Section 1102

Underwriting

Requirements

You must calculate the minimum Underwritten DSCR Underwritten DSCRRatio of Underwritten Net Cash Flow to the annual debt service for a Mortgage Loan amount based on a level debt service payment with the applicable amortization, and calculated per Part II, Chapter 2: Valuation and Income, Section 203: Income Analysis, as adjusted for the applicable products and…  based on an amortizing debt service constant.

Minimum Underwritten DSCR
Term Equals the sum of the...

Maximum Note Rate
  • minimum Cap Strike Rate Cap Strike RateIndex interest rate specified in the Interest Rate Cap Agreement at or above which a payment obligation will be triggered by the Interest Rate Cap provider. as set by Fannie Mae Fannie MaeThis Glossary term Is Created Using Automation in Lower Environments and is used for testing purposes only!! for the Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 , plus
  • Mortgage Loan Mortgage 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. Test Notes-SV Test Again Sub-bullet test1 Sub-bullet test2 margin equal to the sum of the
    • Investor InvestorMBS Investor for an MBS Mortgage Loan, or Fannie Mae for a Cash Mortgage Loan. spread,
    • Guaranty Fee Guaranty FeeFee retained by Fannie Mae for credit enhancing a Mortgage Loan or assuming credit risk on a Mortgage Loan, and which may be expressed as a percentage. , and
    • Servicing Fee Servicing FeeFee a Servicer receives for collecting payments, managing operational procedures, and assuming your portion of credit risk for a Mortgage Loan, and which may be expressed as a percentage. .
Debt Service Constant
  • Maximum Note Rate Maximum Note RateEquals the sum of the: minimum Cap Strike Rate as set by Fannie Mae; and Mortgage Loan margin equal to the sum of the Investor spread, Guaranty Fee, and Servicing Fee.   , plus
  • applicable amortization factor based on the Maximum Note Rate Maximum Note RateEquals the sum of the: minimum Cap Strike Rate as set by Fannie Mae; and Mortgage Loan margin equal to the sum of the Investor spread, Guaranty Fee, and Servicing Fee.   .

You must ensure the maximum SARM Loan amount is the lesser of the amount:

  • calculated using the:
    • minimum DSCR DSCROn an annual basis or any specified period, the ratio of Net Cash Flow to the total of:  principal, interest, and required Mezzanine Financing or Hard Pay Preferred Equity payments. per  Form 4660  for both the
      • Maximum Note Rate Maximum Note RateEquals the sum of the: minimum Cap Strike Rate as set by Fannie Mae; and Mortgage Loan margin equal to the sum of the Investor spread, Guaranty Fee, and Servicing Fee.   for the adjustable interest rate, and
      • Fixed Rate Test described in  Form 4660 ; and
    • maximum LTV Ratio LTV RatioRatio of the actual aggregate UPB of the Mortgage Loan, plus any Pre-Existing Mortgage Loans, plus any Hard Pay Preferred Equity, plus any Mezzanine Financing, to the value of the Property, expressed as a percentage.  per  Form 4660 ; or
  • you determined is appropriate.

You must use the Fixed Rate Test interest rate to determine the UPB UPBUnpaid Principal Balance for the refinance risk analysis per  Part II, Chapter 2: Valuation and Income, Section 204: Refinance Risk Analysis .

Guidance

The amortization used to underwrite the SARM Loan is different than the actual SARM Loan amortization schedule, which uses fixed monthly principal installments.