Recast Loan Overview

With the November 3, 2021 Selling Guide update, Fannie Mae will purchase a re-amortized (recast) loan following the application of a substantial principal curtailment received from the borrower. The curtailment reduces the principal balance and results in a lower monthly loan payment based on the re-amortization of the new outstanding loan balance over the remaining term of the loan. The following requirements must be met:

• The only changes to the original note terms are to reduce the monthly loan payment amount due to the principal curtailment and recast. 
• The original note amount  must comply with maximum loan limits in effect at the time of acquisition.
• When the loan was underwritten, the borrower was fully qualified based on the original note amount.
• The lender must complete an Agreement for Modification, Re-Amortization, or Extension of a Mortgage (Form 181), in accordance with the requirements of the Servicing Guide, place a copy of the Agreement in the loan servicing file, and deliver the completed Agreement to the applicable document custodian in accordance with Selling Guide Section E-2-01, Required Custodial Documents.
• The delivery data must comply with the delivery instructions for principal curtailments. This includes delivering the loan with special feature code 076.