Have Servicing Questions? Ask Poli

AskPoli

Fannie Mae customers! Get answers to your Servicing Guide & policy questions with Fannie Mae's AI-powered search tool.

Launch Ask Poli for Servicers  

Guide Resources

Access forms, announcements, lender letters, notices, and more to stay current on our servicing policies.

View Resources  

D1-4.1-03: Allowable Exceptions Due to State Law Restrictions (“Window-Period” Mortgage Loans) (11/08/2017)

Introduction

This topic contains information on allowable exceptions due to state law restrictions (“window-period” mortgage loans).

The Garn-St. Germain Depository Institutions Act of 1982, which authorized enforcement of due-on-sale (or due-on-transfer) provisions, exempted certain mortgage loans that were already subject to state law restrictions on due-on-sale (or due-on-transfer) enforcement. Mortgage loans originated or assumed between the time the state enacted its restrictions and the date the Garn-St. Germain Depository Institutions Act went into effect are “window-period” mortgage loans. A list of the states having window-period mortgage loans, the term of the exemption, and Fannie Mae’s specific enforcement policy related to a fixed-rate first lien mortgage loan or a second lien mortgage loan secured by a property located in one of these states are shown below:

  • Michigan: Mortgage loan may be assumed at a blended rate, in accordance with state law. Window period runs from January 5, 1977, to October 15, 1982. Restrictions are in effect for the full term of the mortgage loan.

  • New Mexico: Mortgage loan may be assumed with a 2% increase in the existing interest rate, subject to any maximum limitation specified in the state law. Window period runs from March 15, 1979, to October 15, 1982. Restrictions are in effect for the full term of the mortgage loan.

  • Utah: Mortgage loan may be assumed with a 1% increase in the existing interest rate and an additional 1% increase five years later. Window period runs from May 12, 1981 to October 15, 1982. Restrictions are in effect for the full term of the mortgage loan.

The servicer must verify whether a mortgage loan is a “window-period” mortgage loan. If the mortgage loan is a “window-period” mortgage loan, the servicer is authorized to approve a transfer of ownership as long as the criteria listed in the following table are satisfied.

Criteria required to approve a transfer of ownership on window-period mortgage loans
 

The purchaser’s credit and financial capacity are acceptable under Fannie Mae’s current underwriting guidelines (see F-1-28, Reviewing a Transfer of Ownership for Credit and Financial Capacity).

 

The mortgage insurer approves the transfer and the mortgage insurer’s specified conditions are satisfied, if applicable. The servicer must follow the procedures in Obtaining MI Approval for a Conventional Mortgage Loan in F-1-17, Processing a Transfer of Ownership for information on obtaining mortgage insurer approval.

Note: If the mortgage insurer denies the transfer or imposes conditions for approval, the servicer must inform the parties involved in the transaction of the mortgage insurer’s decision as its reason for not approving the request or the imposition of conditions for approval.

When the state law allows an increase in the mortgage loan interest rate, the servicer should determine the new rate for a whole mortgage loan or a participation pool mortgage loan by adding the allowable increase to the existing mortgage loan interest rate, unless the state law requires a different method. That new interest rate for the mortgage loan should be used to evaluate the purchaser’s financial ability. The servicer must not change the interest rate if the mortgage loan is in an MBS pool, even though the state law would permit an increase.

If the transfer of ownership is not approved or the required eligibility criteria are not satisfied and the transfer of ownership occurs, the servicer must take all steps necessary to enforce the due-on-sale (or due-on-transfer) provision. If the funds required to satisfy the mortgage loan debt are not received after the mortgage loan is accelerated, the servicer must initiate foreclosure proceedings.

The servicer must follow the procedures in Completing a Transfer of Ownership in F-1-17, Processing a Transfer of Ownership for detailed requirements related to executing an assumption (or assumption and release) agreement.

The servicer must notify the applicable property insurance companies, tax authorities, and any other interested parties. If the purchaser did not provide a new property insurance policy, the servicer must obtain an endorsement to the existing property insurance policy.

 

Recent Related Announcements

There are no recently issued Announcements related to this topic.                      

Have You Tried Ask Poli?

Poli knows. Just ask.

Ask Poli features exclusive Q&As and
more—plus official Selling & Servicing
Guide
content.

Try Ask Poli

Related Articles


AskPoli

Customers Recommend Ask Poli

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

Guide Resources

For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

X
Having Issues with Seeing this Page Correctly?

Use Firefox or Chrome   How to do a hard refresh in Internet Explorer
We recommend that you use the latest version of FireFox or Chrome.

Download Firefox
Download Chrome
  A hard refresh will clear the browsers cache for a specific page and force the most recent version of a page.
    Hold the Ctrl key and press the F5 key.
     

Email Us
If you still have Technical Support questions, feel free to emailAsk_Poli@fanniemae.com.