1205.01

Generally

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. ; and
  • 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
    • effective date of any permitted conversion 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
    • SARM Loan Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .
Interest Rate Cap Provider BorrowerBorrowerPerson who is the obligor per the Note. must only obtain bids from Fannie Mae-approved providers listed on https://multifamily.fanniemae.com.
Interest Rate Cap Documentation Must be on forms acceptable to Fannie Mae.
Minimum Interest Rate Cap Term 5 years.
Replacement Interest Rate Cap You must ensure the BorrowerBorrowerPerson who is the obligor per the Note. purchases 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. 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 SARM Loan conversion or Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .
Interest Rate Cap Reserves BorrowerBorrowerPerson who is the obligor per the Note. must fund a cash reserve equal to at least 110% of the current replacement cap cost 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 SARM Loan Maturity DateMaturity DateDate all Mortgage Loan amounts become fully due and payable per the Loan Documents. .
Interest Rate Cap Contract Process and Documentation

You must deliver all 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. -related documentation, including the

 

  • Interest Rate Cap AgreementInterest Rate Cap AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. , and
  • Interest Rate Cap Reserve and Security Agreement (Form 6442 series).
Fannie Mae will engage outside counsel at your expense to review all cap-related documentation.
Initial Interest Rate Cap Notional Amount

Must equal the original principal amount of the SARM Loan throughout the Interest Rate Cap’sInterest Rate Cap’sInterest 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.

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 to pay these expenses.