Fannie Mae Selling Guide B2-1.1-01 — Occupancy Types

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Fannie Mae Selling Guide B2-1.1-01 — Occupancy Types.

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      paragraph_quote: 'B2-1.1-01, Occupancy Types (10/05/2022) Introduction This topic contains information on occupancy type requirements, including: Overview Principal Residence Properties Second Home Properties Investment Properties Deﬁning Occupancy for a Group Home Published May 6, 2026 158 Overview Fannie Mae purchases or securitizes mortgages secured by properties that are principal residences, second homes, or investment properties. For the maximum allowable LTV/CLTV/HCLTV ratios and credit score requirements for each occupancy type, see the Eligibility Matrix. Principal Residence Properties A principal residence is a property that the borrower occupies as their primary residence. The following table describes conditions under which Fannie Mae considers a residence to be a principal residence even though the borrower will not be occupying the property. Borrower Types Requirements for Owner Occupancy Multiple borrowers Only one borrower must occupy and take title to the property, except as otherwise required for mortgages that have guarantors or co-signers (see B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction). Military service members A military service member borrower currently on active duty and temporarily absent from their principal residence because of military service is considered to be an owner occupant. Lenders must verify the borrower''s temporary absence from the subject property by obtaining a copy of the borrower''s military orders. The military orders must evidence the borrower will be absent from the subject property as of the date the owner occupancy must be established as required by the security instrument. Loans that meet these requirements must be delivered with Special Feature Code 754. Parents or legal guardian wanting to provide housing for their handicapped or disabled adult child If the child is unable to work or does not have suﬃcient income to qualify for a mortgage on their own, the parent or legal guardian is considered the owner/occupant. Published May 6, 2026 159 Borrower Types Requirements for Owner Occupancy Children wanting to provide housing for parents If the parent is unable to work or does not have suﬃcient income to qualify for a mortgage on their own, the child is considered the owner/occupant. Second Home Properties The table below provides the requirements for second home properties. ✓ Second Home Requirements must be occupied by the borrower for some portion of the year is restricted to one-unit dwellings must be suitable for year-round occupancy the borrower must have exclusive control over the property must not be rental property or a timeshare arrangement 1 If the lender identiﬁes rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above). cannot be subject to any agreements that give a management ﬁrm control over the occupancy of the property must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV reﬁnance loans required to be underwritten in accordance with the Alternative Qualiﬁcation Path (see B5-7-03, High LTV Reﬁnance Alternative Qualiﬁcation Path). An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix. Investment Properties An investment property is owned but not occupied by the borrower. An LLPA applies to all mortgage loans Published May 6, 2026 160 secured by an investment property. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix. Loans secured by an investment property must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV reﬁnance loans that are required to be underwritten in accordance with the Alternative Qualiﬁcation Path (see B5-7-03, High LTV Reﬁnance Alternative Qualiﬁcation Path). Deﬁning Occupancy for a Group Home Eligibility and pricing for group homes will be the same as currently provided under the terms and conditions established for principal residence, second home, or investment properties depending on the particular occupancy status of the borrower(s). Investment properties that are or will be leased to business entities for use as a group home are eligible for purchase by Fannie Mae (provided all borrowers are individuals). If the lender identiﬁes rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above). 1 Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2022-09 October 05, 2022 Announcement SEL-2022-05 June 01, 2022 Announcements SEL-2021-11 December 15, 2021 Announcement SEL-2021-03 April 07, 2021 Announcement SEL-2019-04 May 01, 2019 Announcement SEL-2019-02 March 6, 2019 Published May 6, 2026 161 Section B2-1.2, LTV, CLTV, HCLTV, and Subordinate Financing B2-1.2-01, Loan-to-Value (LTV) Ratios (06/01/2022) Introduction This topic contains information on LTV ratios, including: Calculation of the LTV Ratio Sales Price and Appraised Value Used by DU Loan-Level Price Adjustments Calculation of the LTV Ratio The maximum allowable LTV ratio for a ﬁrst mortgage is based on a number of factors including, the representative credit score, the type of mortgage product, the number of dwelling units, and the occupancy status of the property. The following table describes the requirements for calculating LTV ratios for a ﬁrst mortgage transaction. The result of these calculations must be truncated (shortened) to two decimal places, then rounded up to the nearest whole percent. For example: 94.01% will be delivered as 95%, and 80.001% will be delivered as 80%. The rounding rules noted above also apply to the CLTV and HCLTV ratio calculations. Lenders'' systems must contain rounding methodology that results in the same or a higher LTV ratio. Underwriting Method Type of Transaction Calculation of the LTV Ratio 1 Manual and DU Purchase money transactions Divide the original loan amount by the property value. (The property value is the lower of the sales price or the current appraised value.) Manual and DU Reﬁnance transactions Divide the original loan amount by the property value. (The property value is the current appraised value.) Published May 6, 2026 162 Underwriting Method Type of Transaction Calculation of the LTV Ratio 1 Manual and DU Co-op share loans See Calculating the LTV ratio for Co-op Share Loans in B4-2.3-04, Loan Eligibility for Co-op Share Loans. Manual and DU Mortgages with ﬁnanced mortgage insurance Divide the original loan amount plus the ﬁnanced mortgage insurance by the property value. (The property value is the lower of the sales price or the current appraised value.) Note: The LTV ratio calculations shown above may diﬀer for certain mortgage loans. For details on these diﬀerences, see B2-1.3-05, Payoﬀ of Installment Land Contract Requirements; B5-2-03, Manufactured Housing Underwriting Requirements; B5-3.1-02, Conversion of Construction-to- Permanent Financing: Single-Closing Transactions; B5-3.3-01, HomeStyle Refresh for Improvements on Existing Properties; B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations; B5-5.1-02, Community Seconds Loan Eligibility; B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements; B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirements; and B7-1-01, Provision of Mortgage Insurance. Refer to the Eligibility Matrix for maximum allowable LTV ratios. Sales Price and Appraised Value Used by DU DU uses information in the loan application to determine the sales price and appraised value it uses to calculate the LTV, CLTV, and HCLTV ratios. DU uses the amounts entered in the following data ﬁelds in the online loan application: Sales price = Line A + Line B + Line C (in Section L4) Line A = Sales Contract Price (the sales price for purchase transactions, or the cost of construction for construction transactions). Line B = Improvements, Renovations, and Repairs (the cost of these items for HomeStyle Renovation transactions). Line C = Land Value (For certain construction or manufactured home transactions the cost or value of the land if the borrower acquired the lot separately). Appraised value = Appraised Property Value (in Section 4a) Note: If the Appraised Property Value is not present, DU will use the Estimated Property Value. The Appraised Property Value must be entered (when available) and the loan caseﬁle must be resubmitted. Loan-Level Price Adjustments Published May 6, 2026 163 An LLPA may apply to certain mortgages based on the loan-to-value (LTV) ratio and representative credit score. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix . As deﬁned in the LTV ratio, the original loan amount is the amount of the loan as indicated by the note. 1 Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2022-05 June 01, 2022 Announcement SEL-2020-07 December 16, 2020 B2-1.2-02, Combined Loan-to-Value (CLTV) Ratios (12/04/2018) Introduction This topic contains information on CLTV ratios, including: Calculation of the CLTV Ratio Loan-Level Price Adjustments Calculation of the CLTV Ratio For ﬁrst mortgage loans that are subject to subordinate ﬁnancing, the lender must calculate the LTV ratio and the CLTV ratio. For ﬁrst mortgage loans that are subject to a HELOC, see B2-1.2-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios. For all other subordinate liens, see B2-1.2-04, Subordinate Financing for additional information. The CLTV ratio is determined by dividing the sum of the items listed below by the lesser of the sales price or the appraised value of the property. the original loan amount of the ﬁrst mortgage, the drawn portion (outstanding principal balance) of a HELOC, and the unpaid principal balance of all closed-end subordinate ﬁnancing. (With a closed-end loan, a borrower draws down all funds on day one and may not make any payment plan changes or access any paid-down Published May 6, 2026 164 principal once the loan is closed.) Note: For each subordinate liability, in order for the lender to accurately calculate the CLTV ratio for eligibility and underwriting purposes, the lender must determine the drawn portion of all HELOCs, if applicable, and the unpaid principal balance for all closed-end subordinate ﬁnancing. If any subordinate ﬁnancing is not shown on a credit report, the lender must obtain documentation from the borrower or creditor. If the borrower discloses, or the lender discovers, new (or increased) subordinate ﬁnancing after the underwriting decision has been made, up to and concurrent with closing, the lender must re-underwrite the mortgage loan. (See B3-6-02, Debt-to-Income Ratios, for additional information.) Note: The CLTV ratio calculation may diﬀer for certain mortgage loans. For details on these diﬀerences, see B2-1.3-05, Payoﬀ of Installment Land Contract Requirements; B5-2-03, Manufactured Housing Underwriting Requirements; B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions; B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations; B5-3.3-01, HomeStyle Refresh for Improvements on Existing Properties; B5-5.1-02, Community Seconds Loan Eligibility; and B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements; and B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirements. Refer to the Eligibility Matrix for allowable CLTV ratios. Loan-Level Price Adjustments An LLPA applies to certain mortgages with subordinate ﬁnancing. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix. Recent Related Announcements There are no recently issued Announcements related to this topic. B2-1.2-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios (02/23/2016) Introduction This topic contains information on HCLTV ratios, including: Calculation of the HCLTV Ratio Permanently Modiﬁed HELOCs Published May 6, 2026 165 Calculation of the HCLTV Ratio For ﬁrst mortgages that have subordinate ﬁnancing under a HELOC, the lender must calculate the HCLTV ratio. This is determined by dividing the sum of the items listed below by the lesser of the sales price or appraised value of the property. the original loan amount of the ﬁrst mortgage, the full amount of any HELOCs (whether or not funds have been drawn), and the unpaid principal balance (UPB) of all closed-end subordinate ﬁnancing. Note: For each subordinate liability, in order for the lender to accurately calculate the HCLTV ratio for eligibility and underwriting purposes, the lender must determine the maximum credit line for all HELOCs, if applicable, and the unpaid principal balance for all closed-end subordinate ﬁnancing. If any subordinate ﬁnancing is not shown on a credit report, the lender must obtain documentation from the borrower or creditor. If the borrower discloses, or the lender discovers, new (or increased) subordinate ﬁnancing after the underwriting decision has been made, up to and concurrent with closing, the lender must re- underwrite the mortgage loan. (See B3-6-02, Debt-to-Income Ratios, for additional information.) Permanently Modiﬁed HELOCs If the lender determines the HELOC has been permanently modiﬁed and the outstanding UPB is less than the permanently modiﬁed HELOC, the lender must use the modiﬁed HELOC amount in calculating the HCLTV ratio for eligibility purposes and for delivery. The lender must obtain appropriate documentation that the HELOC has been permanently modiﬁed and include this documentation in the loan ﬁle. If the outstanding UPB is greater than the permanently modiﬁed HELOC, the lender must use the outstanding UPB to calculate the HCLTV ratio for eligibility purposes and for delivery. As noted above, the lender must obtain appropriate documentation and include that documentation in the loan ﬁle. In no case may the CLTV ratio exceed the HCLTV ratio. Note: The HCLTV ratio calculation may diﬀer for certain mortgage loans. For details on these diﬀerences, see B2-1.3-05, Payoﬀ of Installment Land Contract Requirements; B5-2-03, Manufactured Housing Underwriting Requirements; B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions; B5-3.3-01, HomeStyle Refresh for Improvements on Existing Properties; B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations; and B5-5.1-02, Community Seconds Loan Eligibility. Note: Refer to the Eligibility Matrix for maximum allowable HCLTV ratios. Recent Related Announcements There are no recently issued Announcements related to this topic. Published May 6, 2026 166'

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Verbatim provisions from Fannie Mae Selling Guide B2-1.1-01 — Occupancy Types — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.

Fannie Mae Selling Guide B2-1.1-01 — Occupancy Types

B2-1.1-01, Occupancy Types (10/05/2022) Introduction This topic contains information on occupancy type requirements, including: Overview Principal Residence Properties Second Home Properties Investment Properties Deﬁning Occupancy for a Group Home Published May 6, 2026 158 Overview Fannie Mae purchases or securitizes mortgages secured by properties that are principal residences, second homes, or investment properties. For the maximum allowable LTV/CLTV/HCLTV ratios and credit score requirements for each occupancy type, see the Eligibility Matrix. Principal Residence Properties A principal residence is a property that the borrower occupies as their primary residence. The following table describes conditions under which Fannie Mae considers a residence to be a principal residence even though the borrower will not be occupying the property. Borrower Types Requirements for Owner Occupancy Multiple borrowers Only one borrower must occupy and take title to the property, except as otherwise required for mortgages that have guarantors or co-signers (see B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction). Military service members A military service member borrower currently on active duty and temporarily absent from their principal residence because of military service is considered to be an owner occupant. Lenders must verify the borrower's temporary absence from the subject property by obtaining a copy of the borrower's military orders. The military orders must evidence the borrower will be absent from the subject property as of the date the owner occupancy must be established as required by the security instrument. Loans that meet these requirements must be delivered with Special Feature Code 754. Parents or legal guardian wanting to provide housing for their handicapped or disabled adult child If the child is unable to work or does not have suﬃcient income to qualify for a mortgage on their own, the parent or legal guardian is considered the owner/occupant. Published May 6, 2026 159 Borrower Types Requirements for Owner Occupancy Children wanting to provide housing for parents If the parent is unable to work or does not have suﬃcient income to qualify for a mortgage on their own, the child is considered the owner/occupant. Second Home Properties The table below provides the requirements for second home properties. ✓ Second Home Requirements must be occupied by the borrower for some portion of the year is restricted to one-unit dwellings must be suitable for year-round occupancy the borrower must have exclusive control over the property must not be rental property or a timeshare arrangement 1 If the lender identiﬁes rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above). cannot be subject to any agreements that give a management ﬁrm control over the occupancy of the property must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV reﬁnance loans required to be underwritten in accordance with the Alternative Qualiﬁcation Path (see B5-7-03, High LTV Reﬁnance Alternative Qualiﬁcation Path). An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix. Investment Properties An investment property is owned but not occupied by the borrower. An LLPA applies to all mortgage loans Published May 6, 2026 160 secured by an investment property. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix. Loans secured by an investment property must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV reﬁnance loans that are required to be underwritten in accordance with the Alternative Qualiﬁcation Path (see B5-7-03, High LTV Reﬁnance Alternative Qualiﬁcation Path). Deﬁning Occupancy for a Group Home Eligibility and pricing for group homes will be the same as currently provided under the terms and conditions established for principal residence, second home, or investment properties depending on the particular occupancy status of the borrower(s). Investment properties that are or will be leased to business entities for use as a group home are eligible for purchase by Fannie Mae (provided all borrowers are individuals). If the lender identiﬁes rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above). 1 Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2022-09 October 05, 2022 Announcement SEL-2022-05 June 01, 2022 Announcements SEL-2021-11 December 15, 2021 Announcement SEL-2021-03 April 07, 2021 Announcement SEL-2019-04 May 01, 2019 Announcement SEL-2019-02 March 6, 2019 Published May 6, 2026 161 Section B2-1.2, LTV, CLTV, HCLTV, and Subordinate Financing B2-1.2-01, Loan-to-Value (LTV) Ratios (06/01/2022) Introduction This topic contains information on LTV ratios, including: Calculation of the LTV Ratio Sales Price and Appraised Value Used by DU Loan-Level Price Adjustments Calculation of the LTV Ratio The maximum allowable LTV ratio for a ﬁrst mortgage is based on a number of factors including, the representative credit score, the type of mortgage product, the number of dwelling units, and the occupancy status of the property. The following table describes the requirements for calculating LTV ratios for a ﬁrst mortgage transaction. The result of these calculations must be truncated (shortened) to two decimal places, then rounded up to the nearest whole percent. For example: 94.01% will be delivered as 95%, and 80.001% will be delivered as 80%. The rounding rules noted above also apply to the CLTV and HCLTV ratio calculations. Lenders' systems must contain rounding methodology that results in the same or a higher LTV ratio. Underwriting Method Type of Transaction Calculation of the LTV Ratio 1 Manual and DU Purchase money transactions Divide the original loan amount by the property value. (The property value is the lower of the sales price or the current appraised value.) Manual and DU Reﬁnance transactions Divide the original loan amount by the property value. (The property value is the current appraised value.) Published May 6, 2026 162 Underwriting Method Type of Transaction Calculation of the LTV Ratio 1 Manual and DU Co-op share loans See Calculating the LTV ratio for Co-op Share Loans in B4-2.3-04, Loan Eligibility for Co-op Share Loans. Manual and DU Mortgages with ﬁnanced mortgage insurance Divide the original loan amount plus the ﬁnanced mortgage insurance by the property value. (The property value is the lower of the sales price or the current appraised value.) Note: The LTV ratio calculations shown above may diﬀer for certain mortgage loans. For details on these diﬀerences, see B2-1.3-05, Payoﬀ of Installment Land Contract Requirements; B5-2-03, Manufactured Housing Underwriting Requirements; B5-3.1-02, Conversion of Construction-to- Permanent Financing: Single-Closing Transactions; B5-3.3-01, HomeStyle Refresh for Improvements on Existing Properties; B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations; B5-5.1-02, Community Seconds Loan Eligibility; B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements; B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirements; and B7-1-01, Provision of Mortgage Insurance. Refer to the Eligibility Matrix for maximum allowable LTV ratios. Sales Price and Appraised Value Used by DU DU uses information in the loan application to determine the sales price and appraised value it uses to calculate the LTV, CLTV, and HCLTV ratios. DU uses the amounts entered in the following data ﬁelds in the online loan application: Sales price = Line A + Line B + Line C (in Section L4) Line A = Sales Contract Price (the sales price for purchase transactions, or the cost of construction for construction transactions). Line B = Improvements, Renovations, and Repairs (the cost of these items for HomeStyle Renovation transactions). Line C = Land Value (For certain construction or manufactured home transactions the cost or value of the land if the borrower acquired the lot separately). Appraised value = Appraised Property Value (in Section 4a) Note: If the Appraised Property Value is not present, DU will use the Estimated Property Value. The Appraised Property Value must be entered (when available) and the loan caseﬁle must be resubmitted. Loan-Level Price Adjustments Published May 6, 2026 163 An LLPA may apply to certain mortgages based on the loan-to-value (LTV) ratio and representative credit score. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix . As deﬁned in the LTV ratio, the original loan amount is the amount of the loan as indicated by the note. 1 Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2022-05 June 01, 2022 Announcement SEL-2020-07 December 16, 2020 B2-1.2-02, Combined Loan-to-Value (CLTV) Ratios (12/04/2018) Introduction This topic contains information on CLTV ratios, including: Calculation of the CLTV Ratio Loan-Level Price Adjustments Calculation of the CLTV Ratio For ﬁrst mortgage loans that are subject to subordinate ﬁnancing, the lender must calculate the LTV ratio and the CLTV ratio. For ﬁrst mortgage loans that are subject to a HELOC, see B2-1.2-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios. For all other subordinate liens, see B2-1.2-04, Subordinate Financing for additional information. The CLTV ratio is determined by dividing the sum of the items listed below by the lesser of the sales price or the appraised value of the property. the original loan amount of the ﬁrst mortgage, the drawn portion (outstanding principal balance) of a HELOC, and the unpaid principal balance of all closed-end subordinate ﬁnancing. (With a closed-end loan, a borrower draws down all funds on day one and may not make any payment plan changes or access any paid-down Published May 6, 2026 164 principal once the loan is closed.) Note: For each subordinate liability, in order for the lender to accurately calculate the CLTV ratio for eligibility and underwriting purposes, the lender must determine the drawn portion of all HELOCs, if applicable, and the unpaid principal balance for all closed-end subordinate ﬁnancing. If any subordinate ﬁnancing is not shown on a credit report, the lender must obtain documentation from the borrower or creditor. If the borrower discloses, or the lender discovers, new (or increased) subordinate ﬁnancing after the underwriting decision has been made, up to and concurrent with closing, the lender must re-underwrite the mortgage loan. (See B3-6-02, Debt-to-Income Ratios, for additional information.) Note: The CLTV ratio calculation may diﬀer for certain mortgage loans. For details on these diﬀerences, see B2-1.3-05, Payoﬀ of Installment Land Contract Requirements; B5-2-03, Manufactured Housing Underwriting Requirements; B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions; B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations; B5-3.3-01, HomeStyle Refresh for Improvements on Existing Properties; B5-5.1-02, Community Seconds Loan Eligibility; and B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements; and B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirements. Refer to the Eligibility Matrix for allowable CLTV ratios. Loan-Level Price Adjustments An LLPA applies to certain mortgages with subordinate ﬁnancing. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix. Recent Related Announcements There are no recently issued Announcements related to this topic. B2-1.2-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios (02/23/2016) Introduction This topic contains information on HCLTV ratios, including: Calculation of the HCLTV Ratio Permanently Modiﬁed HELOCs Published May 6, 2026 165 Calculation of the HCLTV Ratio For ﬁrst mortgages that have subordinate ﬁnancing under a HELOC, the lender must calculate the HCLTV ratio. This is determined by dividing the sum of the items listed below by the lesser of the sales price or appraised value of the property. the original loan amount of the ﬁrst mortgage, the full amount of any HELOCs (whether or not funds have been drawn), and the unpaid principal balance (UPB) of all closed-end subordinate ﬁnancing. Note: For each subordinate liability, in order for the lender to accurately calculate the HCLTV ratio for eligibility and underwriting purposes, the lender must determine the maximum credit line for all HELOCs, if applicable, and the unpaid principal balance for all closed-end subordinate ﬁnancing. If any subordinate ﬁnancing is not shown on a credit report, the lender must obtain documentation from the borrower or creditor. If the borrower discloses, or the lender discovers, new (or increased) subordinate ﬁnancing after the underwriting decision has been made, up to and concurrent with closing, the lender must re- underwrite the mortgage loan. (See B3-6-02, Debt-to-Income Ratios, for additional information.) Permanently Modiﬁed HELOCs If the lender determines the HELOC has been permanently modiﬁed and the outstanding UPB is less than the permanently modiﬁed HELOC, the lender must use the modiﬁed HELOC amount in calculating the HCLTV ratio for eligibility purposes and for delivery. The lender must obtain appropriate documentation that the HELOC has been permanently modiﬁed and include this documentation in the loan ﬁle. If the outstanding UPB is greater than the permanently modiﬁed HELOC, the lender must use the outstanding UPB to calculate the HCLTV ratio for eligibility purposes and for delivery. As noted above, the lender must obtain appropriate documentation and include that documentation in the loan ﬁle. In no case may the CLTV ratio exceed the HCLTV ratio. Note: The HCLTV ratio calculation may diﬀer for certain mortgage loans. For details on these diﬀerences, see B2-1.3-05, Payoﬀ of Installment Land Contract Requirements; B5-2-03, Manufactured Housing Underwriting Requirements; B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions; B5-3.3-01, HomeStyle Refresh for Improvements on Existing Properties; B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations; and B5-5.1-02, Community Seconds Loan Eligibility. Note: Refer to the Eligibility Matrix for maximum allowable HCLTV ratios. Recent Related Announcements There are no recently issued Announcements related to this topic. Published May 6, 2026 166

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