Fannie Mae Provides Additional Details on Loan Eligibility Related to Revised Qualified Mortgage Rule

May 26, 2021

Today, Fannie Mae released Lender Letter LL-2021-11, Loan Eligibility Under the Preferred Stock Purchase Agreement and Revised General Qualified Mortgage Rule, to its single-family sellers. This lender letter provides additional details related to the policies introduced in LL-2021-09 that were the result of the 2021 amendments to our senior preferred stock purchase agreement (PSPA) with Treasury and the Revised General Qualified Mortgage loan definition (Revised QM).

Lenders can begin applying the policies detailed in LL-2021-11 immediately but must apply them to all loans with application dates on or after July 1, 2021. As announced in LL-2021-09, GSE Patch loans that do not meet the Revised QM Rule must have application dates on or before June 30, 2021 and be purchased or securitized on or before August 31, 2021.

Fannie Mae worked closely with Freddie Mac, in consultation with FHFA, to align on certain policies, such as those related to loans that are exempt from the Truth in Lending Act (TILA) or the Ability-to-Repay (ATR) rule. Many of the policies detailed in LL-2021-11 are in the Selling Guide today and remain unchanged. New policies include:

Effective Dates

  • ATR Covered Loans with application dates prior March 1, 2021 (the effective date of CFPB’s rule) may be purchased after August 31, 2021, provided the loans otherwise meet the Revised QM Rule.
  • Single-closing construction-to-permanent loans must be purchased or securitized on or before February 28, 2022.

Loan Eligibility for Loans Covered by QM

  • The APR-APOR spread must match the requirements in the regulation – generally not exceeding 2.25. 
  • The Points and Fees must match the requirements in the regulation – generally not exceeding 3%.
  • There are special calculation requirements for short-term ARMs – see the Lender Letter for more information.

Loan Eligibility for Loans Not Covered by QM (e.g., HFA or non-owner-occupied)

  • The APR-APOR spread must not exceed 6.5 (this is an existing requirement).
  • The Points and Fees must not exceed 5% (this is an existing requirement).

High LTV Refinance Loans

  • Fannie Mae is temporarily pausing the acquisition of high-LTV refinance loans due to the extremely low volume and impact of the Revised QM Rule. These transactions will not be eligible for purchase or securitization after August 31, 2021.

For additional details please view Lender Letter LL-2021-11.