702.05

Interest-Only

Requirements

If an interest-only ARM LoanARM LoanMortgage Loan with an interest rate that periodically adjusts based on an Index per the Note or Loan Documents. or SARM Loan converts during the interest-only period and the new loan term is less than the original term, you must ensure

  • the interest-only period does not carry over, and
  • fixed rate amortization begins immediately.

Guidance

If an interest-only ARM LoanARM LoanMortgage Loan with an interest rate that periodically adjusts based on an Index per the Note or Loan Documents. or SARM Loan converts during the interest-only period and the new loan term is greater than or equal to the original term, you may allow the remaining interest-only period to carry over to the fixed rate Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. .