1.1-05, Disclosure of Information to Appraisers (04/15/2014) . . . . . 572B4-1.1-06, Uniform Appraisal Dataset (UAD) and the UniformCollateral Data Portal (UCDP) (01/27/2015) . . . . . . . . . . . . . . . . . . . . . 574

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B4-1.2, Documentation Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577B4-1.2-01, Appraisal Report Forms and Exhibits (04/15/2014) . . . . . . . 577B4-1.2-02, Appraisal Age and Use Requirements (04/15/2014) . . . . . . . 582B4-1.2-03, Requirements for Postponed Improvements (04/15/2014) . . . 584

B4-1.3, Appraisal Report Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589B4-1.3-01, Review of the Appraisal Report (04/15/2014) . . . . . . . . . . . . 589B4-1.3-02, Subject and Contract Sections of the Appraisal Report(04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590B4-1.3-03, Neighborhood Section of the Appraisal Report (09/30/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593B4-1.3-04, Site Section of the Appraisal Report (04/15/2014) . . . . . . . . 600B4-1.3-05, Improvements Section of the Appraisal Report (12/16/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605B4-1.3-06, Property Condition and Quality of Construction of theImprovements (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612B4-1.3-07, Sales Comparison Approach Section of the Appraisal Report(04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620B4-1.3-08, Comparable Sales (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . 622B4-1.3-09, Adjustments to Comparable Sales (12/16/2014) . . . . . . . . . . 626B4-1.3-10, Cost and Income Approach to Value (04/15/2014) . . . . . . . . 630B4-1.3-11, Valuation Analysis and Reconciliation (04/15/2014) . . . . . . . 631B4-1.3-12, Quality Assurance (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . 633

B4-1.4, Special Appraisal Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636B4-1.4-01, Factory-Built Housing: Manufactured Housing (04/15/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636B4-1.4-02, Factory-Built Housing: Modular, Prefabricated, Panelized,or Sectional Housing (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642B4-1.4-03, Condo Appraisal Requirements (04/15/2014) . . . . . . . . . . . . 643B4-1.4-04, Co-op Appraisal Requirements (04/15/2014) . . . . . . . . . . . . 644B4-1.4-05, Leasehold Interests Appraisal Requirements (04/15/2014) . . 648B4-1.4-06, Community Land Trust Appraisal Requirements(04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650B4-1.4-07, Mixed-Use Property Appraisal Requirements (04/15/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653B4-1.4-08, Environmental Hazards Appraisal Requirements(04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654B4-1.4-09, Special Assessment or Community Facilities DistrictsAppraisal Requirements (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . 657

B4-2, Project Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660B4-2.1, General Project Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661

B4-2.1-01, General Information on Project Standards (11/10/2014) . . . . 661

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B4-2.1-02, Ineligible Projects (11/10/2014) . . . . . . . . . . . . . . . . . . . . . . 670B4-2.2, Project Eligibility and Environmental Hazards . . . . . . . . . . . . . . . . . 685

B4-2.2-01, Limited Review Process (11/10/2014) . . . . . . . . . . . . . . . . . . 685B4-2.2-02, Full Review Process (11/10/2014) . . . . . . . . . . . . . . . . . . . . . 687B4-2.2-03, Full Review: Additional Eligibility Requirements forAttached Units in New and Newly Converted Condo Projects(11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695B4-2.2-04, Geographic-Specific Condo Project Considerations(01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701B4-2.2-05, FHA-Approved Condo Review Eligibility (11/10/2014) . . . . 703B4-2.2-06, Project Eligibility Review Service (PERS) (11/10/2014) . . . . 705B4-2.2-07, Additional Requirements for Review of Condo, Co-op, andPUD Projects Comprised of Manufactured Homes (11/10/2014) . . . . . . 711B4-2.2-08, Projects with Special Considerations and Project EligibilityWaivers (11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713B4-2.2-09, Environmental Hazard Assessments (04/01/2009) . . . . . . . . 714B4-2.2-10, Unacceptable Environmental Conditions (04/01/2009) . . . . . 717B4-2.2-11, Remedial Actions for Environmental Assessments BelowStandards (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720

B4-2.3, PUD and Co-op Eligibility Requirements . . . . . . . . . . . . . . . . . . . . . 721B4-2.3-01, Eligibility Requirements for Units in PUD Projects(11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 721B4-2.3-02, Co-op Project Eligibility (11/10/2014) . . . . . . . . . . . . . . . . . 723B4-2.3-03, Legal Requirements for Co-op Projects (04/01/2009) . . . . . . 729B4-2.3-04, Loan Eligibility for Co-op Share Loans (08/20/2013) . . . . . . 734B4-2.3-05, Other Requirements for Co-op Share Loans (04/15/2014) . . 738

Subpart B5, Unique Eligibility and Underwriting Considerations . . . . . . . . . . . . . . . . . 744B5-1, High-Balance Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745

B5-1-01, High-Balance Mortgage Loan Eligibility and Underwriting(01/17/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745B5-1-02, High-Balance Pricing, Mortgage Insurance, Special Feature Codes,and Delivery Limitations (06/26/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 748

B5-2, Manufactured Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750B5-2-01, Manufactured Housing (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . . 750B5-2-02, Manufactured Housing Loan Eligibility (04/15/2014) . . . . . . . . . . . 752B5-2-03, Manufactured Housing Underwriting Requirements (07/26/2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754B5-2-04, Manufactured Housing Pricing, Mortgage Insurance, and SpecialFeature Code Requirements (12/30/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 760B5-2-05, Manufactured Housing Legal Considerations (07/30/2013) . . . . . . . 761

B5-3, Construction and Energy Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 769

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B5-3.1, Conversion of Construction-to-Permanent Financing . . . . . . . . . . . . . 770B5-3.1-01, Conversion of Construction-to-Permanent Financing:Overview (01/31/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770B5-3.1-02, Conversion of Construction-to-Permanent Financing:Single-Closing Transactions (09/24/2013) . . . . . . . . . . . . . . . . . . . . . . . . 771B5-3.1-03, Conversion of Construction-to-Permanent Financing: Two-Closing Transactions (08/20/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776

B5-3.2, HomeStyle Renovation Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . 778B5-3.2-01, HomeStyle Renovation Mortgage: Lender Eligibility(12/01/2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 778B5-3.2-02, HomeStyle Renovation Mortgages: Borrower Eligibility(08/20/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780B5-3.2-03, HomeStyle Renovation Mortgages: Underwriting andCollateral Considerations (03/31/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . 783B5-3.2-04, HomeStyle Renovation Mortgages: Costs and EscrowAccounts (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786B5-3.2-05, HomeStyle Renovation Mortgages: Completion(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788B5-3.2-06, HomeStyle Construction Contract, Construction LoanAgreement, and Lien Waiver (12/30/2009) . . . . . . . . . . . . . . . . . . . . . . . 789

B5-3.3, Mortgage Loans with Energy Improvement Features on ExistingProperties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793

B5-3.3-01, Mortgage Loans with Energy Improvement Features onExisting Properties (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793

B5-3.4, Property Assessed Clean Energy Loans . . . . . . . . . . . . . . . . . . . . . . . 798B5-3.4-01, Property Assessed Clean Energy Loans (12/01/2010) . . . . . . 798

B5-4, Property-Specific Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801B5-4-01, Native American Conventional Lending Initiative (NACLI)(06/26/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801B5-4-02, Disaster-Related Limited Cash-Out Refinance Flexibilities(06/26/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803B5-4-03, Loans Secured by HomePath Properties (07/29/2014) . . . . . . . . . . . 806B5-4.1, General Requirements of Texas Section 50(a)(6) Mortgages(03/292010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809

B5-4.1-01, Texas Section 50(a)(6) Mortgages (03/29/2010) . . . . . . . . . . 809B5-4.1-02, Texas Section 50(a)(6) Mortgage Eligibility (04/15/2014) . . 812B5-4.1-03, Texas Section 50(a)(6) Underwriting and CollateralConsiderations (03/29/2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815B5-4.1-04, Texas Section 50(a)(6) Mortgage Delivery Considerations(03/29/2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 817

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B5-4.1-05, Texas Section 50(a)(6) Mortgage Legal Considerations(09/30/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819

B5-5, Community Seconds, Community Land Trusts, DU Refi Plus and RefiPlus, and Loans with Resale Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821

B5-5.1, Community Seconds and Community Land Trusts . . . . . . . . . . . . . . 822B5-5.1-01, Community Seconds Mortgages (04/09/2013) . . . . . . . . . . . 822B5-5.1-02, Community Seconds Loan Eligibility (08/26/2014) . . . . . . . 823B5-5.1-03, Community Seconds Delivery Considerations (04/09/2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831B5-5.1-04, Community Land Trusts (08/26/2014) . . . . . . . . . . . . . . . . . 832

B5-5.2, DU Refi Plus and Refi Plus Mortgage Loans . . . . . . . . . . . . . . . . . . . 838B5-5.2-01, DU Refi Plus and Refi Plus Eligibility (01/27/2015) . . . . . . . 838B5-5.2-02, DU Refi Plus and Refi Plus Underwriting Considerations(01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 856B5-5.2-03, DU Refi Plus and Refi Plus Property Valuation and ProjectStandards (09/24/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875B5-5.2-04, DU Refi Plus and Refi Plus Closing, Pricing, and Delivery(05/28/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881

B5-5.3, Loans with Resale Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885B5-5.3-01, Loans With Resale Restrictions: Lender Eligibility(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885B5-5.3-02, Loans with Resale Restrictions: Loan and BorrowerEligibility (08/26/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 887B5-5.3-03, Loans with Resale Restrictions: Underwriting and CollateralConsiderations (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889B5-5.3-04, Loans with Resale Restrictions: Legal Considerations(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891B5-5.3-05, Loans with Resale Restrictions: Delivery Considerations(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892B5-5.3-06, Loans with Resale Restrictions: Pricing, Mortgage Insuranceand Special Feature Codes (06/26/2012) . . . . . . . . . . . . . . . . . . . . . . . . . 893B5-5.3-07, Massachusetts Resale Restriction Loan EligibilityRequirements (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 895

B5-6, MyCommunityMortgage (MCM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 897B5-6-01, MyCommunityMortgage (08/21/2012) . . . . . . . . . . . . . . . . . . . . . . 897B5-6-02, MyCommunityMortgage Loan and Borrower Eligibility(01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 899B5-6-03, MyCommunityMortgage Underwriting Methods and Requirements(01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 905

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B5-6-04, MyCommunityMortgage: Additional Eligibility and UnderwritingRequirements for Community Solutions and Community HomeChoice(11/13/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911B5-6-05, MyCommunityMortgage Pricing, Mortgage Insurance, and SpecialFeature Codes (09/24/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 917

Subpart B6, Government Programs Eligibility and Underwriting Requirements . . . . . . 919B6-1, Government Insured and Guaranteed Mortgages . . . . . . . . . . . . . . . . . . . . . 920

B6-1-01, General Government Mortgage Loan Requirements (09/30/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 921B6-1-02, Eligible FHA-Insured Mortgage Loans (07/29/2014) . . . . . . . . . . . 924B6-1-03, Eligible VA-Guaranteed Mortgages (08/20/2013) . . . . . . . . . . . . . . 926B6-1-04, Eligible HUD-Guaranteed Section 184 Mortgages (06/26/2012) . . . 927B6-1-05, Eligible RD-Guaranteed Mortgages (06/26/2012) . . . . . . . . . . . . . . 929B6-1-06, Government Mortgage Loan Guaranty or Insurance (04/01/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 930

Subpart B7, Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 931B7-1, Mortgage Insurance/Loan Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 932

B7-1-01, Provision of Mortgage Insurance (07/29/2014) . . . . . . . . . . . . . . . . 933B7-1-02, Mortgage Insurance Coverage Requirements (01/27/2015) . . . . . . . 937B7-1-03, Lender-Purchased Mortgage Insurance (05/27/2010) . . . . . . . . . . . . 939B7-1-04, Financed Borrower-Purchased Mortgage Insurance (11/10/2014) . . 941B7-1-05, Government Mortgage Loan Guaranty or Insurance (04/09/2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944

B7-2, Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 948B7-2-01, Provision of Title Insurance (04/01/2009) . . . . . . . . . . . . . . . . . . . . 948B7-2-02, Title Insurer Requirements (09/24/2013) . . . . . . . . . . . . . . . . . . . . . 949B7-2-03, General Title Insurance Coverage (01/27/2015) . . . . . . . . . . . . . . . . 951B7-2-04, Special Title Insurance Coverage Considerations (08/20/2013) . . . . 953B7-2-05, Title Exceptions and Impediments (04/09/2013) . . . . . . . . . . . . . . . 957

B7-3, Property and Flood Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 961B7-3-01, Property Insurance Requirements for Insurers (07/29/2014) . . . . . . 962B7-3-02, General Property Insurance Coverage (12/16/2014) . . . . . . . . . . . . 965B7-3-03, Determining the Amount of Required Property Insurance Coverage(07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 967B7-3-04, Property Insurance Coverage for Units in Project Developments(07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 969B7-3-05, Additional Insurance Coverage (07/29/2014) . . . . . . . . . . . . . . . . . . 974B7-3-06, Evidence of Property Insurance (07/29/2014) . . . . . . . . . . . . . . . . . 977B7-3-07, Flood Insurance Coverage Requirements (12/16/2014) . . . . . . . . . . 980B7-3-08, Mortgagee Clause for Property and Flood Insurance (07/29/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 987

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B7-4, Additional Project Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989B7-4-01, Liability Insurance (11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . 989B7-4-02, Fidelity/Crime Insurance (11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . 990

Subpart B8, Closing: Legal Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993B8-1, General Information on Legal Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 994

B8-1-01, Publication of Legal Documents (06/28/2011) . . . . . . . . . . . . . . . . . 994B8-2, Security Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997

B8-2-01, Security Instruments for Conventional Mortgages (04/30/2010) . . . 997B8-2-02, Special-Purpose Security Instruments (04/30/2010) . . . . . . . . . . . . 1000B8-2-03, Signature Requirements for Security Instruments (10/22/2013) . . . 1004

B8-3, Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1006B8-3-01, Notes for Conventional Mortgages (08/20/2013) . . . . . . . . . . . . . . 1006B8-3-02, Special Note Provisions and Language Requirements (08/20/2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1008B8-3-03, Signature Requirements for Notes (10/22/2013) . . . . . . . . . . . . . . 1009B8-3-04, Note Endorsement (12/20/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1011

B8-4, Riders and Addenda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1014B8-4-01, Riders and Addenda (05/27/2010) . . . . . . . . . . . . . . . . . . . . . . . . . 1014

B8-5, Special-Purpose Legal Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018B8-5-01, General Information on Special-Purpose Legal Documents(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1018B8-5-02, Inter Vivos Revocable Trust Mortgage Documentation andSignature Requirements (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1019B8-5-03, Texas Section 50(a)(6) Mortgage Documentation (03/29/2010) . . . 1022B8-5-04, HomeStyle Mortgage Documentation Requirements (12/30/2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1024B8-5-05, Sample Legal Documents (01/27/2011) . . . . . . . . . . . . . . . . . . . . . 1025B8-5-06, Requirements for Use of a Power of Attorney (05/27/2014) . . . . . 1027

B8-6, Mortgage Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1031B8-6-01, General Information (04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . 1031B8-6-02, Mortgage Assignment to Fannie Mae (04/09/2013) . . . . . . . . . . . . 1032B8-6-03, Authorized Use of Intervening and Blanket Assignments(04/01/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1034

B8-7, Mortgage Electronic Registration System (MERS) . . . . . . . . . . . . . . . . . . . 1037B8-7-01, Mortgage Electronic Registration Systems (MERS) (04/15/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1037

Part C, Selling, Securitizing, and Delivering Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042Subpart C1, General Information on Execution Options and Loan Delivery . . . . . . . . 1044

C1-1, Execution Options Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1045C1-1-01, Execution Options (11/13/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1045

C1-2, Loan Delivery Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1051

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C1-2-01, General Information on Delivering Loan Data and Documents(10/30/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1051C1-2-02, Loan Data and Documentation Delivery Requirements(06/26/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1053C1-2-03, Ownership of Mortgage Loans Prior to Purchase or Securitizationand Third-Party Security Interests (11/13/2012) . . . . . . . . . . . . . . . . . . . . . . 1056C1-2-04, Bailee Letters (06/26/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1059

C1-3, Loan Remittance Types Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1064C1-3-01, General Information on Remittance Types (08/26/2014) . . . . . . . . 1064

Subpart C2, Whole Loan Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1067C2-1, Mandatory and Best Efforts Commitments to Sell Whole Loans . . . . . . . . 1068

C2-1.1, Mandatory Commitments to Sell Whole Loans . . . . . . . . . . . . . . . . 1069C2-1.1-01, Mandatory Commitment Process (10/30/2009) . . . . . . . . . . 1069C2-1.1-02, Pricing, Fees, and Pricing Adjustments (04/01/2009) . . . . . 1070C2-1.1-03, Mandatory Commitment Terms, Amounts, Periods andOther Requirements (08/26/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073C2-1.1-04, Mandatory Commitment Extensions and Pair-Offs(10/25/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1076C2-1.1-05, Servicing Fees (10/25/2011) . . . . . . . . . . . . . . . . . . . . . . . . 1078C2-1.1-06, Accrued Interest Payments for Regularly AmortizingMortgages (06/28/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1079C2-1.1-07, Standard ARM and Converted ARM Resale Commitments(04/09/2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1080

C2-1.2, Best Efforts Commitments to Sell Whole Loans . . . . . . . . . . . . . . . 1083C2-1.2-01, Best Efforts Commitment Process (10/25/2011) . . . . . . . . . 1083C2-1.2-02, Best Efforts Commitment Pricing, Periods, and Fees(10/25/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1084C2-1.2-03, Best Efforts Commitment Terms, Amounts, and OtherRequirements (01/27/2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1086C2-1.2-04, Servicing Execution Tool in eCommitONE (12/16/2014) . . 1089

C2-2, Whole Loan Deliveries to and Purchasing by Fannie Mae . . . . . . . . . . . . . 1092C2-2-01, General Requirements for Good Delivery of Whole Loans(08/26/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1093C2-2-02, Documentation Requirements for Whole Loan Deliveries(10/25/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1096C2-2-03, General Information on Whole Loan Purchasing Policies(11/13/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1098C2-2-04, Timing of Distribution of Whole Loan Purchase Proceeds(06/28/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1100C2-2-05, Whole Loan Purchasing Process (11/13/2012) . . . . . . . . . . . . . . . . 1101C2-2-06, Authorization to Transfer Funds (09/24/2013) . . . . . . . . . . . . . . . . 1104

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C2-2-07, Purchase Payee Codes (07/30/2013) . . . . . . . . . . . . . . . . . . . . . . . 1106C2-2-08, Triparty Wiring Instructions (04/01/2009) . . . . . . . . . . . . . . . . . . . 1108

Subpart C3, Mortgage-Backed Securities (MBS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1111C3-1, MBS Program Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1112

C3-1-01, General Information About Fannie Maes MBS Program(06/26/2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1113C3-1-02, Preparing to Pool Loans into MBS (10/30/2009) . . . . . . . . . . . . . . 1117

C3-2, Entering Into an MBS Pool Purchase Contract . . . . . . . . . . . . . . . . . . . . . 1119C3-2-01, Determining Eligibility for Loans Pooled into MBS (08/26/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1119C3-2-02, Establishing the Contract Amount (12/30/2009) . . . . . . . . . . . . . . 1123C3-2-03, Selecting a Servicing Option (04/01/2009) . . . . . . . . . . . . . . . . . . 1124C3-2-04, MBS Remittance Type and Selecting a Remittance Cycle(10/25/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1125C3-2-05, Obtaining a Pool Purchase Contract (08/26/2014) . . . . . . . . . . . . . 1126

C3-3, MBS Guaranty Fees and Guaranty Fee Buyups and Buydowns . . . . . . . . . 1130C3-3-01, Determining and Remitting Guaranty Fees (10/25/2011) . . . . . . . . 1130C3-3-02, Accessing Buyup and Buydown Ratios and Calculating Paymentsor Charges (07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1132C3-3-03, Buying Up and Buying Down the Guaranty Fee for MBS(07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1135

C3-4, Pooling Loans into Fixed-Rate MBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1137C3-4-01, Term-Related Fixed-Rate Mortgage Pooling Parameters(08/26/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1137C3-4-02, Commingling Fixed-Rate Mortgages in MBS (08/26/2014) . . . . . 1140

C3-5, Pooling Loans into ARM MBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1142C3-5-01, Creating Stated-Structure ARM MBS (08/26/2014) . . . . . . . . . . . 1143C3-5-02, Stated-Structure ARM MBS Pooling Process (04/01/2009) . . . . . . 1145C3-5-03, Creating Weighted-Average ARM MBS (08/26/2014) . . . . . . . . . . 1150C3-5-04, Calculating the Weighted-Average Pool Accrual Rates for ARMFlex Pools Using a Fixed MBS Margin (04/01/2009) . . . . . . . . . . . . . . . . . . 1152C3-5-05, Calculating the Weighted-Average Pool Accrual Rates for ARMFlex Pools Using a Weighted-Average MBS Margin (04/01/2009) . . . . . . . . 1155C3-5-06, Pooling ARMs with a Conversion Option (07/29/2014) . . . . . . . . 1158C3-5-07, Uniform Hybrid ARM MBS (04/01/2009) . . . . . . . . . . . . . . . . . . . 1160C3-5-08, Commingling ARMs in MBS (04/01/2009) . . . . . . . . . . . . . . . . . . 1162

C3-6, Pooling Loans into Fannie Majors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1163C3-6-01, Parameters for Pooling Loans Into Fannie Majors (06/26/2012) . . 1163

C3-7, Delivering and Trading MBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1167C3-7-01, Establishing an MBS Trading Account (04/15/2014) . . . . . . . . . . . 1168C3-7-02, Initiating an MBS Sale (10/25/2011) . . . . . . . . . . . . . . . . . . . . . . . 1176

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C3-7-03, Making Good Delivery (10/30/2009) . . . . . . . . . . . . . . . . . . . . . . . 1178C3-7-04, Delivering Data and Documents (08/26/2014) . . . . . . . . . . . . . . . . 1182C3-7-05, Confirming Presettlement Information (04/01/2009) . . . . . . . . . . . 1187C3-7-06, Settling the Trade (03/31/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1189C3-7-07, Sale of Fannie Mae Securities to Third Parties (04/01/2009) . . . . . 1193

Part D, Ensuring Quality Control (QC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1197Subpart D1, Lender QC Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1198

D1-1, Lender Quality Control Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1199D1-1-01, Lender Quality Control Programs, Plans, and Processes(07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1200D1-1-02, Lender Quality Control Staffing and Outsourcing of the QualityControl Process (07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1205

D1-2, Lender Prefunding QC Mortgage Review . . . . . . . . . . . . . . . . . . . . . . . . . . 1208D1-2-01, Lender Prefunding Quality Control Review Process (07/29/2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1208

D1-3, Lender Post-Closing QC Mortgage Review . . . . . . . . . . . . . . . . . . . . . . . . 1213D1-3-01, Lender Post-Closing Quality Control Review Process (07/30/2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1214D1-3-02, Lender Post-Closing Quality Control Review of ApprovalConditions, Underwriting Decisions, and Documentation (07/29/2014) . . . . 1218D1-3-03, Lender Post-Closing Quality Control Review of Data Integrity(07/30/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1222D1-3-04, Lender Post-Closing Quality Control Review of Appraisers andAppraisals (07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1225D1-3-05, Lender Post-Closing Quality Control Review of ClosingDocuments (07/30/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1227D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention,and Audit (07/29/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1229

Subpart D2, Fannie Mae QC Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1232D2-1, General Information on Fannie Mae QC Process . . . . . . . . . . . . . . . . . . . . 1233

D2-1-01, General Information on Fannie Mae QC Reviews (06/24/2014) . . 1233D2-1-02, Fannie Mae QC File Request and Submission Requirements(11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1234D2-1-03, Fannie Mae QC Report of Findings and Lender Rebuttal(06/24/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1236

Part E, Quick Reference Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1239E-1, Selling Guide Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1240

E-1-01, References to Fannie Mae's Website (12/16/2014) . . . . . . . . . . . . . . . . . . 1240E-1-02, Acronyms and Abbreviations (11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . 1245E-1-03, List of Contacts (11/10/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1248E-1-04, List of Lender Contracts (04/15/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1254

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E-2, Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1256E-2-01, Borrowers Authorization for Counseling (04/01/2009) . . . . . . . . . . . . . . 1256E-2-02, Required Custodial Documents (10/22/2013) . . . . . . . . . . . . . . . . . . . . . 1257E-2-03, Suggested Format for Phase I Environmental Hazard Assessments(06/28/2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1260E-2-04, Master Agreement Terms and Conditions (01/27/2015) . . . . . . . . . . . . . . 1269E-2-05, Revocable Trust Rider (Sample Language) (01/17/2013) . . . . . . . . . . . . 1275E-2-06, Signature Requirements for Mortgages to Inter Vivos Revocable Trusts(01/17/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1277E-2-07, eCommitONE/Servicing Execution Tool Mortgage Loan ServicingPurchase and Sale Agreement (12/16/2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1279

E-3, Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1298E-3-01, Glossary of Fannie Mae Terms: A (11/10/2014) . . . . . . . . . . . . . . . . . . . 1299E-3-02, Glossary of Fannie Mae Terms: B (07/29/2014) . . . . . . . . . . . . . . . . . . . 1302E-3-03, Glossary of Fannie Mae Terms: C (11/10/2014) . . . . . . . . . . . . . . . . . . . 1305E-3-04, Glossary of Fannie Mae Terms: D (01/27/2015) . . . . . . . . . . . . . . . . . . . 1312E-3-05, Glossary of Fannie Mae Terms: E (01/27/2015) . . . . . . . . . . . . . . . . . . . 1315E-3-06, Glossary of Fannie Mae Terms: F (11/10/2014) . . . . . . . . . . . . . . . . . . . . 1317E-3-07, Glossary of Fannie Mae Terms: G (11/10/2014) . . . . . . . . . . . . . . . . . . . 1322E-3-08, Glossary of Fannie Mae Terms: H (11/10/2014) . . . . . . . . . . . . . . . . . . . 1324E-3-09, Glossary of Fannie Mae Terms: I (08/20/2013) . . . . . . . . . . . . . . . . . . . . 1325E-3-10, Glossary of Fannie Mae Terms: J (04/01/2009) . . . . . . . . . . . . . . . . . . . . 1329E-3-11, Glossary of Fannie Mae Terms: K (10/02/2012) . . . . . . . . . . . . . . . . . . . 1329E-3-12, Glossary of Fannie Mae Terms: L (08/26/2014) . . . . . . . . . . . . . . . . . . . 1329E-3-13, Glossary of Fannie Mae Terms: M (11/10/2014) . . . . . . . . . . . . . . . . . . . 1332E-3-14, Glossary of Fannie Mae Terms: N (11/10/2014) . . . . . . . . . . . . . . . . . . . 1340E-3-15, Glossary of Fannie Mae Terms: O (11/10/2014) . . . . . . . . . . . . . . . . . . . 1341E-3-16, Glossary of Fannie Mae Terms: P (11/10/2014) . . . . . . . . . . . . . . . . . . . . 1342E-3-17, Glossary of Fannie Mae Terms: Q (04/01/2009) . . . . . . . . . . . . . . . . . . . 1347E-3-18, Glossary of Fannie Mae Terms: R (11/10/2014) . . . . . . . . . . . . . . . . . . . 1347E-3-19, Glossary of Fannie Mae Terms: S (12/16/2014) . . . . . . . . . . . . . . . . . . . 1351E-3-20, Glossary of Fannie Mae Terms: T (11/10/2014) . . . . . . . . . . . . . . . . . . . 1356E-3-21, Glossary of Fannie Mae Terms: U (07/30/2013) . . . . . . . . . . . . . . . . . . . 1358E-3-22, Glossary of Fannie Mae Terms: V (04/01/2009) . . . . . . . . . . . . . . . . . . . 1359E-3-23, Glossary of Fannie Mae Terms: W (11/10/2014) . . . . . . . . . . . . . . . . . . . 1359E-3-24, Glossary of Fannie Mae Terms: X (04/01/2009) . . . . . . . . . . . . . . . . . . . 1360E-3-25, Glossary of Fannie Mae Terms: Y (04/01/2009) . . . . . . . . . . . . . . . . . . . 1360E-3-26, Glossary of Fannie Mae Terms: Z (04/01/2009) . . . . . . . . . . . . . . . . . . . 1361

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PrefaceContent Organization

The Selling Guide is organized into parts that reflect how lenders generally categorize variousaspects of their business relationship with Fannie Mae:

Part A, Doing Business with Fannie Mae Subpart 1: Approval Qualification Subpart 2: Lender Contract Subpart 3: Getting Started With Fannie Mae Subpart 4: Maintaining Lender Eligibility

Part B, Originating through Closing Subpart 1: Loan Application Package Subpart 2: Eligibility Subpart 3: Underwriting Borrowers Subpart 4: Underwriting Property Subpart 5: Unique Eligibility and Underwriting Considerations Subpart 6: Government Programs Eligibility and Underwriting Requirements Subpart 7: Insurance Subpart 8: Closing: Legal Documents

Part C, Selling, Securitizing, and Delivering Loans Subpart 1: General Information on Execution Options and Loan Delivery Subpart 2: Whole Loan Transactions Subpart 3: Mortgage-Backed Securities (MBS)

Part D, Ensuring Quality Control (QC) Subpart 1: Lender QC Process Subpart 2: Fannie Mae QC Process

Part E, Quick Reference Materials Chapter 1: Selling Guide Resources Chapter 2: Exhibits

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Chapter 3: Glossary

Part A through Part D are structured hierarchicallyby subpart, chapter, section, and topicto present Fannie Mae requirements with increasing levels of detail, so that readers canquickly locate a subject of interest and find desired content. Part E includes a variety of supportcomponentsincluding Selling Guide Resources, Exhibits, and Glossary.

The Table of Contents provides additional details on the content. To learn more about the contentincluded in a particular part and how content in that part is organized, see the Introductionprovided at the beginning of the part.

Use of the Numbering System to Identify Levels of Content

The numbering system used to identify the levels of detail of the content contained within thisSelling Guide can help the reader to navigate the Guide more easily and to recognize where aparticular topic is contained within the content hierarchy.

Consider the numbering system identifier for the topic Requirements for Credit Reports:

B3-5.2-01 Requirements for Credit Reports

Based on the following,

Part has a corresponding Letter (uppercase beginning with A)Subpart has a corresponding Numeral (one-digit beginning with 1)Chapter has a corresponding Numeral (one-digit beginning with 1)Section has a corresponding Numeral (one-digit beginning with 1)

Topic has a corresponding Numeral (two-digit beginning with 01)

the reader can use the numbering system identifier (B3-5.2-01) to map the location and level ofcontent detail of this topic within the Selling Guide.

For example, here is how the numbering system identifier for topic B35.201 maps to thecontent levels:

Part BSubpart 3Chapter 5Section 2Topic 01

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As shown above, the part and subpart are combined as B3-. The chapter and section arecombined as 5.2- and the topic is added as 01.

Keep in mind that not all parts have subparts and not all chapters have sections. For example, thetopic Master Agreement Overview has the numbering system identifier A2-4-01 (which doesnot include a section):

Part ASubpart 2Chapter 4Topic 01

Note: As topics are added, updated and deleted with each publication of the SellingGuide, the chapters, sections and topic identifiers will change accordingly.

Use of Icons to Identify Types of Content

The online and PDF versions of this Selling Guide use various icons to help the reader quicklyidentify the type of content:

Icon DescriptionOverview topics provide the logic behind the arrangement of a part, subpart, orchapter.

Policy topics present what must or must not be done (for example, laws and rules).

Process and Procedure topics present actions that must be followed over time or thatmust be performed in a particular instance.

Supporting Information topics present concepts, facts, structures, or backgroundinformation that corroborate or expand upon a topic.

Glossary topics present key terms and their definitions.

Acronyms and Abbreviations topic provides a listing of the full terminology that isreferenced throughout the Guide.

Terms and General Conventions

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Lenders may contract to sell mortgages to Fannie Mae using either of the two following deliverymethods. (Fannie Mae acquires title to the mortgages in both types of transactions.)

As whole mortgage loans the lender contracts to sell mortgages to Fannie Mae as wholemortgages (to be retained by Fannie Mae in its portfolio or to be included later in MBS poolsformed by Fannie Mae) and receives cash proceeds in payment of the purchase price for thesemortgages.

As MBS mortgage loans the lender contracts to sell mortgages that are conveyed to anMBS trust under the terms of the Fannie Mae MBS program and receives (or its designeereceives) mortgage pass-through certificates representing interests in the mortgages as thepurchase price for the mortgages.

The term delivery is used in this Selling Guide to refer to whole mortgage loans and to MBSpools. In cases where specific requirements apply to one type of transaction, the delivery methodis specified.

Also, for the sake of brevity, the term loan is used to mean mortgage loan unless specifiedotherwise.

The glossary provides definitions of terms used in connection with Fannie Mae requirements inthe Selling Guide.

Amendments to the Guide

Fannie Mae may at any time alter or waive any of the requirements of this Selling Guide, imposeother additional requirements, or rescind or amend any and all material set forth in this SellingGuide. The lender must make sure that its staff is thoroughly familiar with the content andrequirements of this Selling Guide, as it now exists and as it may be changed from time to time.

Notification of Changes and Updates

Fannie Mae notifies lenders of changes and updates to Selling Guide policies and procedures viaannouncements, notices, and lender letters, described below:

Announcements communicate policy changes that impact the Selling Guide and thatare incorporated into the Selling Guide on a monthly cycle. On occasion, a policy changemay require immediate communication with Fannie Mae lenders and so is released off-cycle and incorporated into a future Selling Guide update. Announcements are numbered as:SEL-20XX-XX.

Lender letters present new or modified policies and procedures that are not documented inthe Guide, such as policy changes that are temporary in nature (initiatives or pilots), reminders

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of existing policies, or upcoming Guide updates. Lender letters are numbered as: LL-20XX-XX.

Notices clarify or reiterate existing Selling Guide policies, provide advance notice ofupcoming changes, provide minor updates to procedures, notify lenders of updated formsor documents posted on Fannie Maes website, communicate extended expiration dates orother important information of interest to Fannie Mae or Fannie Mae lenders. While noticesmay refer to requirements in the Selling Guide, they do not revise or otherwise change theserequirements and are not used to communicate new policies. Notices can be identified by thedate published (and are not numbered).

Announcements, lender letters, and notices are incorporated into the Guide by reference, and assuch, are legally binding.

Lender letters and notices are not included in the Guide but continue to be in effect and legallybinding until any sunset date specified in the lender letter or notice or until amended by asubsequent lender letter, notice, or announcement.

Announcements, lender letters, and notices are released to lenders in two ways:

By posting the documents on Fannie Mae's website and the AllRegs website.

By email notification of these postings to lenders that subscribe to Fannie Maes emailsubscription service and select the option Selling News.

Fannie Mae does not mail printed copies of Selling Guide updates, announcements, noticesor lender letters. Lenders that want printed copies may download and print PDF files of thedocuments posted on Fannie Mae's website.

Contents of the Selling Guide

The Selling Guide contains the current policies and procedures and all announcements issued todate have been incorporated.

Forms, Exhibits, and Content Incorporated by Reference

Information about the specific forms that lenders must use in fulfilling the requirementscontained in the Selling Guide is given in context within the Guide. Lenders can access the actualforms in several ways:

On Fannie Mae's website via the Guide Forms page, which provides a complete list of forms.

On the AllRegs website via embedded links in the free electronic version of the Guide (andthrough a searchable database with a full subscription to AllRegs Online).

https://www.fanniemae.com/singlefamily/indexhttps://www.fanniemae.com/singlefamily/indexhttps://www.fanniemae.com/singlefamily/selling-servicing-guide-forms

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Some exhibits that relate to Fannie Mae requirements are only referenced in the Guide and areposted in their entirety on Fannie Mae's website. In addition, from time to time, product-specificguides or directives are issued which are incorporated into this Selling Guide by reference. Suchproduct-specific informationwhether it currently exists or is subsequently createdand theexhibits referenced in the Guide now or later are legally a part of this Selling Guide (and theServicing Guide).

Technical Issues

In the event of technical difficulties or system failures with Fannie Mae's website, with deliveryof the Selling News option of Fannie Maes email subscription service, or with the AllRegswebsite, users may contact the following resources:

For Fannie Mae's website and Fannie Maes email subscription service, use the Contact Uslink on the website to ask questions or obtain more information.

For the AllRegs website, submit an email support request from the website or contact AllRegsCustomer Service at (800) 848-4904.

When Questions Arise

This Selling Guide explains how to become an approved Fannie Mae lender and the proceduresfor normal and routine selling matters. If a lender feels that a situation is not covered or aprocedure may not apply because of certain circumstances, the lenders principal contact shouldbe its lead Fannie Mae regional office. The Guide specifically indicates situations in which alender may need to contact other groups within Fannie Mae, such as the Capital Markets SalesDesk. For contact information on the regional offices and other key contacts, refer to E-1-03, Listof Contacts.

Part A, Doing Business with Fannie Mae January 27, 2015

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Part A, Doing Business with Fannie Mae

Doing Business with Fannie Mae

Introduction

This part describes the requirements a lender must satisfy to become a Fannie Mae-approvedseller and servicer of residential home mortgage loans. This part also includes information on anapproved lenders contractual obligations, procedures for obtaining technology applications, andrequirements for maintaining lender eligibility.

Subpart A1, Approval Qualification

This subpart describes the requirements for becoming an approved Fannie Mae lender and thelender approval process.

Subpart A2, Lender Contract

This subpart describes some of the contractual obligations a lender takes on when it becomesan approved Fannie Mae lender. It includes information on Fannie Maes Charter Act,representations and warranties a lender makes when delivering mortgages to Fannie Mae, thelimited waiver of representations and warranties for mortgages underwritten with DesktopUnderwriter (DU), and the policies and procedures associated with obtaining a MasterAgreement. It articulates some of the circumstances under which the Lender Contract canbe terminated and the consequences of any breach of lender obligations. It lists the types ofmortgage loan reviews conducted by Fannie Mae and describes scenarios that may result inloan repurchase or make whole payment requests. It also describes the parameters within whichFannie Mae may elect its remedies such as imposing compensatory fees or formal sanctions andrequiring loan repurchases or substitutions. This subpart also includes Fannie Maes policies onthe establishment, maintenance, retention, and examination of mortgage files and records, andthe use of Fannie Maes name and trademark.

Subpart A3, Getting Started With Fannie Mae

This subpart describes the requirements a lender must meet in order to transact businesswith Fannie Mae, which includes the procedures for obtaining technology applications and

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completing the compliance certifications. It describes policies on concurrent servicing transfersand working with third parties such as mortgage brokers, loan correspondents, quality controlfirms, document custodians, and subservicers. It addresses Fannie Maes requirements for itslender customers in the areas of data integrity, fraud prevention, and fidelity bond and errors andomissions coverage.

Subpart A4, Maintaining Lender Eligibility

This subpart contains the reporting requirements to which lenders must adhere in order tomaintain their eligibility to transact business with Fannie Mae.

In This Part

This part contains the following subparts:

Subpart A1, Approval Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Subpart A2, Lender Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Subpart A3, Getting Started With Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96Subpart A4, Maintaining Lender Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Part A, Doing Business with Fannie MaeSubpart 1, Approval Qualification

January 27, 2015

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Subpart A1, Approval Qualification

Approval Qualification

Introduction

This subpart contains the requirements for becoming an approved Fannie Mae lender, anoverview of the lender approval process, and a list of loan types that require special lenderapproval.

In This Subpart

This subpart contains the following chapter:

A1-1, Application and Approval of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Part A, Doing Business with Fannie MaeSubpart 1, Approval QualificationChapter 1, Application and Approval of Lender

January 27, 2015

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Chapter A1-1, Application and Approval ofLender

Application and Approval of Lender

Introduction

This chapter includes information on the eligibility and application requirements for lendersseeking Fannie Mae approval. It also describes loan types that require special lender approval.

In This Chapter

This chapter contains the following topics:

A1-1-01, Application and Approval of Lender (04/09/2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A1-1-01, Application and Approval of Lender (04/09/2013)

Introduction

This topic contains general information on Fannie Maes lender approval requirements,including:

General Information

Eligibility

Application Requirements

Application Review Fee

Special Lender Approval and MSSC Addendum

Part A, Doing Business with Fannie MaeSubpart 1, Approval QualificationChapter 1, Application and Approval of Lender

January 27, 2015

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General Information

Lenders must be approved to do business with Fannie Mae. Fannie Mae determines a lendersqualifications by reviewing the lenders financial condition, organization, staffing, servicingexperience, and other relevant factors.

Fannie Maes standard approval is for the sale and/or servicing of single-family loans (excludingthose loans delivered under a negotiated contract). Lenders must obtain special approval to selland service certain mortgages with unique requirements, such as loans secured by co-op sharesor HomeStyle renovation mortgages.

Eligibility

Approval or rejection of a lenders application is at Fannie Maes sole discretion and is based onFannie Maes business judgment with respect to the totality of the lenders circumstances. At aminimum, to be considered for approval to sell and service residential first mortgages, a lendermust:

have as its principal business purpose, the origination, selling, and/or servicing of residentialmortgages;

have demonstrated the ability to originate, sell, and/or service the types of mortgages forwhich approval is being requested;

have adequate facilities and staff experienced in originating, selling, and/or servicing the typesof mortgages for which approval is being requested;

be duly organized, validly existing, properly licensed (in good standing) or otherwiseauthorized to conduct its business in each of the jurisdictions in which it originates, sells, andservices residential mortgages;

have a net worth of at least $2.5 million, plus a dollar amount that represents 0.25% of theunpaid principal balance of any Fannie Mae portfolio it is servicing. A lenders Fannie Maeportfolio includes mortga