409.01

General

An acceptable Interest Rate HedgeInterest Rate HedgeInterest 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. must be in place and maintained at all times for:

  • variable rate Credit Enhancement Mortgage LoansCredit Enhancement Mortgage LoansMortgage Loan financed by a Bond issuance where Fannie Mae provides credit enhancement by a Credit Enhancement Instrument, or an MBS for Bonds. ;
  • Structured ARM Loans; and
  • any 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. where (i) the BorrowerBorrowerPerson who is the obligor per the Note. executed the Fannie Mae Interest Rate Cap Reserve and Security Agreement (Form 6442 series), or a similar agreement, allowing for a “springing” 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. under certain circumstances, and (ii) the requirement of the BorrowerBorrowerPerson who is the obligor per the Note. to acquire and pledge to the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. an 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. has been triggered under the agreement.

The Interest Rate HedgeInterest Rate HedgeInterest 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. may be either an 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. or Interest Rate SwapInterest Rate SwapInterest 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. , although the prior approval of Fannie Mae is required before the BorrowerBorrowerPerson who is the obligor per the Note. may enter into an Interest Rate SwapInterest Rate SwapInterest 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. .

Each Interest Rate Hedge AgreementInterest Rate Hedge AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. and its collateral assignment must meet the requirements of Part III, Chapter 12: Structured Adjustable Rate Mortgage (SARM) Loans.

Fannie Mae outside counsel must be engaged, at Borrower’sBorrower’sPerson who is the obligor per the Note. cost, to review the hedge bid package and documents, and prepare the amended Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. for each hedge renewal.  The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must submit a completed Counsel Designation Request for Interest Rate Hedge Transactions (Form 4625.A).