Servicing Guide

Published September 9, 2020

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A2-3-03: Yield Differential Adjustments (08/16/2017)

When the interest rate of a fixed-rate mortgage loan is greater than Fannie Mae’s required yield, it allows the servicer to retain all or part of this difference. A similar concept applies for ARM loans when the mortgage margin — or net mortgage margin for net yield commitments — exceeds Fannie Mae’s required commitment margin. The exact amount of the difference that the servicer may retain —which is called a yield differential adjustment —is determined by the policy Fannie Mae had in effect when it issued its commitment to purchase the mortgage loan. In addition, ARM loans may have a short-term yield differential until the first interest rate change if the “base interest rate” or “net mortgage rate” exceeds Fannie Mae’s required yield.

The exact amount of yield differential adjustment that the servicer may retain is usually determined by the policy that was in effect when Fannie Mae issued its commitment to purchase the mortgage loan. See F-2-05, Historical Yield Differential Adjustment Provisions for Fannie Mae’s present yield differential adjustment policy and a historical record of the various yield differential adjustment policies that may apply to mortgage loans in the servicer’s portfolio.

Yield differential adjustments may be changed, or eliminated altogether, under the conditions described in the following table.

If Fannie Mae… Then…

sells the mortgage loan or an interest in it

any yield differential adjustment will be eliminated —although Fannie Mae’s pooling of portfolio mortgage loans to form an MBS will not affect the servicer’s yield differential adjustment.

terminates the servicer’s right to service the mortgage loan (either with cause or without cause)

any yield differential adjustment will be eliminated, unless Fannie Mae agrees otherwise in writing.

purchased an ARM loan at a discount

the yield differential adjustment will be eliminated when the first interest rate adjustment occurs. See F-2-05, Historical Yield Differential Adjustment Provisions for an exception to this policy.

purchased an ARM loan at par

the yield differential adjustment may be reduced when the first interest rate change occurs. See F-2-05, Historical Yield Differential Adjustment Provisions for an explanation of how the new yield differential adjustment is determined.

Additionally, if the servicer chooses to terminate its servicing responsibility under the terms of the Lender Contract, any yield differential adjustment will be eliminated, unless Fannie Mae agrees otherwise in writing.

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If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

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