Servicing Guide

Published November 10, 2020

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What are the requirements for exercising and reporting conversions of ARM plans with a monthly or periodic conversion option?

The servicer must notify Fannie Mae about the conversion of a portfolio ARM loan or participation pool ARM loan to a fixed rate mortgage loan when it submits its monthly accounting reports, in accordance with C-2.3-01, Processing ARM Conversions to Fixed Rate Mortgage Loans.

The following table provides a timeline that compares the requirements for exercising and reporting conversions of ARM plans that have a monthly conversion option to those that have a periodic conversion option.

Action Date Monthly Conversion Option Periodic Conversion Option

Date by which borrower must give notice of election to convert

Lender-specified date. Generally, the date will be in the first 5 days of a month for conversions that will become effective on the first¹ day of the second month following the election notice.

Lender-specified date. Generally, the date will be between 15 and 45 days before the scheduled interest rate change date.

Date by which borrower must pay conversion fee and return executed documents

Lender-specified date. Generally, the date will fall between 5 and 45 days before the date on which the new converted interest rate will become effective¹.

Lender-specified date. Generally, the date will fall between 5 and 30 days before the scheduled interest rate change date.

Date of Fannie Mae required net yield used as basis for new converted interest rate

Applicable yield in effect as of the beginning of the first business day of the month in which the election notice is given.

Applicable yield in effect as of the beginning of the day that is 45 days before the scheduled interest rate change date.

Effective date for new converted interest rate

First2 day of the second month following the election notice.

Scheduled interest rate change date.

Effective date for new payment

First2day of the month following the effective date of the new converted interest rate.

First2day of the month following the scheduled interest rate change date.

Last date for notifying borrower of new payment

Twenty-five days before the effective date of the new payment.

Twenty-five days before the effective date of the new payment.

Last date for reporting conversion to Fannie Mae

Third business day of the month following the effective date for the new payment (which is when the Fannie Mae investor reporting system reports for the reporting period that includes that effective date are due).

Third business day of the month following the effective date for the new payment (which is when the Fannie Mae investor reporting system reports for the reporting period that includes that effective date are due).

For more information please see F-1-01, Servicing ARM Loans

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