Fannie Mae Selling Guide B5-7-01 — High LTV Refinance Loan and Borrower Eligibility

Fannie Mae Selling Guide B5-7-01 — High LTV Refinance Loan and Borrower Eligibility

B5-7-01, High LTV Refinance Loan and Borrower Eligibility (08/06/2025) Introduction This topic contains information about the following aspects of the high LTV refinance option, including: Overview Published May 6, 2026 803 Existing Loan Requirements New Loan Requirements Borrower Eligibility Property Eligibility LTV Ratio Requirements Eligible Subordinate Financing Leasehold Estates Eligibility Multiple Financed Properties Overview The high LTV refinance option is designed for Fannie Mae borrowers who are making their mortgage payments on time, but whose LTV ratios exceed the maximum allowed for standard limited cash-out refinance transactions. Lenders are not required to evaluate borrower creditworthiness except for the requirements specifically stated in the high LTV refinance topics. The current servicer or a new servicer may refinance the existing loan. Lenders may not solicit Fannie Mae loans for refinancing except in accordance with standard requirements in Lender Solicitation for Refinancing found in B2-1.3-04, Prohibited Refinancing Practices. Note: The acquisition of high LTV refinances is currently paused. Existing Loan Requirements The following table provides requirements for the existing loan that is to be refinanced under the high LTV refinance option. ✓ The existing loan must.... be a first lien, conventional mortgage loan owned or securitized by Fannie Mae. have a note date on or after October 1, 2017. have seasoning of at least 15 months - meaning at least 15 months have passed from the note date of the existing loan to the note date of the new loan. For example, if the note date on the existing loan is January 1, 2018, the note date of the new loan must be no earlier than April 1, 2019. Note: Loans that are part of a risk-sharing structure (for example, credit risk transfers) are eligible to be refinanced under the high LTV refinance option. Conversely, the following loans are not eligible for refinance under the high LTV refinance option: Published May 6, 2026 804 existing DU Refi Plus TM or Refi Plus TM loans; loans that are subject to outstanding repurchase demands; or loans that are subject to recourse, repurchase agreement, indemnification, or another negotiated credit enhancement required at origination for eligibility purposes are not eligible unless the new loan is also subject to a credit enhancement that meets eligibility requirements, or such credit enhancement is not required for eligibility purposes on the new loan. New Loan Requirements The following table provides requirements for the new loan resulting from the refinance under the high LTV refinance option. ✓ The new loan must... have an application date on or after November 1, 2018. Note: The acquisition of high LTV refinances is currently paused. be either: • a fixed-rate loan; or • an ARM that refinances an existing ARM, with the new ARM having a minimum five-year fixed rate term. have a term not to exceed 30 years. meet current general or high-balance loan limits, as applicable, at the time of loan delivery. have a newly executed Uniform Residential Loan Application (Form 1003) for the borrower(s) with all information completed, including borrower income, employment, and assets. provide a benefit to the borrower in the form of at least one of the following: • a lower P&I payment; • a lower interest rate; • a shorter amortization term; or • movement to a more stable product (for example, from an ARM or step-rate modification to a fixed-rate loan). The new loan cannot be originated pursuant to Texas Constitution Section 50(a)(6). Temporary interest rate buydowns are not allowed. The standard limited cash-out refinance requirements are modified for high LTV loan transactions. The new loan amount is limited to Published May 6, 2026 805 the payoff of the UPB of the existing first mortgage loan being refinanced (including accrued interest); the financing of closing costs, prepaid items, and points up to $5,000 total for the new loan; and cash back to the borrower up to $250. Excess proceeds may be applied as a curtailment on the new loan. Lenders may provide an incentive to the borrower(s) in the form of a payment to pay off a portion of the existing loan being refinanced provided the following: no repayment is required, the payment is reflected on the settlement statement as a lender credit, and because any such reduction of the existing loan balance will impact the LTV ratio as it applies to the calculation of the new loan amount, lenders are advised to use caution as incentives have the potential to reduce the LTV ratio below the minimum allowed for this option. See B3-4.1-02, Interested Party Contributions (IPCs), for additional requirements that apply to lender incentives. Borrower Eligibility Generally, the borrower(s) on the loan being refinanced (or the current borrower(s) if the existing loan was assumed) must be identical to the borrower(s) on the new loan. However, an existing borrower may be excluded from the new loan for either of the following: the remaining borrower(s) meets the mortgage payment history requirements and provides evidence that they have been making the payments on the existing loan from their own funds for the most recent 12 months prior to the application of the new loan, or due to the death of a borrower. Evidence of the deceased borrower’s death must be documented in the loan file. If this criteria cannot be met, the new loan must be underwritten in accordance with the Alternative Qualification Path. See B5-7-03, High LTV Refinance Alternative Qualification Path for additional information. New borrowers may not be added to the new loan refinanced via the high LTV refinance option. Additionally, if the loan being refinanced was assumed by the current borrower(s) prior to the refinance, the current borrowers must have been qualified for the existing loan in accordance with the requirements of the Servicing Guide. Borrowers who have applied for or received a modification are eligible for refinancing provided the following: the borrower benefit provision is met using the prevailing payment, and the payment history requirement is met. See Credit Eligibility Requirements in B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan . Property Eligibility All Fannie Mae-eligible property types are permitted for refinance under the high LTV refinance option. For properties in condo, co-op, or PUD projects, all project review requirements are waived with the exception that the lender must confirm the project is not a condo or co-op hotel or motel, houseboat project, timeshare, or segmented ownership project. For assistance in determining whether the project is a condo or co-op hotel or motel, see B4-2.1-03, Ineligible Projects. Published May 6, 2026 806 The lender must obtain property and flood insurance in accordance with this Guide. LTV Ratio Requirements For the new loan to be eligible, the following table provides the minimum LTV ratio requirements for both fixed- rate and ARM loans. Occupancy Type Units Minimum LTV Principal Residence 1 97.01% 2 85.01% 3-4 75.01% Second Home 1 90.01% Investment Property 1-4 75.01% The loan being refinanced and the new loan do not have to represent the same occupancy. The occupancy of the subject property may have changed by the time of the high LTV refinance transaction. There are no maximum LTV, CLTV, or HCLTV ratios for fixed-rate loans. There is a maximum LTV ratio of 105% for ARM loans, but no maximum CLTV or HCLTV ratio. For comprehensive requirements see the Eligibility Matrix. Eligible Subordinate Financing New subordinate financing is only permitted if it replaces existing subordinate financing. In addition, the existing subordinate financing may not be satisfied with the proceeds of the new loan, but may remain in place as long as it is resubordinated to the new loan, and may be simultaneously refinanced as long as the new subordinate lien loan amount does not exceed the existing UPB. Other subordinate financing requirements described in B2-1.2-04, Subordinate Financing are not applicable. Leasehold Estates Eligibility The term of the leasehold must run for at least five years beyond the maturity date of the mortgage, unless fee simple title will vest at an earlier date in the borrower. The lender is not required to perform any additional review of the leasehold terms. Published May 6, 2026 807 Multiple Financed Properties There are no limits on the number of financed properties the borrower may own. The additional eligibility requirements for borrowers with multiple financed properties in B2-2-03, Multiple Financed Properties for the Same Borrower do not apply. Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2025-06 August 06, 2025 Announcement SEL-2021-08 September 01, 2021 B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan (09/03/2025) Introduction This topic contains information about underwriting requirements for the high LTV refinance option, including: Underwriting Methods Underwriting Requirements Employment, Income, and Asset Verification Valuation Requirements Underwriting Methods High LTV refinance loans may be underwritten using DU or manually, with the exception of loans subject to the Alternative Qualification Path (which must be manually underwritten). Loans secured by a second home or an investment property must be underwritten in DU and receive an Approve/Eligible recommendation, unless they are required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification Path). Loans Underwritten in DU When a limited cash-out refinance loan casefile that meets the minimum LTV requirement for a high LTV refinance loan is underwritten in DU, internal data will be used to determine if Fannie Mae owns the loan on the property, and if that loan is eligible to be refinanced using the high LTV refinance option. Published May 6, 2026 808 When DU finds a loan for the subject property address using either the address provided on the DU loan application or the standardized address, DU will then confirm that the Social Security number(s) for the borrower(s) on the new loan casefile match those on the existing loan. The result of the Social Security number matching will be specified in a DU message. When none of the borrower Social Security numbers match, the loan casefile will not be underwritten as a high LTV refinance loan. DU will issue a message informing the lender that the Social Security number(s) does not match and remind the lender to confirm the property address. When there is a Social Security number match, DU will underwrite the loan casefile as a high LTV refinance loan. If the Social Security number for any of the borrowers on the loan casefile do not match using all nine digits, DU will advise the lender. When a borrower Social Security number is matched using 7 or 8 digits of the 9-digit Social Security number, the DU message will specify that the Social Security numbers are one or two digits different and will require the lender to confirm the borrowers on the existing loan are the same borrowers that will be on the new loan. When there are two borrowers on the new loan and two borrowers on the existing loan, but only one borrower’s Social Security number matches, the DU message will specify that not all of the borrower Social Security numbers match and will require that the lender confirm the borrowers on the existing loan are the same borrowers that will be on the new loan. When one borrower is on the new loan casefile but more than one borrower is on the existing loan, the DU message will state that it appears that a borrower is being removed with transaction and refer the lender to the Selling Guide for additional requirements on removing a borrower with a high LTV refinance transaction. When there is more than one borrower on the new loan casefile but there is only one on the existing loan, the DU message will state that it appears that a borrower is being added with the high LTV refinance transaction, and if that is the case, the high LTV refinance loan is not eligible for delivery. Manually Underwritten Loans The lender must determine that all eligibility requirements are met for manually underwritten loans. Underwriting Requirements The following table provides underwriting and documentation requirements applicable to high LTV refinance loans. Underwriting and Documentation Requirements Published May 6, 2026 809 Payment History To be eligible for the high LTV refinance option, the payment history for the existing loan for the most recent 12 months must reflect • no delinquencies in the most recent 6 months, and • in months 7-12, no more than one, 30-day delinquency and no delinquency greater than 30 days. DTI Ratio There are no maximum DTI ratio requirements except for loans underwritten under the Alternative Qualification Path. Credit Score There is no minimum credit score requirement except for loans underwritten under the Alternative Qualification Path. Lenders must obtain and review a merged credit report in accordance with standard Selling Guide policies for payment history and pricing purposes. However, lenders are not required to comply with the waiting period and re- establishment of credit requirements for significant derogatory credit events or the payoff or satisfaction of a judgment identified on the credit report. Also, lenders are not required to review or consider Form 1003 Declarations in the underwriting evaluation. Property Status The lender does not need to confirm the subject property is not currently listed for sale. Request for Transcript of Tax Return Each borrower must complete and sign a separate IRS Form 4506-C at or before closing. See B3-3.1-02, Tax Return and Transcript Documentation Requirements , for additional information. Published May 6, 2026 810 Higher-Priced Loan Requirements If the loan is a higher-priced mortgage loan or a higher- priced covered transaction under Regulation Z, the loan must comply with the Alternative Qualification Path requirements. DU is unable to determine if a loan casefile is a higher-priced mortgage loan or a higher-priced covered transaction under Regulation Z. The lender must make this determination. Lenders are not relieved of complying with Regulation Z by only adhering to the stricter representative credit score and DTI ratio. The loan must comply in all respects with Regulation Z requirements for such loans, including the underwriting and consumer protection requirements. Employment, Income, and Asset Verification The lender must obtain one of the following for the new loan: a verbal verification of employment for employment or self-employment income for at least one borrower, documentation of a non-employment income source, or documentation of liquid financial reserves equal to 12 months of the new monthly housing payment. With the exception of loans underwritten under the Alternative Qualification Path, lenders are not required to assess continuity of income, verify income, verify assets, or calculate the DTI ratio. Valuation Requirements For certain loan casefiles, DU will offer value acceptance or value acceptance + property data - options to sell the loan to Fannie Mae without an appraisal. Otherwise, an appraisal with an interior and exterior inspection is required. If an appraisal is obtained, it must be used for valuation even if value acceptance is offered by DU. A lender may only exercise the high LTV refinance value acceptance or value acceptance + property data offer if the final submission of the loan casefile to DU resulted in an offer, an appraisal is not obtained for the transaction, and the offer is not more than four months old on the date of the note and the mortgage. Lenders exercising the high LTV refinance value acceptance offer must deliver Special Feature Code 807 or 774 for value acceptance + property data. When the lender is required by law to obtain an appraisal, the lender must comply with such requirements, but Published May 6, 2026 811 may still exercise the offer. For manually underwritten loans, an appraisal with an interior and exterior inspection is required. Repairs to a property damaged as the result of a disaster (as defined by this Selling Guide) are not required prior to loan sale as long as the loan meets the applicable property insurance requirements. The lender is not required to perform an additional inspection and/or new appraisal of the property after a disaster. Recent Related Announcements The table below provides references to the Announcements that have been issued that are related to this topic. Announcements Issue Date Announcement SEL-2025-07 September 03, 2025 Announcement SEL-2023-02 March 01, 2023 Announcement SEL-2021-03 April 07, 2021 Announcement SEL-2020-07 December 16, 2020

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