Adjusting Interest Rate Hedge Reserves for SARM Loans Using Form 6442 Series with an Effective Date Before May 2024

Per the Interest Rate Cap Reserve and Security Agreement ( Form 6442 series ), the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must evaluate the Interest Rate Cap Interest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. reserve and determine if the cost of a replacement Interest Rate Cap Interest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. has increased or decreased based on market conditions.

• If the estimated cost of a replacement cap has increased, the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must increase the monthly reserve payment to ensure that sufficient funds will be available to purchase the replacement cap by the end of the reserve period.
• If the estimated cost of a replacement cap has decreased, the Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. may:
  • opt to not adjust the reserve; or
  • calculate and adjust the monthly escrow payments needed to purchase a replacement Interest Rate Cap Interest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. based on 115% of the cost of an Interest Rate Cap Interest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. with the term required by the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , provided:
    • it is a Portfolio Mortgage Loan Portfolio Mortgage LoanMortgage Loan purchased by Fannie Mae and held as of a certain date regardless of whether it is a Cash Mortgage Loan or an MBS Mortgage Loan. Delivered DeliveredSubmission of all correct, accurate, and certifiable documents, data, and information with all applicable documents properly completed, executed, and recorded as needed, and any deficiencies resolved to Fannie Mae’s satisfaction. before January 1, 2023;
    • the Interest Rate Cap Interest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. escrow payments are recalculated at least every 6 months;
    • it is not part of a Variable Rate Bond Credit Enhancement Transaction;
    • it does not have an existing Payment Default Payment DefaultBorrower's failure to fully pay any required Mortgage Loan payment when due, including, principal, interest, late charges, default interest, fees, pricing incentive recapture, prepayment premium, escrows, or other collateral accounts for taxes, insurance, … or Performance Default Performance DefaultBorrower's failure to perform any promise or covenant within any applicable grace periods per the Mortgage Loan, other than a Payment Default. under the Loan Documents Loan DocumentsAll Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. or a Borrower BorrowerPerson who is the obligor per the Note. , Key Principal Key PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. , or Principal PrincipalPerson who owns or controls, in the aggregate, directly or indirectly (together with that Person's Immediate Family Members, if an individual), specified interests in the Borrower per Part I, Chapter 3: Borrower, Guarantor, Key Principals, and Principals, Section 303: Key Principals, Principals,… on ACheck ACheckLender due diligence performed for the Borrower, Key Principal, and Principal using the ACheckTM application. ; and
    • no other Portfolio Mortgage Loans Portfolio Mortgage LoansMortgage Loan purchased by Fannie Mae and held as of a certain date regardless of whether it is a Cash Mortgage Loan or an MBS Mortgage Loan. in your Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! portfolio with that Sponsor SponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). have an existing Payment Default Payment DefaultBorrower's failure to fully pay any required Mortgage Loan payment when due, including, principal, interest, late charges, default interest, fees, pricing incentive recapture, prepayment premium, escrows, or other collateral accounts for taxes, insurance, … or Performance Default Performance DefaultBorrower's failure to perform any promise or covenant within any applicable grace periods per the Mortgage Loan, other than a Payment Default. .

The Servicer ServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. may refund to the Borrower BorrowerPerson who is the obligor per the Note. any amount left in the reserve account after purchasing the replacement Interest Rate Cap Interest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. .