Servicing Guide

Published September 9, 2020

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What are the requirements for repurchasing and redelivery of a converted MBS mortgage loan?

The following table provides additional information regarding the repurchase and redelivery of converted MBS mortgage loans in accordance with C-2.3-03, Repurchasing Converted MBS Mortgage Loans and Redelivering Them to Fannie Mae.

Post-Conversion Disposition Option Under this option, the servicer must…

Option 1: Market Rate

  • decide whether or not to redeliver the converted mortgage loan to Fannie Mae;

  • retain the interest rate risk associated with the period of time between the date the mortgage loan is converted and the date of any future sale of the mortgage loan; and

  • verify the mortgage loan meets the specific eligibility requirements for converted ARM loans that are specified in the Selling Guide.

If the servicer chooses to redeliver the mortgage loan to Fannie Mae, it may either deliver the mortgage loan

  • as part of a new MBS pool of fixed-rate mortgage loans, or

  • as a portfolio mortgage loan that must be either an actual/actual or a scheduled/actual remittance type.

The servicer is authorized to use any outstanding commitment it has with Fannie Mae (or obtain a new one) for the redelivery of the mortgage loan.

Option 2: Take-Out Option

Redeliver the converted mortgage loan to Fannie Mae as a portfolio mortgage loan.

Fannie Mae does not require the servicer to re-qualify the borrower or to verify that the mortgage loan still meets Fannie Mae’s eligibility requirements.

Procedures for obtaining a take-out option commitment are in the Selling Guide.

1. To ensure consistent treatment of borrowers, servicers that service both portfolio mortgage loans and MBS mortgage loans should consider using the time frame required for MBS mortgage loans – which is no later than the 15th day of the month in which the election notice is given.

2. Timeline assumes that the monthly payments are due on the first day of each month. If not, the servicer must change these references to reflect the day of the month on which monthly payments are actually due.

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

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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.

Guide Resources

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Visit Selling and Servicing Guide Communications and Forms

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