Section 103

Letters of Credit

103.01

Servicing File

Requirements

You must immediately deliver to Fannie Mae:

  • the original Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. ; and
  • any new, replacement, or amended Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. delivered to you.

Operating Procedures

In your Servicing FileServicing FileYour file for each Mortgage Loan serviced. , you must keep a copy of any

  • Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , and
  • the associated Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. .
103.02

Certification

Operating Procedure

With any new or replacement Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , you must

103.03

Monitoring Expiration Dates

Operating Procedures

You must:

  • effectively monitor each Letter of Credit'sLetter of Credit'sLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. expiration date; and
  • ensure Fannie Mae receives an acceptable renewal or replacement Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit.
    • by the deadline per the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. , or
    • if no deadline is specified, at least 5 Business DaysBusiness DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. before the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. expires.

If you do not provide a renewal or replacement Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. , Fannie Mae will present a sight draft against the expiring Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. .

103.04

Replacement Letter of Credit

Operating Procedures

You must ensure any replacement Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. has an expiration date at least 30 days after the applicable Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. expiration date.

103.05

Verifying Issuer Ratings
103.05A

Monitoring

Operating Procedures

While each Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. is outstanding, you must:

103.05B

Rating Noncompliance

Operating Procedures

If the rating of the financial institution issuing or confirming the Letter of Credit does not comply with... You must...
Part I, Chapter 2: Mortgage Loan, Section 204.02: Issuers and Ratings

Promptly notify Multifamily Business OperationsMultifamily Business OperationsTeam that can be contacted at [email protected]. even if the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or other Collateral AgreementCollateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument.

 

  • provides different acceptable issuer rating criteria, or
  • does not authorize Fannie Mae to act if the rating falls.
Rating criterial in the Achievement Agreement or other Collateral Agreement
  • Promptly notify Multifamily Business OperationsMultifamily Business OperationsTeam that can be contacted at [email protected]. .
  • Require the BorrowerBorrowerPerson who is the obligor per the Note. to provide a replacement or confirming Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. from an acceptably rated institution by the:
    • replacement deadline per the Achievement AgreementAchievement AgreementAgreement requiring the Borrower to provide a letter of credit, cash, or guaranty as additional collateral to support the Mortgage Loan amount and specifying the terms for releasing the collateral. or Collateral AgreementCollateral AgreementAgreement granting a security interest in Mortgage Loan collateral not covered by the Security Instrument. ; or
    • earlier of
      • 30 days after notifying the BorrowerBorrowerPerson who is the obligor per the Note. , or
      • 5 Business DaysBusiness DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. before the Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. expires.
103.06

Managing Draws and Releases
103.06A

Letter of Credit Draws

Requirements

You must promptly notify Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected]. and Multifamily Business OperationsMultifamily Business OperationsTeam that can be contacted at [email protected]. if a Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. draw is appropriate.

103.06B

Releasing/Reducing Letters of Credit or Other Collateral

Operating Procedures

Unless a 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. is being fully repaid, you must:

  • assess each BorrowerBorrowerPerson who is the obligor per the Note. request to fully release or partially reduce a Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. or other collateral;
  • submit your recommendation to Multifamily Asset ManagementMultifamily Asset ManagementTeam that can be contacted at [email protected]. ; and
  • notify the BorrowerBorrowerPerson who is the obligor per the Note. when each request is approved or denied.