A4-1-01, Maintaining Seller/Servicer Eligibility (05/01/2024)

Adjusted Net Worth is defined as:

• total equity capital as determined by Generally Accepted Accounting Principles (GAAP); minus
• goodwill and other intangible assets (excluding mortgage servicing rights); minus
• affiliated receivables; minus
• pledged assets net of associated liabilities; minus
• deferred tax assets net of associated deferred tax liabilities.

Note: If the deferred tax liabilities are greater than the deferred tax assets, then the deduction from the Adjusted Net Worth will be zero.

Allowable liquidity includes:

• unrestricted cash and cash equivalents;
• unpledged, available-for-sale or held-for-trading investment grade securities limited to the following:
  • Fannie Mae, Freddie Mac, and Ginnie Mae MBS;
  • obligations of GSEs;
  • U.S. Treasury obligations; and
• 50% of the unused portion of committed servicing advance lines of credit of one- to four-unit residential first lien mortgage loans serviced for Fannie Mae, Freddie Mac, and Ginnie Mae.

The outstanding UPB of a seller/servicer's portfolio of one- to four-unit residential first lien mortgage loans the seller/servicer is contractually obligated to service for all investors other than Fannie Mae, Freddie Mac, and Ginnie Mae, plus the following regardless of the investor:

• second lien mortgage loans;
• funded home equity lines of credit;
• reverse mortgage loans; and
• construction and land development mortgage loans

The outstanding UPB of mortgage loans serviced by a seller/servicer under a subservicing arrangement is excluded.

The outstanding UPB of a seller/servicer's portfolio of one- to four-unit residential first lien mortgage loans the seller/servicer is contractually obligated to service for Fannie Mae, Freddie Mac, or Ginnie Mae, as applicable, excluding;

• funded home equity lines of credit,
• reverse mortgage loans, and
• construction and land developments mortgage loans.

The outstanding UPB of mortgage loans serviced by a seller/servicer under a subservicing arrangement is excluded.

A seller must sell at least 12 loans to Fannie Mae during the prior calendar year.

All depository and non-depository sellers/servicers must maintain at all times an Adjusted Net Worth of at least $2.5 million, plus an amount equal to or greater than the sum of the following:

• 0.25% of the portion of the seller/servicer's Residential First Lien Mortgage Servicing UPB serviced for Fannie Mae and Freddie Mac, plus
• 0.35% of the portion of the seller/servicer's Residential First Lien Mortgage Servicing UPB serviced for Ginnie Mae, plus
• 0.25% of the Other Servicing UPB

See Seller Eligibility Criteria for Servicing Marketplace in  A3-3-02, Concurrent Servicing TransfersA3-3-02, Concurrent Servicing Transfers for additional requirements for SMP lenders.

For entities such as nonprofit corporations whose financial reporting requirements or standards do not facilitate calculation of Adjusted Net Worth, Fannie Mae will use equivalent financial data to determine compliance with the minimum net worth requirements.

Non-depository sellers/servicers must maintain at all times an Allowable Liquidity at a level equal to or greater than the sum of the following:

• 0.07% of the portion of the seller/servicer's Residential First Lien Mortgage Servicing UPB serviced for Fannie Mae and Freddie Mac with scheduled/scheduled or scheduled/actual remittance types, plus
• 0.035% of the portion of the seller/servicer's Residential First Lien Mortgage Servicing UPB serviced for Fannie Mae and Freddie Mac with actual/actual remittance types, plus;
• 0.10% of the portion of the seller/servicer's Residential First Lien Mortgage Servicing UPB serviced for Ginnie Mae, plus
• 0.035% of the Other Servicing UPB.

Non-depository seller/servicers who originate greater than $1 billion in one- to four-unit residential first lien mortgage loans (excluding reverse mortgages, one- to four-unit residential construction-to-permanent loans to home buyers, and lot loans to consumers) in the most recent four-quarter period must maintain an origination liquidity of 0.5% of the sum of the following:

• one- to four-unit residential first lien mortgage loans (excluding reverse mortgages, one- to-four-unit residential construction-to-permanent loans to home buyers, and lot loans to consumers) held for sale, at lower of cost or market; plus
• one- to four-unit residential first lien mortgage loans (excluding reverse mortgages, one- to-four-unit residential construction-to-permanent loans to home buyers, and lot loans to consumers) held for sale, at fair value; plus 
• UPB of interest rate lock commitments after fallout adjustments.

In additional to the minimum liquidity requirements for non-depository seller/servicers above, Large Non-depository sellers/servicers must maintain supplemental Allowable Liquidity at all times at a level equal to a greater to or greater than the sum of the following:

• 0.02% of the portion of the seller/server's Residential First Lien Mortgage Servicing UPB serviced for Fannie Mae and Freddie Mac, and 
• 0.05% of the portion of the seller/servicer's Residential First Lien Mortgage Servicing UPB serviced for Ginnie Mae.

Within 90 days after the end of each calendar year, Large Non-depository sellers/servicers must submit a plan to Fannie Mae that describes how the seller/servicer intends to manage its capital and liquidity in a manner consistent with Fannie Mae requirements.

The capital and liquidity plan must include the following at a minimum:

• a description of the seller/servicer's corporate governance over the capital and liquidity planning process, such as oversight responsibilities of senior management and its board of directors, and a discussion of the seller/servicer's risk management framework;
• a description of the processes to monitor and measure liquidity risks, such as business activity reports and financial forecast and cashflow projections;
• capital and liquidity contingency funding plans, including providing for testing and reaffirmation of such plans at least annually;
• an annual liquidity stress test, including a stress test of the value of mortgage servicing rights in an adverse scenario as developed by the seller/servicer, or as prescribed by Fannie Mae, or both; and
• a requirement to provide written notice to Fannie Mae
  • within five business days following any material change to or material deviation from the plan; and
  • within one business day of any material changes during times of stress.

Note: The seller/servicer is authorized to run the stress test either in-house or using a third-party vendor.

To submit the capital and liquidity plans to Fannie Mae, sellers/servicers must contact their Fannie Mae customer account team for further instructions.

Large Non-depository seller/servicer's must maintain a Rating Agency rating as follows:

• Sellers/servicers servicing equal to or greater than $50 billion in Residential First Lien Mortgage Service UPB plus Other Servicing UPB must have one primary Servicer Rating or master Servicer Rating, as applicable;
• Sellers/servicers servicing greater than $100 billion in Residential First Lien Mortgage Servicing UPB must have:
  • one primary Servicer Rating or master Servicer Rating, as applicable; and 
  • one Long-term Senior Unsecured Debt Rating or Long-term Corporate Family Rating.
• Sellers/servicers servicing greater than $150 billion in Residential First Lien Mortgage Servicing UPB plus Other Servicing UPB must have:
  • one primary Servicer Rating or master Servicing Rating, as applicable; and
  • issued by two Rating Agencies, a Long-term Senior Unsecured Debt Rating or a Long-term Corporate Family Rating.

• a breach by the seller/servicer on a credit or funding facility, including warehouse or servicing advance lines of credit;

• a breach by any seller/servicer’s affiliate or related entity in any of its obligations with Fannie Mae, including parental guarantees;

• a breach of any agreements with any other creditors where such breach involves an amount that exceeds 3% of the seller/servicer’s Lender Adjusted Net Worth;

• a breach of, or an impairment of any rights contained in any agreement that is material to the seller/servicer's origination of loans eligible for sale to Fannie Mae, servicing of Fannie Mae loans, the financial or business condition or operations of the seller/servicer, or the seller/servicer's ability to comply with the Lender Contract;

• the occurrence of any change event, or circumstance which has or could reasonably be expected to have a material adverse effect on the seller/servicer's origination of loans, servicing of Fannie Mae loans, on the financial or business condition or operations of the seller/servicer, or the ability to comply with the Lender Contract.

An impairment of rights is any event that may restrict the ability of the seller or servicer to conduct its business, continue to sell loans, or service any loan assets in the regular course of its business.

The seller/servicer must provide Fannie Mae with written notification in the form of an updated Lender Record Information ( Form 582) submission and email notification to the Changes in Lender Organization mailbox (see E-1-02, List of ContactsE-1-02, List of Contacts) within five business days of the occurrence of any of the foregoing.