If a borrower questions why the servicer did not provide notification of an upcoming opportunity to exercise a conversion to a fixed rate mortgage loan option and the borrower was entitled to such notification under Fannie Mae’s policy, the servicer must immediately offer the borrower the option of converting, provided that the borrower met the eligibility criteria on the option date.
The servicer must verify the correct interest rate for a borrower who questions the servicer’s failure to provide advance notification of an upcoming opportunity to exercise the option to convert to a fixed-rate mortgage loan. To accomplish this, the servicer must calculate the rate that would have been in effect had the borrower been given timely notice of the conversion option and made his or her election within the required time frame.
The interest rate must
- be calculated in accordance with the provisions of the mortgage loan instruments, and
- not exceed the original interest rate by more than the lifetime interest rate cap specified in the mortgage loan instruments.
For more information please see F-1-01, Servicing ARM Loans and C-2.2-02, Assuming Responsibility for Conversion Notice Errors