Section 702

Secondary Risk Mortgage Loans and Primary Risk Mortgage Loans

702.01

Generally

For certain LendersLendersPerson Fannie Mae approved to sell or service Mortgage Loans. , the Lender’s ContractLender’s ContractProgram Documents per the Multifamily Selling and Servicing Agreement. with Fannie Mae will specify which party has all of the risk of loss on 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. , or if the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. and Fannie Mae share the loss.  In some Lender ContractsLender ContractsProgram Documents per the Multifamily Selling and Servicing Agreement. , the Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. may be Secondary RiskSecondary RiskMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. until the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. recourse obligation is deemed exhausted after which the Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. will become Primary RiskPrimary RiskMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. .

702.02

Secondary Risk Mortgage Loans
702.02A

Definition

A 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 considered a Secondary Risk Mortgage LoanSecondary Risk Mortgage LoanMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. when all losses incurred on such 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. are contractually borne by the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. until the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. specified recourse obligation is deemed exhausted.  This obligation to bear all losses is sometimes referred to as a "Top Loss" obligation.  Because Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. will convert to Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. upon the deemed exhaustion of the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. obligation, Fannie Mae and the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must work together to accurately track amounts for any losses that may have occurred.

702.02B

Lender is Special Servicer

For all Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. , the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. , or its approved contract servicer, will be the Special ServicerSpecial ServicerServicer (which may be Fannie Mae, the Servicer, or a third-party special servicer contracted by Fannie Mae) responsible for implementing the loss mitigation actions for a Non-Performing Mortgage Loan. .  The Special ServicerSpecial ServicerServicer (which may be Fannie Mae, the Servicer, or a third-party special servicer contracted by Fannie Mae) responsible for implementing the loss mitigation actions for a Non-Performing Mortgage Loan. will be required to submit to Fannie Mae a Servicer Workout Action Template (“SWAT”) (Form 4810) for all Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. as more particularly provided in Part V, Chapter 7: Non-Performing Mortgage Loans, Section 708.02: Servicer Workout Action Template (“SWAT”).

702.02C

Deemed Exhaustion of Recourse Obligation

When the cumulative approved realized losses plus Potential Losses under a Secondary RiskSecondary RiskMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. Lender ContractLender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. equal or exceed 90% of the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. recourse obligation under that ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. , the Lender’sLender’sPerson Fannie Mae approved to sell or service Mortgage Loans. recourse obligation under the ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. will be deemed to be exhausted and the remaining Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. serviced under that ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. will be deemed to be Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. .  Fannie Mae will provide notice in writing to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. at the time of such re-designation.  Re-designation of a 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. from Secondary RiskSecondary RiskMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. to Primary RiskPrimary RiskMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. does not relieve the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. of its remaining recourse obligation.

Fannie Mae's estimate of Potential Losses will be calculated as follows:

  • the value of each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). (as provided below) securing all then-delinquent Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , less
  • the UPBUPBUnpaid Principal Balance  of all then-delinquent Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , plus
  • estimated expenses to pursue a foreclosure Course of ActionCourse of ActionFor Non-Performing Mortgage Loans, loss mitigation activities per per Part V, Chapter 7: Non-Performing Mortgage Loans. for all then-delinquent Mortgage LoansMortgage LoansMortgage 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 value of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). shall be calculated as follows:

  • 90% of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). value of each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing each such delinquent 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. if the value is established by an appraisal or broker’s opinion of value dated six (6) months or less prior to incurring the Potential Loss, or
  • 60% of the most recent PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). value of each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing each such delinquent 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. if the value is established by an appraisal or broker’s opinion of value dated more than six (6) months prior to incurring the Potential Loss.
702.03

Primary Risk Mortgage Loans Defined
702.03A

Definition

A 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 considered a Primary Risk Mortgage LoanPrimary Risk Mortgage LoanMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. when Fannie Mae bears all losses on 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. or when the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. and Fannie Mae share the losses on 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. .  All Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. delivered under the DUSDUSDelegated Underwriting and Servicing and Aggregation product lines and certain other Mortgage LoansMortgage LoansMortgage 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 Fannie Mae either bears all the risk of loss or shares in a portion of the risk of loss are Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. .

702.03B

Fannie Mae is Special Servicer

For all Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , Fannie Mae, or its contract servicer, will be the Special ServicerSpecial ServicerServicer (which may be Fannie Mae, the Servicer, or a third-party special servicer contracted by Fannie Mae) responsible for implementing the loss mitigation actions for a Non-Performing Mortgage Loan. .