Section 1101

Description

Requirements

An ARM LoanARM LoanMortgage Loan with an interest rate that periodically adjusts based on an Index per the Note or Loan Documents. has

  • an interest rate that is adjusted periodically based on a specified
    • IndexIndexBasis for determining the Gross Note Rate of an ARM Loan, including any required alternative index that may be determined necessary by Fannie Mae because the Index is no longer widely accepted or has been replaced as the index for similar financial instruments. , and
    • interest period,
  • payments that are adjusted to repay the UPBUPBUnpaid Principal Balance  in substantially equal payments over the remaining amortization period, and
  • a term of 5, 7, or 10 years, depending on the plan.

Product Description

Plan Number
  • 04931 - ARM 5/5 Loan:  30-Day Average SOFR30-Day Average SOFRCompounded average of SOFR over a specified interest period of 30 days.
  • 04933 - ARM 7/6 Loan:  30-Day Average SOFR30-Day Average SOFRCompounded average of SOFR over a specified interest period of 30 days.

Terms
  • ARM 5/5 Loan:  Initial 5-year term with an optional second 5-year adjustable rate term
  • ARM 7/6 Loan:  7-year term
Index
  • ARM 5/5 Loan:  30-Day Average SOFR30-Day Average SOFRCompounded average of SOFR over a specified interest period of 30 days.
  • ARM 7/6 Loan:  30-Day Average SOFR30-Day Average SOFRCompounded average of SOFR over a specified interest period of 30 days.

Interest Rate Floor

Must not be less than the combined

 

  • Guaranty FeeGuaranty FeeFee retained by Fannie Mae for credit enhancing a Mortgage Loan or assuming credit risk on a Mortgage Loan, and which may be expressed as a percentage. , plus
  • Servicing FeeServicing FeeFee a Servicer receives for collecting payments, managing operational procedures, and assuming your portion of credit risk for a Mortgage Loan, and which may be expressed as a percentage. , plus
  • InvestorInvestorMBS Investor for an MBS Mortgage Loan, or Fannie Mae for a Cash Mortgage Loan. spread.

Lockout Period
  • 1st Loan YearLoan YearPeriod beginning on the date of the Note and ending on the last day of the month that is 12 full months after the date of the Note, and each successive 12-month period thereafter. ; and
  • 1st Loan YearLoan YearPeriod beginning on the date of the Note and ending on the last day of the month that is 12 full months after the date of the Note, and each successive 12-month period thereafter. of the second 5-year adjustable rate term (typically the 6th Loan YearLoan YearPeriod beginning on the date of the Note and ending on the last day of the month that is 12 full months after the date of the Note, and each successive 12-month period thereafter. ), when an ARM 5/5 Loan renews for an additional 5-year adjustable rate term.  

Prepayment Availability

May be voluntarily prepaid after each lockout period with a 1% Prepayment PremiumPrepayment PremiumFor a Mortgage Loan prepayment, amount the Borrower must pay in addition to the prepaid principal and accrued interest per the Loan Documents. , but no Prepayment PremiumPrepayment PremiumFor a Mortgage Loan prepayment, amount the Borrower must pay in addition to the prepaid principal and accrued interest per the Loan Documents. is due

 

  • during the "open period" (typically the last 3 months of the loan term),
  • when an ARM LoanARM LoanMortgage Loan with an interest rate that periodically adjusts based on an Index per the Note or Loan Documents. converts to a 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. , or
  • when an ARM 5/5 Loan renews for an additional 5-year adjustable rate term. 

Rate Change Date

Date the interest rate changes based on changes in the selected IndexIndexBasis for determining the Gross Note Rate of an ARM Loan, including any required alternative index that may be determined necessary by Fannie Mae because the Index is no longer widely accepted or has been replaced as the index for similar financial instruments. .

Interest Rate Change Frequency

Monthly

Maximum Interest Rate Change

Plus or minus 1% of the then-current interest rate.

Maximum Lifetime Interest Rate Limit
  • For an ARM 5/5 Loan,
    • Guaranty FeeGuaranty FeeFee retained by Fannie Mae for credit enhancing a Mortgage Loan or assuming credit risk on a Mortgage Loan, and which may be expressed as a percentage. , plus
    • Servicing FeeServicing FeeFee a Servicer receives for collecting payments, managing operational procedures, and assuming your portion of credit risk for a Mortgage Loan, and which may be expressed as a percentage. , plus
    • 5%.
  • For an ARM 7/6 Loan,
    • Guaranty FeeGuaranty FeeFee retained by Fannie Mae for credit enhancing a Mortgage Loan or assuming credit risk on a Mortgage Loan, and which may be expressed as a percentage. , plus
    • Servicing FeeServicing FeeFee a Servicer receives for collecting payments, managing operational procedures, and assuming your portion of credit risk for a Mortgage Loan, and which may be expressed as a percentage. , plus
    • 6%.

Index Look-Back Period

1 Business DayBusiness DayAny 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 Rate Change Date.

Interest Accrual Method

Actual/360

Interest Rate Cap

Not required; interest rate adjustments are subject to an embedded cap.

Conversion to Fixed Rate

Permitted, with no prepayment penalty and minimal re-underwriting, after the lockout period and before the "open period" (typically the last day of the 4th month preceding the end of the 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. term). 
Investors
  • For an ARM 5/5 Loan,
    • the Multifamily Trading DeskMultifamily Trading DeskTeam that quotes interest rate pricing for a Mortgage Loan and can be contacted at (888) 889-1118. , or
    • Third Party MBS InvestorThird Party MBS InvestorMBS Investor for an MBS Mortgage Loan that is not the Multifamily Trading Desk. .
  • For an ARM 7/6 Loan, the Multifamily Trading DeskMultifamily Trading DeskTeam that quotes interest rate pricing for a Mortgage Loan and can be contacted at (888) 889-1118. .
Rate Lock
  • Maximum 45-day CommitmentCommitmentContractual agreement between you and Fannie Mae where Fannie Mae agrees to buy a Mortgage Loan at a future date in exchange for an MBS, or at a specific price for a Cash Mortgage Loan, and you agree to Deliver that Mortgage Loan. .
  • No rate change may occur before DeliveryDeliverySubmission 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. . 
ARM 5/5 Loan Options at Maturity

Before the end of the initial 5-year term for an ARM 5/5 Loan, BorrowerBorrowerPerson who is the obligor per the Note. must elect to:

  • convert the ARM LoanARM LoanMortgage Loan with an interest rate that periodically adjusts based on an Index per the Note or Loan Documents. to a fixed rate;
  • fully repay the ARM LoanARM LoanMortgage Loan with an interest rate that periodically adjusts based on an Index per the Note or Loan Documents. ; or
  • renew the adjustable rate term for an additional 5-year term.