409.02A

Bond Credit Enhancement Transactions

For BondBondTax-exempt or taxable multifamily revenue bonds, or other tax-exempt or taxable bonds, issued to finance 1 or more Credit Enhancement Mortgage Loan Properties. 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. , 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. must:

  • be in place whenever the variable rate mode is in effect; and
  • comply with the requirements of the Reimbursement Agreement and other Loan DocumentsLoan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .

Per the Interest Rate Cap Reserve and Security Agreement (Form 6442 series), the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must evaluate 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. reserve and determine if the cost of 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. has increased or decreased based on market conditions.

  • If the estimated cost of a replacement cap has increased, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must increase the monthly reserve payment to ensure sufficient funds will be available to purchase the replacement cap by the end of the reserve period.
  • If the estimated cost of a replacement cap has decreased, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must not adjust the reserve.