Adjusting Interest Rate Hedge Reserves for SARM Loans Using Form 6442 Series with an Effective Date Before May 2024

Per the Interest Rate Cap Reserve and Security Agreement (Form 6442 series), the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must evaluate the Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. reserve and determine if the cost of a replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. has increased or decreased based on market conditions.

• If the estimated cost of a replacement cap has increased, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must increase the monthly reserve payment to ensure that sufficient funds will be available to purchase the replacement cap by the end of the reserve period.
• If the estimated cost of a replacement cap has decreased, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. may:
  • opt to not adjust the reserve; or
  • calculate and adjust the monthly escrow payments needed to purchase a replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. based on 115% of the cost of an Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. with the term required by the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , provided:
    • it is a Portfolio Mortgage LoanPortfolio Mortgage LoanMortgage Loan purchased by Fannie Mae and held as of a certain date regardless of whether it is a Cash Mortgage Loan or an MBS Mortgage Loan. DeliveredDeliveredSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. before January 1, 2023;
    • the Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. escrow payments are recalculated at least every 6 months;
    • it is not part of a Variable Rate Bond Credit Enhancement Transaction;
    • it does not have an existing Payment DefaultPayment DefaultBorrower's failure to fully pay any required Mortgage Loan payment when due, including, principal, interest, late charges, default interest, fees, pricing incentive recapture, prepayment premium, escrows, or other collateral accounts for taxes, insurance, … or Performance DefaultPerformance DefaultBorrower's failure to perform any promise or covenant within any applicable grace periods per the Mortgage Loan, other than a Payment Default. under the Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. or a BorrowerBorrowerPerson who is the obligor per the Note. , Key PrincipalKey PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or PrincipalPrincipalPerson who owns or controls specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals, and Guarantors. on ACheckACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheck application. ; and
    • no other Portfolio Mortgage LoansPortfolio Mortgage LoansMortgage Loan purchased by Fannie Mae and held as of a certain date regardless of whether it is a Cash Mortgage Loan or an MBS Mortgage Loan. in your Fannie Mae portfolio with that SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). have an existing Payment DefaultPayment DefaultBorrower's failure to fully pay any required Mortgage Loan payment when due, including, principal, interest, late charges, default interest, fees, pricing incentive recapture, prepayment premium, escrows, or other collateral accounts for taxes, insurance, … or Performance DefaultPerformance DefaultBorrower's failure to perform any promise or covenant within any applicable grace periods per the Mortgage Loan, other than a Payment Default. .

The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. may refund to the BorrowerBorrowerPerson who is the obligor per the Note. any amount left in the reserve account after purchasing the replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. .