205.01

Adjustable Rate Mortgage Loan Interest Rate Changes and Required Monthly Payments

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g.,  the originator, the selling Lender, or a third-party servicer). must enforce each 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. in accordance with the terms of the executed Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .  This includes making periodic interest rate and payment adjustments in connection with any type of Adjustable Rate Mortgage LoansAdjustable Rate Mortgage LoansMortgage Loan with an interest rate that periodically adjusts based on an Index per the Note or Loan Documents. .  The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g.,  the originator, the selling Lender, or a third-party servicer). must change 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. interest rate and monthly payments to the fullest extent permitted or required, maintaining at all times 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. margin specified in the executed ARM Note.  Factors used to determine the new interest rate for ARM Mortgage Loans include:

  • the 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. on which the rate is to be based;
  • the “look back” period;
  • any applicable interest rate change limitations; and
  • 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. margin.

If the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g.,  the originator, the selling Lender, or a third-party servicer). fails to make a timely interest rate or payment adjustment, the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g.,  the originator, the selling Lender, or a third-party servicer). must use its own funds to satisfy any shortage.

205.01A

The Adjustable Rate Mortgage Loan Index

The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g.,  the originator, the selling Lender, or a third-party servicer). must determine the 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. on which the rate is to be based as specified in the Loan DocumentsLoan DocumentsAll documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. .  To assist the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g.,  the originator, the selling Lender, or a third-party servicer). in monitoring indexes, Fannie Mae offers an ARM Index service through its website on https://multifamily.fanniemae.com.  The ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g.,  the originator, the selling Lender, or a third-party servicer). must establish procedures to monitor the 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. to assure that the ServicerServicerPrimary Person responsible for servicing the Mortgage Loan (e.g.,  the originator, the selling Lender, or a third-party servicer). uses the latest available 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. to determine an interest rate change.

205.01B

Determining the New Monthly Payment

Except for Fannie Mae Structured ARM Loans, a Required Monthly Payment change occurs at established intervals and corresponds to any change in the interest rate.  The new monthly payment is calculated by determining the amount required to repay the UPBUPBUnpaid Principal Balance 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. in substantially equal payments over the remaining amortization period 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. at the interest rate in effect following the latest interest rate change utilizing the applicable Interest Calculation Method.  If 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. is an interest-only 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. , the new monthly payment is the monthly interest payment at the interest rate in effect following the latest interest rate change utilizing the applicable Interest Calculation Method.  The new Required Monthly Payment becomes effective on the first day of the month following the month in which the interest Rate Change Date occurs.