Fannie Mae Selling Guide C3-5-01 — Creating Weighted-Average ARM MBS

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Fannie Mae Selling Guide C3-5-01 — Creating Weighted-Average ARM MBS.

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      paragraph_quote: 'C3-5-01, Creating Weighted-Average ARM MBS (08/26/2014) Introduction This topic contains information on creating weighted-average ARM MBS (ARM Flex), including General Information on Weighted-Average ARM MBS (ARM Flex) ARM Flex Pool Accrual Rate Calculation Options General Information on Weighted-Average ARM MBS (ARM Flex) Published May 6, 2026 997 ARM Flex pools provide interest accruals at a weighted-average pool accrual rate to the holders of securities backed by the ARMs in the pool. These pools may be delivered only as single pool transactions and diﬀerent standard ARM plans may not be commingled in the same pool. The original term of an ARM included in a weighted-average ARM MBS pool must be no more than 30 years. Each mortgage must accrue interest in arrears and have a payment due date of the ﬁrst day of the month. There is no restriction on the range of ﬁrst payment due dates, interest rate change dates, and payment change dates. To limit the eﬀect that prepayments have on the weighted-average pool accrual rate of an ARM Flex, lenders should consider limiting to 1% (100 basis points) the range between the lowest and highest mortgage margins and the lowest and highest mortgage interest rate ceilings of all the mortgages in the pool. ARM Flex Pool Accrual Rate Calculation Options Under the ARM Flex pooling structure, lenders may create a weighted-average ARM MBS using either the ﬁxed MBS margin or weighted-average MBS margin. The diﬀerence between the two margin types is the method used to determine the interest rate that accrues on the pool and the retained servicing fee. The ﬁxed MBS margin option is based on a pool-level MBS margin and a loan-level servicing fee. This means that when the pooled mortgages have diﬀerent mortgage margins, the servicing fees for the mortgages vary in order to equalize the diﬀerences in the mortgage margins. While the guaranty fee remains the same, the servicing spread (the sum of the servicing fee and the guaranty fee and, if applicable the periodic renewal premium for lender-purchased mortgage insurance) diﬀers from mortgage to mortgage. The ﬁxed MBS margin applies to each mortgage in the weighted-average ARM MBS; therefore, the lowest mortgage margin in the pool must be able to, at least, support the sum of the MBS margin, the guaranty fee, and the minimum allowable servicing fee. The periodic renewal premium for lender-purchased mortgage insurance must also be included, if applicable. The weighted-average MBS margin option is based on a pool-level servicing fee and a loan-level MBS margin, which means that when the mortgages in the pool have diﬀerent mortgage margins, the servicing spread will be equal for all the mortgages, but the MBS margin will vary from mortgage to mortgage. Recent Related Announcements There are no recently issued Announcements related to this topic. C3-5-02, Calculating the Weighted-Average Pool Accrual Rates for Published May 6, 2026 998 ARM Flex Pools Using a Fixed MBS Margin (04/01/2009) Introduction This topic contains information on calculating the weighted-average pool accrual rates for ARM Flex pools using a ﬁxed MBS margin. How to Determine the Weighted-Average Pool Accrual Rate(s) for ARM Flex Pools Using a Fixed MBS Margin (based on Pool-Level MBS Margin and Loan-Level Servicing Fee) Step One: Step Two: Step Three: Step Four: Step Five: Step Six: How to Determine the Weighted-Average Pool Accrual Rate(s) for ARM Flex Pools Using a Fixed MBS Margin (based on Pool-Level MBS Margin and Loan- Level Servicing Fee) In the following example, assume that the lender wants to place the following three ARM Plan 57 ARMs into a weighted-average ARM Flex MBS pool with a standard remittance cycle. All of the mortgages in the pool will be serviced under the special servicing option and will have a guaranty fee of 0.35%. All of the mortgages have borrower-purchased mortgage insurance. Category Loan A Loan B Loan C Mortgage Interest Rate 9.00% 9.50% 10.00% Mortgage Margin 2.25% 2.50% 2.50% Mortgage Ceiling 15.00% 15.50% 16.00% UPB $70,000 $50,000 $60,000 Interest Rate Change Date 1–Jun 1–Jul 1–Aug To develop a ﬁxed MBS margin, the lender must ﬁrst derive a loan-level servicing fee by reducing the mortgage margin for each mortgage to be included in the pool by the desired ﬁxed MBS margin and then by the applicable guaranty fee percentage and, if applicable, by the periodic renewal premium for lender-purchased mortgage insurance. The diﬀerences in the servicing fees for the mortgages in the pool will be exactly equal to the diﬀerences in their mortgage margins. The weighted-average pool accrual rate is then determined by ﬁrst reducing each individual mortgage interest rate by the servicing spread for the mortgage (the sum of the Published May 6, 2026 999 guaranty fee and the calculated loan-level servicing fee and, if applicable, the periodic renewal premium for lender-purchased mortgage insurance) and then developing a weighted-average of the net mortgage interest rates. This same procedure also is used to establish the maximum weighted-average pool accrual rate (and any applicable minimum weighted-average pool accrual rate), using the weighted-average of the net mortgage interest rate ceilings (or ﬂoors) of the mortgages in the pool. Step One: Determine the loan-level servicing fee, using a 1.50% pool-level MBS margin. Category Loan A Loan B Loan C Mortgage Margin 2.25% 2.50% 2.75% MBS Margin 1.50% 1.50% 1.50% Guaranty Fee 0.35% 0.35% 0.35% Servicing Fee 0.40% 0.65% 0.90% Step Two: Determine the net mortgage interest rate. Category Loan A Loan B Loan C Mortgage Interest Rate 9.00% 9.50% 10.00% Guaranty Fee 0.35% 0.35% 0.35% Servicing Fee 0.40% 0.65% 0.90% Net Mortgage Interest Rate 8.25% 8.50% 8.75% Step Three: Determine the weighted-average pool accrual rate. Published May 6, 2026 1000 Loan ID Net Mortgage Interest Rate UPB Product Loan A 8.25% $70,000 5,775.00 Loan B 8.50% $50,000 4,250.00 Loan C 8.75% $60,000 5,250.00 $180,000 15,275.00 15,275/180,000 = 8.486%, rounded to three decimal places. Step Four: Determine the net mortgage interest rate ceiling. Category Loan A Loan B Loan C Mortgage Interest Rate Ceiling 15.00% 15.50% 16.00% Guaranty Fee 0.35% 0.35% 0.35% Servicing Fee 0.40% 0.65% 0.90% Net Mortgage Interest Rate Ceiling 14.25% 14.50% 14.75% Step Five: Determine the maximum weighted-average pool accrual rate. Loan ID Net Mortgage Interest Rate UPB Product Loan A 14.25% $70,000 9,975.00 Loan B 14.50% $50,000 7,250.00 Published May 6, 2026 1001 Loan ID Net Mortgage Interest Rate UPB Product Loan C 14.75% $60,000 8,850.00 $180,000 26,075.00 26,075.00/180,0000 = 14.486%, rounded to three decimal places. Step Six: Determine the minimum weighted-average pool accrual rate (if the mortgages have an interest rate ﬂoor). Since the mortgages in this example do not have an interest rate ﬂoor, this step is not necessary. It is shown for illustration purposes only. First, ﬁnd the net mortgage interest rate ﬂoor by following Step Four, substituting the mortgage interest rate ﬂoor for the ceiling. Then, follow Step Five to ﬁnd the minimum weighted-average pool accrual rate, using the net mortgage interest rate ﬂoor just calculated for each mortgage instead of the mortgage interest rate ceilings. Recent Related Announcements There are no recently issued Announcements related to this topic. C3-5-03, Calculating the Weighted-Average Pool Accrual Rates for ARM Flex Pools Using a Weighted-Average MBS Margin (04/01/2009) Introduction This topic contains information on calculating the weighted-average pool accrual rates for ARM ﬂex pools using a weighted-average MBS margin. How to Determine the Weighted-Average Pool Accrual Rate(s) for ARM Flex Pools Using a Weighted- Average MBS Margin (based on Pool-Level Servicing Fee and Loan-Level MBS Margin) Step One: Step 2: Step 3: Step Four: Step Five: Step Six: Published May 6, 2026 1002 How to Determine the Weighted-Average Pool Accrual Rate(s) for ARM Flex Pools Using a Weighted-Average MBS Margin (based on Pool-Level Servicing Fee and Loan-Level MBS Margin) In the following example, assume that the lender wants to place the following three ARM Plan 57 ARMs into a weighted-average ARM Flex MBS pool with a standard remittance cycle. All of the mortgages in the pool will be serviced under the special servicing option and will have a guaranty fee of 0.35%. All of the mortgages have borrower-purchased mortgage insurance. Category Loan A Loan B Loan C Mortgage Interest Rate 9.00% 9.50% 10.00% Mortgage Margin 2.25% 2.50% 2.50% Mortgage Ceiling 15.00% 15.50% 16.00% UPB $70,000 $50,000 $60,000 Interest Rate Change Date 1–Jun 1–Jul 1–Aug To develop a weighted-average MBS margin, the lender must reduce the mortgage margin for each mortgage to be included in the pool by the applicable guaranty fee percentage and then by the desired ﬁxed servicing fee (and, if applicable, by the periodic renewal premium for lender-purchased mortgage insurance) to arrive at a loan-level MBS margin. The diﬀerence between the MBS margins for the mortgages in the pool will be exactly equal to the diﬀerences in their mortgage margins. The weighted-average pool accrual rate is then determined by ﬁrst reducing each individual mortgage interest rate by the servicing spread for the mortgage (the sum of the guaranty fee and the desired servicing fee and, if applicable, the periodic renewal premium for lender- purchased mortgage insurance) and then developing a weighted-average of the net mortgage interest rates. This same procedure also is used to establish the maximum weighted-average pool accrual rate (and any applicable minimum weighted-average pool accrual rate), using the weighted-average of the net mortgage interest rate ceilings (or ﬂoors) of the mortgages in the pool. Step One: Determine the loan-level MBS margin, using a 0.250% standard servicing fee. (This step is not necessary. It is included for informational purposes only.) Category Loan A Loan B Loan C Mortgage Margin 2.250% 2.500% 2.750% Published May 6, 2026 1003 Category Loan A Loan B Loan C –Guaranty Fee 0.350% 0.350% 0.350% –Servicing Fee 0.250% 0.250% 0.250% MBS Margin 1.650% 1.900% 2.150% Step 2: Determine the net mortgage interest rate. Category Loan A Loan B Loan C Mortgage Interest Rate 9.000% 9.500% 10.000% Guaranty Fee 0.350% 0.350% 0.350% Servicing Fee 0.250% 0.250% 0.250% Net Mortgage Interest Rate 8.400% 8.900% 9.400% Step 3: Determine the weighted-average pool accrual rate. Loan ID Net Mortgage Interest Rate UPB Product Loan A 8.400% $70,000 5,880.00 Loan B 8.900% $50,000 4,440.00 Loan C 9.400% $60,000 5,640.00 $180,000 15,970.00 15,970/180,000 = 8.872%, rounded to three decimal places. Published May 6, 2026 1004 Step Four: Determine the net mortgage interest rate ceiling. Category Loan A Loan B Loan C Mortgage Interest Rate Ceiling 15.000% 15.500% 16.000% –Guaranty Fee 0.350% 0.350% 0.350% –Servicing Fee 0.250% 0.250% 0.250% Net Mortgage Interest Rate Ceiling 14.400 14.900% 15.400% Step Five: Determine the maximum weighted-average pool accrual rate. Loan ID Net Mortgage Interest Rate Ceiling UPB Product Loan A 14.400% $70,000 10,080.00 Loan B 14.900% $50,000 7,450.00 Loan C 15.400% $60,000 9,240.00 $180,000 26,770.00 26,770.00/180,000 = 14.872%, rounded to three decimal places. Step Six: Determine the minimum weighted-average pool accrual rate (if the mortgages have an interest rate ﬂoor). Since the mortgages in this example do not have an interest rate ﬂoor, this step is not necessary. It is shown for illustration purposes only. First, ﬁnd the net mortgage interest rate ﬂoor by following Step Four, substituting the mortgage interest rate ﬂoor for the ceiling. Then, follow Step Five to ﬁnd the minimum weighted-average pool accrual rate, using the net mortgage interest rate ﬂoor just calculated for each mortgage instead of the mortgage interest rate ceilings. Published May 6, 2026 1005 Recent Related Announcements There are no recently issued Announcements related to this topic.'

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Fannie Mae Selling Guide C3-5-01 — Creating Weighted-Average ARM MBS

C3-5-01, Creating Weighted-Average ARM MBS (08/26/2014) Introduction This topic contains information on creating weighted-average ARM MBS (ARM Flex), including General Information on Weighted-Average ARM MBS (ARM Flex) ARM Flex Pool Accrual Rate Calculation Options General Information on Weighted-Average ARM MBS (ARM Flex) Published May 6, 2026 997 ARM Flex pools provide interest accruals at a weighted-average pool accrual rate to the holders of securities backed by the ARMs in the pool. These pools may be delivered only as single pool transactions and diﬀerent standard ARM plans may not be commingled in the same pool. The original term of an ARM included in a weighted-average ARM MBS pool must be no more than 30 years. Each mortgage must accrue interest in arrears and have a payment due date of the ﬁrst day of the month. There is no restriction on the range of ﬁrst payment due dates, interest rate change dates, and payment change dates. To limit the eﬀect that prepayments have on the weighted-average pool accrual rate of an ARM Flex, lenders should consider limiting to 1% (100 basis points) the range between the lowest and highest mortgage margins and the lowest and highest mortgage interest rate ceilings of all the mortgages in the pool. ARM Flex Pool Accrual Rate Calculation Options Under the ARM Flex pooling structure, lenders may create a weighted-average ARM MBS using either the ﬁxed MBS margin or weighted-average MBS margin. The diﬀerence between the two margin types is the method used to determine the interest rate that accrues on the pool and the retained servicing fee. The ﬁxed MBS margin option is based on a pool-level MBS margin and a loan-level servicing fee. This means that when the pooled mortgages have diﬀerent mortgage margins, the servicing fees for the mortgages vary in order to equalize the diﬀerences in the mortgage margins. While the guaranty fee remains the same, the servicing spread (the sum of the servicing fee and the guaranty fee and, if applicable the periodic renewal premium for lender-purchased mortgage insurance) diﬀers from mortgage to mortgage. The ﬁxed MBS margin applies to each mortgage in the weighted-average ARM MBS; therefore, the lowest mortgage margin in the pool must be able to, at least, support the sum of the MBS margin, the guaranty fee, and the minimum allowable servicing fee. The periodic renewal premium for lender-purchased mortgage insurance must also be included, if applicable. The weighted-average MBS margin option is based on a pool-level servicing fee and a loan-level MBS margin, which means that when the mortgages in the pool have diﬀerent mortgage margins, the servicing spread will be equal for all the mortgages, but the MBS margin will vary from mortgage to mortgage. Recent Related Announcements There are no recently issued Announcements related to this topic. C3-5-02, Calculating the Weighted-Average Pool Accrual Rates for Published May 6, 2026 998 ARM Flex Pools Using a Fixed MBS Margin (04/01/2009) Introduction This topic contains information on calculating the weighted-average pool accrual rates for ARM Flex pools using a ﬁxed MBS margin. How to Determine the Weighted-Average Pool Accrual Rate(s) for ARM Flex Pools Using a Fixed MBS Margin (based on Pool-Level MBS Margin and Loan-Level Servicing Fee) Step One: Step Two: Step Three: Step Four: Step Five: Step Six: How to Determine the Weighted-Average Pool Accrual Rate(s) for ARM Flex Pools Using a Fixed MBS Margin (based on Pool-Level MBS Margin and Loan- Level Servicing Fee) In the following example, assume that the lender wants to place the following three ARM Plan 57 ARMs into a weighted-average ARM Flex MBS pool with a standard remittance cycle. All of the mortgages in the pool will be serviced under the special servicing option and will have a guaranty fee of 0.35%. All of the mortgages have borrower-purchased mortgage insurance. Category Loan A Loan B Loan C Mortgage Interest Rate 9.00% 9.50% 10.00% Mortgage Margin 2.25% 2.50% 2.50% Mortgage Ceiling 15.00% 15.50% 16.00% UPB $70,000 $50,000 $60,000 Interest Rate Change Date 1–Jun 1–Jul 1–Aug To develop a ﬁxed MBS margin, the lender must ﬁrst derive a loan-level servicing fee by reducing the mortgage margin for each mortgage to be included in the pool by the desired ﬁxed MBS margin and then by the applicable guaranty fee percentage and, if applicable, by the periodic renewal premium for lender-purchased mortgage insurance. The diﬀerences in the servicing fees for the mortgages in the pool will be exactly equal to the diﬀerences in their mortgage margins. The weighted-average pool accrual rate is then determined by ﬁrst reducing each individual mortgage interest rate by the servicing spread for the mortgage (the sum of the Published May 6, 2026 999 guaranty fee and the calculated loan-level servicing fee and, if applicable, the periodic renewal premium for lender-purchased mortgage insurance) and then developing a weighted-average of the net mortgage interest rates. This same procedure also is used to establish the maximum weighted-average pool accrual rate (and any applicable minimum weighted-average pool accrual rate), using the weighted-average of the net mortgage interest rate ceilings (or ﬂoors) of the mortgages in the pool. Step One: Determine the loan-level servicing fee, using a 1.50% pool-level MBS margin. Category Loan A Loan B Loan C Mortgage Margin 2.25% 2.50% 2.75% MBS Margin 1.50% 1.50% 1.50% Guaranty Fee 0.35% 0.35% 0.35% Servicing Fee 0.40% 0.65% 0.90% Step Two: Determine the net mortgage interest rate. Category Loan A Loan B Loan C Mortgage Interest Rate 9.00% 9.50% 10.00% Guaranty Fee 0.35% 0.35% 0.35% Servicing Fee 0.40% 0.65% 0.90% Net Mortgage Interest Rate 8.25% 8.50% 8.75% Step Three: Determine the weighted-average pool accrual rate. Published May 6, 2026 1000 Loan ID Net Mortgage Interest Rate UPB Product Loan A 8.25% $70,000 5,775.00 Loan B 8.50% $50,000 4,250.00 Loan C 8.75% $60,000 5,250.00 $180,000 15,275.00 15,275/180,000 = 8.486%, rounded to three decimal places. Step Four: Determine the net mortgage interest rate ceiling. Category Loan A Loan B Loan C Mortgage Interest Rate Ceiling 15.00% 15.50% 16.00% Guaranty Fee 0.35% 0.35% 0.35% Servicing Fee 0.40% 0.65% 0.90% Net Mortgage Interest Rate Ceiling 14.25% 14.50% 14.75% Step Five: Determine the maximum weighted-average pool accrual rate. Loan ID Net Mortgage Interest Rate UPB Product Loan A 14.25% $70,000 9,975.00 Loan B 14.50% $50,000 7,250.00 Published May 6, 2026 1001 Loan ID Net Mortgage Interest Rate UPB Product Loan C 14.75% $60,000 8,850.00 $180,000 26,075.00 26,075.00/180,0000 = 14.486%, rounded to three decimal places. Step Six: Determine the minimum weighted-average pool accrual rate (if the mortgages have an interest rate ﬂoor). Since the mortgages in this example do not have an interest rate ﬂoor, this step is not necessary. It is shown for illustration purposes only. First, ﬁnd the net mortgage interest rate ﬂoor by following Step Four, substituting the mortgage interest rate ﬂoor for the ceiling. Then, follow Step Five to ﬁnd the minimum weighted-average pool accrual rate, using the net mortgage interest rate ﬂoor just calculated for each mortgage instead of the mortgage interest rate ceilings. Recent Related Announcements There are no recently issued Announcements related to this topic. C3-5-03, Calculating the Weighted-Average Pool Accrual Rates for ARM Flex Pools Using a Weighted-Average MBS Margin (04/01/2009) Introduction This topic contains information on calculating the weighted-average pool accrual rates for ARM ﬂex pools using a weighted-average MBS margin. How to Determine the Weighted-Average Pool Accrual Rate(s) for ARM Flex Pools Using a Weighted- Average MBS Margin (based on Pool-Level Servicing Fee and Loan-Level MBS Margin) Step One: Step 2: Step 3: Step Four: Step Five: Step Six: Published May 6, 2026 1002 How to Determine the Weighted-Average Pool Accrual Rate(s) for ARM Flex Pools Using a Weighted-Average MBS Margin (based on Pool-Level Servicing Fee and Loan-Level MBS Margin) In the following example, assume that the lender wants to place the following three ARM Plan 57 ARMs into a weighted-average ARM Flex MBS pool with a standard remittance cycle. All of the mortgages in the pool will be serviced under the special servicing option and will have a guaranty fee of 0.35%. All of the mortgages have borrower-purchased mortgage insurance. Category Loan A Loan B Loan C Mortgage Interest Rate 9.00% 9.50% 10.00% Mortgage Margin 2.25% 2.50% 2.50% Mortgage Ceiling 15.00% 15.50% 16.00% UPB $70,000 $50,000 $60,000 Interest Rate Change Date 1–Jun 1–Jul 1–Aug To develop a weighted-average MBS margin, the lender must reduce the mortgage margin for each mortgage to be included in the pool by the applicable guaranty fee percentage and then by the desired ﬁxed servicing fee (and, if applicable, by the periodic renewal premium for lender-purchased mortgage insurance) to arrive at a loan-level MBS margin. The diﬀerence between the MBS margins for the mortgages in the pool will be exactly equal to the diﬀerences in their mortgage margins. The weighted-average pool accrual rate is then determined by ﬁrst reducing each individual mortgage interest rate by the servicing spread for the mortgage (the sum of the guaranty fee and the desired servicing fee and, if applicable, the periodic renewal premium for lender- purchased mortgage insurance) and then developing a weighted-average of the net mortgage interest rates. This same procedure also is used to establish the maximum weighted-average pool accrual rate (and any applicable minimum weighted-average pool accrual rate), using the weighted-average of the net mortgage interest rate ceilings (or ﬂoors) of the mortgages in the pool. Step One: Determine the loan-level MBS margin, using a 0.250% standard servicing fee. (This step is not necessary. It is included for informational purposes only.) Category Loan A Loan B Loan C Mortgage Margin 2.250% 2.500% 2.750% Published May 6, 2026 1003 Category Loan A Loan B Loan C –Guaranty Fee 0.350% 0.350% 0.350% –Servicing Fee 0.250% 0.250% 0.250% MBS Margin 1.650% 1.900% 2.150% Step 2: Determine the net mortgage interest rate. Category Loan A Loan B Loan C Mortgage Interest Rate 9.000% 9.500% 10.000% Guaranty Fee 0.350% 0.350% 0.350% Servicing Fee 0.250% 0.250% 0.250% Net Mortgage Interest Rate 8.400% 8.900% 9.400% Step 3: Determine the weighted-average pool accrual rate. Loan ID Net Mortgage Interest Rate UPB Product Loan A 8.400% $70,000 5,880.00 Loan B 8.900% $50,000 4,440.00 Loan C 9.400% $60,000 5,640.00 $180,000 15,970.00 15,970/180,000 = 8.872%, rounded to three decimal places. Published May 6, 2026 1004 Step Four: Determine the net mortgage interest rate ceiling. Category Loan A Loan B Loan C Mortgage Interest Rate Ceiling 15.000% 15.500% 16.000% –Guaranty Fee 0.350% 0.350% 0.350% –Servicing Fee 0.250% 0.250% 0.250% Net Mortgage Interest Rate Ceiling 14.400 14.900% 15.400% Step Five: Determine the maximum weighted-average pool accrual rate. Loan ID Net Mortgage Interest Rate Ceiling UPB Product Loan A 14.400% $70,000 10,080.00 Loan B 14.900% $50,000 7,450.00 Loan C 15.400% $60,000 9,240.00 $180,000 26,770.00 26,770.00/180,000 = 14.872%, rounded to three decimal places. Step Six: Determine the minimum weighted-average pool accrual rate (if the mortgages have an interest rate ﬂoor). Since the mortgages in this example do not have an interest rate ﬂoor, this step is not necessary. It is shown for illustration purposes only. First, ﬁnd the net mortgage interest rate ﬂoor by following Step Four, substituting the mortgage interest rate ﬂoor for the ceiling. Then, follow Step Five to ﬁnd the minimum weighted-average pool accrual rate, using the net mortgage interest rate ﬂoor just calculated for each mortgage instead of the mortgage interest rate ceilings. Published May 6, 2026 1005 Recent Related Announcements There are no recently issued Announcements related to this topic.

Source: Fannie Mae Selling Guide C3-5-01 — Creating Weighted-Average ARM MBS · source URL · snapshot 5f7b8b79da595d76