Interest Rate Caps
Requirements
Description | |
---|---|
Interest Rate Cap |
BorrowerBorrowerPerson who is the obligor per the Note. must purchase a third-party 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. . |
Interest Rate Cap Provider |
BorrowerBorrowerPerson who is the obligor per the Note. must only obtain bids from providers approved by Fannie Mae as listed on https://multifamily.fanniemae.com. |
Interest Rate Cap Documentation |
Must be on forms that are acceptable to Fannie Mae. |
Minimum Interest Rate Cap Term |
5 years. The BorrowerBorrowerPerson who is the obligor per the Note. must keep an Interest Rate Cap AgreementInterest Rate Cap AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. in place continually until the earlier of the
|
Replacement Cap |
You must ensure that the BorrowerBorrowerPerson who is the obligor per the Note. purchases a replacement cap if 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. term expires before the conversion or Maturity DateMaturity DateDate all amounts due and owing per the Mortgage Loan become fully due and payable per the Loan Documents. of the SARM Loan. |
Cap Cost Factor |
Equals the cost of a replacement cap divided by the initial cap term. |
Interest Rate Cap Reserves |
BorrowerBorrowerPerson who is the obligor per the Note. must fund a cash reserve sufficient to purchase a replacement cap if 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. term expires before the Maturity DateMaturity DateDate all amounts due and owing per the Mortgage Loan become fully due and payable per the Loan Documents. of the SARM Loan. |
Cap Contract Process and Documentation |
You must deliver all cap-related documentation to Fannie Mae, including the
Fannie Mae will engage outside counsel at your expense to review all cap-related documentation. |
Initial Interest Rate Cap Notional Amount |
Notional amount of the initial 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. throughout its term must equal the original principal amount of the SARM Loan. |
Guidance
You may require the BorrowerBorrowerPerson who is the obligor per the Note. to:
- pay Fannie Mae's costs, including legal fees; and
- fund a reserve for the payment of these expenses.