Glossary: Terms and Definitions

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A

Active Servicer

A servicer that is participating as an activated buyer of servicing for loans committed through Pricing & Execution – Whole Loan application. A servicer is considered active only if the seller and the servicer have submitted an Activation Request with respect to each other and neither the active servicer nor the seller has submitted a Deactivation Request to Fannie Mae.

Actual Net Margin

The gross margin minus the total servicing fee for an adjustable-rate mortgage (ARM).

Allow Cross-Sell Indicator

A Yes / No indicator for identifying loans on which the seller will or will not allow cross-selling of mortgage and/or banking products to the borrower within a concurrent servicing-released sale transaction.

Automatic Extension

Commitments expiring with open remaining balances will be automatically extended if they meet certain criteria. Sellers are responsible for the resulting fee of these extensions. Depending on the circumstances, the length of an automatic extension can vary from one to five calendar days. Please see the Pricing & Execution – Whole Loan: Mandatory Process Overview document on fanniemae.com for more details on the mandatory extension process.

A best efforts commitment with a “Closed” loan status will automatically extend for five calendar days until the loan is purchased or the commitment has been extended for a maximum of 60 calendar days from the original expiration date. After a commitment has reached its maximum allowed auto-extension period, PE – Whole Loan will automatically pair-off the “Closed’ status commitment.

Automatic Pair-off

Commitments that go past their expiration date without being satisfied and are not eligible for an automatic extension will be automatically paired-off. Sellers are responsible for the resulting fee of these pair-offs. Please see the Pricing & Execution – Whole Loan: Mandatory Process Overview document on fanniemae.com for more details on the mandatory pair-off process.

A best efforts commitment that has been placed into “Closed” status and has reached its maximum allowed 60 days of extensions without loan purchase will automatically pair-off, and may result in a pair-off fee.

B

Best Efforts Commitment

A forward commitment for a single loan (for a specific borrower(s) on a specific property) that an approved seller agrees to sell to Fannie Mae by the commitment expiration date. A best efforts commitment allows approved sellers to enter into an agreement to sell a loan to Fannie Mae, but if the loan does not close, typically a pair-off fee for non-delivery will not be charged.

Business Day

A day on which Fannie Mae’s Capital Markets Sales Desk is open for business, which excludes the Securities Industry Association’s (SIFMA’s) recommended holidays and early closings. For more details, view the SIFMA holiday schedule under Additional Resources on the Pricing & Execution main page on the fanniemae.com single family portal.

C

Casefile ID

The DU Casefile ID number assigned by Desktop Underwriter® (DU®) or for loans not underwritten in DU, a unique system-generated casefile ID number used to track the commitment within the PE – Whole Loan application. Note: A DU Casefile ID may be delivered against a commitment with an underwriting method of “Other”; however, the best efforts commitment price will not be adjusted.

Closed Loan Status

A loan is closed when the borrower(s) has signed the closing documents and funds have been disbursed to the borrower(s). A seller should make their best effort to set the loan status to “Closed” in PE – Whole Loan within one business day of the loan funding. For a purchase transaction, that should be the business day after closing. For a refinance transaction, that should be the business day after the expiration of the three-day right-of-rescission period.

Closing Date

The date on which funds are disbursed following the loan closing. For a purchase transaction that should be the business day after closing and for a refinance the business day after the expiration of the three-day right-of-rescission period. The seller should make their best effort to set the loan status to “Closed” in PE – Whole Loan within one business day of the loan closing date.

Commitment ID

The commitment ID is assigned by PE – Whole Loan at time of commitment; it must be used when delivering loans via Loan Delivery.

Commitment Effective Date

The date on which the seller enters into a commitment with Fannie Mae through PE – Whole Loan.

Commitment Expiration Date

The date on which a commitment is scheduled to expire, at which time Fannie Mae’s obligation to honor the commitment price ends. The Original Expiration Date is the expiration date agreed to at the time of commitment. The Current Expiration Date reflects any extensions that have occurred.

Commitment Expiration Notification Period

The advance notice that an active commitment is about to expire. PE – Whole Loan provides a two business day notification via email to any email addresses associated with the committing user’s contact information. Sellers may also view their “Upcoming Expirations” within the application. Note: If a commitment’s original commitment period is less than 5 days, the commitment will not appear within the email notification.

Commitment Fallout Date

The date on which a best efforts commitment is cancelled by the seller, or auto-expires. The mode of cancelation within the PE-Whole Loan application will depend on the loan status at the time of cancelation. A loan in “Committed” status will be available for “Fallout” without incurring a fee and a loan in “Closed” status will be subject to “Pair-Off”.

Commitment Modification Date

The commitment pricing “as of” date and time when a best efforts commitment is re-priced due to key data or product changes or any other post-commitment modification.

Commitment Pass-Through Rate

The rate at which a seller must remit interest on the mortgage to Fannie Mae is the pass-through rate.

For mandatory commitments, the pass-through rate is the gross note rate minus the total servicing.   The total servicing fee includes any monthly lender paid mortgage insurance (LPMI) that may be applicable.

The best efforts commit ment pass-through rate is calculated based on the borrower’s gross note rate minus the servicing fee. PE – Whole Loan assumes a servicing fee of 25 bps for all best efforts commitments. Loans that have LPMI paid for out of the gross note rate may not be committed on a best efforts basis.

Commitment Pass-Through Price

The price Fannie Mae is willing to pay for a particular commitment pass-through rate on a loan, co rresponding to a particular commitment period a nd product. Commitmen t pass-thro ugh prices may vary based on several factors s u ch as executio n type, remi ttance type, underwriting method (best efforts only), and after-hours committing (best efforts only). It does n o t include any loan-level price adjustm e nts (LLPAs) or the Adverse Market Delivery Charge (AMDC). The AMDC and LLPAs will be assessed, if appl i c a ble, upon de livery to Fannie Mae. 

C ommitment Period

The period of time between the Commitment Effective Date through the Commitm ent Expiration Date. Currently, a Commitment Period must range from 1 to 90 calen dar days from the Commitment Effective Date.

Commitment Product

The particular product associate d with a commitment. Most single-family conventional, conforming loan products are available for sale to Fa n nie Mae within PE – Whole Loan. Refer to the Fa n nie Mae Selling Guide and Selling Guide announcements for the most current list of mo rtgage products eligible for sale to Fa nnie Mae.

See the PE-Whole Loan Committing Basics and FAQs document on fanniemae.com for any product exceptions for committing on a best efforts basis.

Commitment Status

A commitment in PE – Whole Loan will have one of the following commitment statuses:

• “Open” – The commitment’s remaining balance has not been satisfied and it is prior to the commitment’s current expiration date.

• “Satisfied” – The commitment has been fulfilled by purchasing loans or through a pair-off prior to the current expiration date.

• “Completed” – The commitment already has been fulfilled by purchasing loans or through a pair-off and the commitment is currently past expiration. This occurs through the normal progression of a commitment (i.e. – the commitment will automatically move from Satisfied to Completed status the calendar day following the current expiration date).

• “Fallout” – A best efforts commitment that has been canceled by the seller or has auto-expired without a loan purchase.

Concurrent Sale of Servicing

You may retain, release, or sell the servicing rights associated with the loans you deliver to Fannie Mae.  All transfers of servicing must comply with the Selling Guide, the Servicing Guide, and all applicable laws.

Credit Score

The representative credit score for the mortgage loan is determined based on the credit scores of each borrower. If there is only one borrower, the single applicable score used to underwrite that borrower is the representative credit score for the mortgage. If there are multiple borrowers, determine the applicable credit score for each individual borrower and select the lowest applicable score from the group as the representative credit score for the mortgage. The Selling Guide defines the representative credit score for single and multiple borrower(s) in the section entitled, “Determining the Representative Credit Score for a Mortgage Loan”.

D

Delivery Date Deadline

The deadline for delivery for a particular mortgage product as announced by Fannie Mae.

Delivery Tolerance

Mandatory commitments include a delivery tolerance of an amount that falls within the greater of $10,000 or +/- 2.5% of the original commitment amount. In the event of a pair-off or over-delivery, the high delivery tolerance is reduced to $50 above the new over-delivered commitment amount and the low delivery tolerance is reduced to $50 below the new paired-off commitment amount.

With a best efforts commitment, there is no commitment amount tolerance. The loan amount may be adjusted up or down without penalty.

 Delivery Status

Delivery status is a field applicable to best efforts commitments only:

• “Purchase Requested” – The loan has been delivered without data errors and is awaiting document certification and purchasing.

• “Error” – The loan has been delivered with data errors, where the commitment data does not match delivered data.

• “Rejected” –The loan has been rejected in Loan Delivery and will need to be redelivered once errors are remediated, or the commitment may need to be canceled.

• “Purchase Ready” – The loan has been purchased by Fannie Mae.

• “Purchased and Funded” – The loan has been purchased by Fannie Mae and funds have been transmitted to the seller’s account.

DU Casefile ID

A unique number assigned to a loan casefile upon entry of loan data in Desktop Underwriter. DU Casefile IDs must be unique to a single best efforts commitment and may not be recommitted utilizing the DU underwriting method. See duplicate commitment definition for more detail.

Duplicate Commitment

Any additional commitment(s) for the same borrower and property address committed prior to or within 30 days of original best efforts commitment’s fallout or expiration date (the earlier of the two) qualifies as a duplicate commitment. If the loan is recommitted within 30 days of fallout or expiration against either a best efforts or mandatory commitment it will receive worse-case pricing. Loans committed after 30 days will receive current market pricing. See the PE – Whole Loan Committing Basics and FAQs for more information on how to re-commit a loan via best efforts or for more information on how worse-case pricing is calculated.

E

Escrow Amount

Escrow funds collected from the borrower at the closing of the loan for taxes, insurance, and similar items (entered in the HUD-1 Settlement Statement, Section 1000: “Reserves Deposited with Lender”, or any successor form), plus any additional escrow funds provided by the borrower after closing, less any payments made by the seller out of such escrow funds on the borrower’s behalf. At time of commitment, the seller may submit an estimate of escrow funds when selecting the option to enter into a concurrent sale of servicing. Sellers must update the escrow funds in the event of any additions to, or payments from, the escrow funds prior to setting the loan status to “Closed.”

Escrows Collected Indicator

A Yes / No indicator for identifying loans that do or do not have taxes, insurance, and similar items escrowed.

Estimated Proceeds

The Commitment Pass-Through Price plus Net SRP minus Escrow Funds. If applicable, loan-level price adjustments (LLPAs) will be subtracted from the estimated proceeds payable by Fannie Mae.

Execution Type

PE – Whole Loan accommodates both mandatory and best efforts execution types:  

With a mandatory execution, a seller agrees to deliver a specified dollar amount of a mortgage product (within certain tolerances) to Fannie Mae by a specific date at an agreed upon price within a range of pass-through rates. Commitments are mandatory, meaning that if a seller is  unable to fulfill the terms of their commitment with Fannie Mae, the seller will be required to pair out of the contract and may be subject to a pair-off fee. However, because commitments are not tied to a specific loan or loans, a seller may be able to substitute loans with similar characteristics in order to fulfill the commitment.

With a best efforts execution, a seller agrees to deliver a loan for a specific borrower(s) on a specific property to Fannie Mae by the commitment expiration date. A best efforts commitment allows a seller to enter into an agreement to sell a loan to Fannie Mae, but if the loan does not close, typically a pair-off fee for non-delivery will not be charged.

Extension

A change to the Current Commitment Expiration Date that extends the date further into the future, allowing for additional time for loan delivery and purchase.

Mandatory commitments can be extended up to 30 calendar days past the original expiration date.

Best efforts commitments may be extended up to 30 days with a loan status of “committed” and up to 60 days with a “closed” loan status. Commitments with a “closed” loan status automatically will be extended for five calendar days until the commitment has reached its maximum allowed extension period or until the loan is purchased (the earlier of the two). After a commitment has reached its maximum allowed extension period of 60 days and the commitment remains in a “closed” loan status, PE – Whole Loan will automatically pair-off the commitment and a fee may be assessed.

Extension Fee

A per-diem fee charged to the seller for extending the Commitment Expiration Date.  

For a mandatory commitment, the extension fee is calculated the remaining balance of a commitment and multiplying it by the lowest pass-through rate (PTR) and dividing that product by 360 days to determine the per- diem extension cost .

A best efforts commitment’s extension fee is calculated by taking the maximum commitment loan amount and multiplying it by the maximum pass-through rate (PTR) throughout the life of the commitment and dividing that amount by 360 days to determine the per-diem extension cost.

F

Fallout Date

See Commitment Fallout Date

G

Gross Margin

The amount that is added to an index value to create the mortgage interest rate for an ARM at adjustment.

Gross Servicing-Released Premium (SRP)

The highest SRP (Servicing Released Premium) that any Active Servicer is willing to pay for the servicing based on your selected loan level parameters.

H I J K

L

Lender-Paid Mortgage Insurance (LPMI)

Lender-paid mortgage insurance (LPMI) is mortgage insurance coverage for a conventional mortgage that the lender pays for by using its own funds (via the servicing cash-flow stream), rather than requiring the borrower to include periodic accruals for such coverage as part of the mortgage payment. When committing a loan on PE – Whole Loan that has LPMI that is paid for out of the gross note rate, the LPMI percentage will need to be factored in to the total servicing fee. For example, a 5.0 percent gross note rate that is sold with 25 basis points (bps) of servicing and 50bps of LPMI will result in a 4.25 percent pass-through rate (5.0 percent – .25 percent servicing – .50 percent LPMI = 4.25 percent PTR).

Loan-Level Price Adjustments (LLPAs) Applicable

Fannie Mae may apply one or more loan-level price adjustments (LLPA) that are charged at loan delivery based on certain loan level credit risk characteristics, such as credit score, loan purpose, occupancy, number of units, and product type. All LLPAs are cumulative.

Loan Status

Loan status is a field applicable to best efforts commitments only.

• Committed – A loan has been committed, but has not yet been closed, purchased or canceled.  The commitment is considered still in process.
• Closed – The loan has been closed and the borrower(s) funded, but is not yet funded by Fannie Mae. The seller should make its best effort to set this status within one business day of the loan funding with the borrower(s).  A closed loan is considered a mandatory obligation to deliver to Fannie Mae. In the event a seller cannot deliver the loan to Fannie Mae a pair-off fee may result.
• Fallout – The commitment that has been canceled by the seller, or has auto-expired without a loan purchase.
• Purchase and Funded – The closed loan has been purchased by Fannie Mae and funds have been transmitted to the seller’s account.

M

Mandatory Commitment

A forward commitment where a seller agrees to deliver a specified dollar amount of mortgage loans (within certain tolerances) for a particular product type to Fannie Mae by a specific date for an agreed upon price. Commitments are mandatory, meaning that if a seller is unable to fulfill the terms of their commitment with Fannie Mae, they will be required to pair out of the contract and may be subject to a pair-off fee. However, because commitments are not tied to a specific loan or loans, a seller may be able to substitute loans with similar characteristics in order to fulfill the commitment.

Margin

See also Gross Margin and Actual Net Margin.

Master Agreement #

A master agreement is a contract between Fannie Mae and a seller that specifies the total dollar amount of loans that the seller expects to deliver during the term of the agreement, and enables the seller to negotiate specific underwriting and product variances.

Max Allowable HBL Delivery Amount

The Max Allowable HBL Delivery Amount is the amount of High Balance loans that can be delivered against a commitment.  For standard 10, 15, 20, & 30yr fixed-rate commitments, 10% of the delivered amount can consist of high balance loans.

Minimum Pass-Through Rate

The pass-through rate is the rate at which mortgage interest is remitted (passed through) to Fannie Mae. It is equivalent to the note rate minus the total servicing fee.

When a seller takes down a mandatory  commitment, they specify the minimum pass-through rate that may be delivered under that commitment.  However, a seller may deliver mortgage loans with pass-through rates up to 50 basis points above the minimum assuming pricing is available for the entire pass-through range. If a commitment is taken towards the upper end of pass-through range that is being priced, 50bps of pass-through rates above the minimum pass-through rate selected may not be available.  In these instances a commitment would only include the pass-through rates that are currently being priced. The minimum pass-through rate must be divisible by 1/8 (0.125%).

N

Net Servicing-Released Premium or Net Funding SRP

The price the Servicer is willing to pay to acquire the servicing associated with a particular committed loan less any fees as agreed by the Servicer and the seller in their Servicing Sales Agreement; it is calculated as gross SRP minus Servicer price adjustments and Total Fees. Changes to loan level data and/or commitment product, period, and pass-through rate may result in an adjustment to the net SRP offered at time of commitment.

O

Other Underwriting Method

The “Other” underwriting method does not require a DU Casefile ID at time of a best efforts commitment. A seller may select the “Other” underwriting method when committing loans that have been underwritten either manually or by an alternative underwriting system; or if the seller does not have an Approve/Eligible DU recommendation prior to commitment. There may be an adjustment to the commitment price if the “Other” underwriting method is selected.

Over-Delivery

Allows a seller to increase the amount and remaining balance of a mandatory commitment.  This is a market transaction and a fee may be applicable.  Whole loan prices at commitment and at the time of the over-delivery are used to determine if an over-delivery fee will be due. The maximum over-delivery amount is 25 percent of the original commitment amount, up to a maximum of the 1-unit, single-family loan limit.

With a best efforts commitment, there is no commitment amount tolerance. The loan amount may be adjusted up or down without penalty.

Over-Delivery Fee

The fee associated with an over-delivery transaction on a mandatory commitment.  Fees are charged when the market price at the time of over-delivery is less than the price on the commitment.

P

Pair-Off

Transactions used to repurchase all or part of a mandatory delivery commitment when customers are unable to deliver the committed dollar amount. Whole loan prices captured at commitment and again at pair-off are used to determine if a pair-off fee will be due, and the amount of the pair-off.

Closed loans in best efforts execution are considered a mandatory obligation to deliver to Fannie Mae. Once the loan status is changed to “Closed”, the option to “Pair-Off” is provided in the event the loan cannot be delivered or purchased by Fannie Mae. A pair-off fee may result, as the obligation to deliver the loan was not met. Please note that commitments in “Closed” status automatically will be extended for a minimum of five calendar days up to a maximum of 60 days, if the loan has not purchased by the current expiration date.

Pair-Off Fee

A fee that may be charged to the seller for failing to deliver a Closed loan associated with a best efforts commitment or the fee for failure to deliver against a mandatory commitment.  Fees may be charged when the price at the time of pair-off exceeds the price of the commitment.

Pass-Through Rate

See Commitment Pass-Through Rate

Delivered but Not Cleared Amount

The aggregate balance of loans that have been delivered into a commitment but have not yet been purchased.  

Potential Remaining Balance

The remaining balance on a commitment after all of the loans pending purchase are purchased.

Product Term

A grouping of loans with the same amortization term. Examples include 30-yr, 20-yr, 15-yr or 10-yr .

Pull-Through Rate

The volume of loans closed and funded divided by the volume of loans committed over a period of time expressed as a percentage. A seller’s pull-through rate is monitored closely by Fannie Mae.  Note: Significant fluctuations and lower than average pull-through rates may impact an individual seller’s overall best efforts pricing.

R

Remaining Balance

The amount that must be satisfied prior to the expiration of a commitment.  Both loan purchases and pair-offs reduce the remaining balance while over-deliveries increase the remaining balance.  Note: Delivery tolerances only apply to delivered loans.  If a commitment is being paired off to satisfy the remaining balance, the entire remaining balance needs to be paired off.

Remittance Type

The method the seller uses to remit mortgage payments to Fannie Mae.

• Actual / Actual: A method of sending mortgage payments that requires the seller to remit only the actual interest due (if it is collected from borrowers) and the actual principal payments that it collects from borrowers.

• Scheduled / Scheduled: A method of sending mortgage payments that requires the seller to remit the scheduled interest due and the scheduled principal due whether or not payments are collected from borrowers.

S

Seller Number

A nine-digit number assigned by Fannie Mae to an approved seller or seller-servicer.

Seller Unique ID

A company’s unique identifier for a commitment or loan (e.g. borrower name or lender loan number)

Servicing Fee

The servicing fee is the portion of the borrowers' interest payments that the Servicer retains as compensation for servicing loans for Fannie Mae. Typically lenders can retain anywhere from 25-50bps for most products in a mandatory commitment, otherwise known as “base servicing fee”.  PE – Whole Loan assumes a servicing fee of 25 bps for a best efforts commitment.

Servicing Released Funding

If the seller accepts Fannie Mae’s price on a loan and the Active Servicer’s price on the associated servicing and subsequently sells the loan to Fannie Mae, Fannie Mae will facilitate the sale of the related servicing by:

• Calculating the Net Funding SRP, based on the Active Servicer’s Net Servicing-Released Premium, or Net SRP, and the final amount of escrow funds entered into PE-Whole Loan

• Collecting an amount equal to the Net Funding SRP from the Active Servicer

• Remitting an amount equal to the Net Funding SRP to the seller on behalf of the Active Servicer, together with the commitment pass-through price.

If the Net Funding SRP is a negative amount, Fannie Mae will deduct that amount from the purchase proceeds it remits to the seller and will remit the deducted amount (i.e., the negative Net Funding SRP amount to the Active Servicer).

Servicing-Released Premium

In a concurrent sale of servicing transaction, PE - Whole Loan will use information submitted by both the seller and the Active Servicer(s) to calculate the Active Servicers’ bids on the servicing. PE – Whole Loan will then compare the bids for the servicing submitted by all of the Active Servicer(s) and display the highest SRP (Servicing Released Premium) that any Active Servicer is willing to pay for the servicing for that loan.

Servicer Required Fields (SRF)

Certain fields may be required by the active servicer on loans when the seller has elected to arrange for a concurrent transfer of servicing. If this information is required by the active servicer, the seller should provide this information prior to Fannie Mae funding the loan.

T

Total Servicing Fee

The sum of the Base Servicing Fee and LPMI for a mandatory commitment, or 25 bps for a best efforts commitment 

U V  WXYZ