Georgia Attorneys Title Guaranty Fund

Underwriting Bulletin No. 89

October 17, 2002

SUBJECT: Fannie Mae Payment Power Pilot Program
Attached is a copy of the First American Home Office National Bulletin 136 regarding the above subject matter. Please distribute to all appropriate personnel in your office.

Please contact the Underwriting Department at the Georgia State Office at 800-328-2642 or 404-250- 1604 if you have any questions.

Home Office Underwriting Department

Case No: HONA 136
Filed: 10-11-2002
Name: Fannie Mae Payment Power Pilot Program
Written By: Keith Pearson

Fannie Mae has come out with a new loan product that allows borrowers to skip up to two payments every 12 months, up to a maximum of 10 times during the life of the loan. The skipped payments are then added to the principal of the loan. There is a rider to the security instrument that should be attached to the recorded mortgage or deed of trust. A copy of the rider and the note can be viewed by clicking on the appropriate link. The most likely endorsement request will be for a ALTA 6.2/CLTA 111.8 Negative Amortization endorsement or similar endorsements in those states that cannot issue the ALTA 6.2.

There are no additional risks present in this loan that are not present in any loan with a negative amortization feature. If the rider to the mortgage or deed of trust is attached, the risk of loss of priority should be minimal, and therefore that should be the only requirement for issuance of the ALTA 6.2 with these types of loans. There is an opportunity here to sell more insurance since most lenders making loans with negative amortization provisions will want to insure for 125% of the loan amount.

Attachments:
Fannie Mae – Addendum to Note
Fannie Mae – Rider to Security Instrument

First American agents have access to these attachments on Eagle Central (http://www.eaglecentral.com). If you do not have Internet access please contact Cherie Long at the Georgia State office at 800-328-2642 or 404-250-1604 for copies of these attachments.

Printable version: ub89.pdf*

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