source:
  type: guide
  id: fnma-sel-b5-5.3-03
  authority: 'Fannie Mae Selling Guide B5-5.3-03 — Shared Equity Transactions: Eligibility,
    Underwriting and Collateral Requirements'
  description: 'Fannie Mae Selling Guide B5-5.3-03 — Shared Equity Transactions: Eligibility,
    Underwriting and Collateral Requirements.'
  coverage_tier: operative
obligations:
- id: fnma-sel-b5-5.3-03-full
  canonical_id: fnma-sel-b5-5.3-03-full
  section: 'Fannie Mae Selling Guide B5-5.3-03 — Shared Equity Transactions: Eligibility,
    Underwriting and Collateral Requirements'
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: 'Fannie Mae Selling Guide B5-5.3-03 — Shared Equity Transactions: Eligibility,
      Underwriting and Collateral Requirements'
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting
      and Collateral Requirements (02/05/2025) Introduction This topic contains information
      on shared equity transactions, including: Eligibility Requirements Aﬀordable
      LTV Calculation: Resale Restrictions that Terminate at Foreclosure LTV Calculation:
      Resale Restrictions that Survive Foreclosure Appraisal Requirements Title Insurance
      and Delivery Requirements Eligibility Requirements The following table describes
      eligibility requirements for shared equity transactions. Criteria Community
      Land Trusts Income and Resale Price Restrictions Eligible shared equity providers
      Shared equity providers must comply with the eligible provider requirements
      in B5-5.1-02, Community Seconds Loan Eligibility. Additionally, the following
      ﬂexibilities are permitted: • Legal entities that are owned exclusively by a
      nonproﬁt organization are also considered eligible shared equity providers.
      For example, an LLC wholly owned by a nonproﬁt organization is considered an
      eligible shared equity provider. • Shared equity providers are not considered
      interested parties to the transaction. Note: Programs on the Shared Eq - Model
      Forms tab of the Certiﬁed Shared Equity Program List meet these provider requirements.
      See B5-5.3-02, Shared Equity Transactions: General Requirements for additional
      information. Published May 6, 2026 786 Criteria Community Land Trusts Income
      and Resale Price Restrictions Required counseling The shared equity provider
      must comply with the provisions of the Model Ground Lease relating to counseling
      the prospective borrowers. The shared equity provider must have an established
      procedure that requires counseling or similar engagement with prospective borrowers
      to ensure such individuals are educated on the speciﬁc terms of the income and
      resale price restrictions, including the calculation that will be used to determine
      the maximum resale price. This counseling or engagement must be conducted at
      least 30 days prior to the closing of any purchase transaction. Examples may
      include, but are not limited to: • one-on-one counseling speciﬁc to the transaction,
      • a program summary document in plain language, or • an attorney review of the
      program with the prospective homebuyer. Eligible borrowers Because of the aﬀordable
      terms that they oﬀer, shared equity programs include restrictions on borrower
      eligibility and on the resale price of the property. Eligible borrowers must
      satisfy the speciﬁc eligibility criteria set up by the shared equity program.
      Note: If income limit requirements are imposed by both the shared equity provider
      and the ﬁrst mortgage, the most restrictive will apply. Eligible property and
      occupancy types All loans secured by one- and two-unit principal residence community
      land trust properties are eligible for purchase by Fannie Mae with the exception
      of units in a co-op project, which are not eligible. All manufactured homes
      are eligible; however, if located in a condo or PUD project, Fannie Mae PERS
      approval of the project is required. (See B4-2.2-06, Project Eligibility Review
      Service (PERS)) Manufactured homes must comply with all applicable requirements
      in this Guide with the following exceptions: As of the loan application date
      • the manufactured home must be aﬃxed to a permanent foundation, and • unless
      it has already been converted, the lessor must have initiated the conversion
      of the manufactured home to real property. All loans secured by one- and two-unit
      principal residence properties are eligible for purchase by Fannie Mae. When
      the subject property is a unit in a limited or shared equity co- op project,
      the requirements in this Section B5-5.3, Shared Equity Transactions, do not
      apply. For limited or shared equity co-ops, the lender must ensure compliance
      with Chapter B4-2, Project Standards. Eligible loans Eligible loans include
      purchase and reﬁnance transactions. Loans must be ﬁxed-rate or ARMs with an
      initial ﬁxed period of ﬁve years or more. Underwriting considerations These
      loans may be underwritten manually or through DU. Any recurring monthly fees
      or expenses associated with the shared equity program must be included in the
      monthly housing expense for qualifying purposes. See B3-6-03, Monthly Housing
      Expense for the Subject Property. Published May 6, 2026 787 Aﬀordable LTV Calculation:
      Resale Restrictions that Terminate at Foreclosure When resale restrictions terminate
      automatically upon foreclosure (or the expiration of any applicable redemption
      period), or the recordation of a deed-in-lieu of foreclosure, the sales price
      is typically not a reliable indicator of market value for the property because
      the sales price does not include the subsidy from the shared equity provider.
      The appraised value is more indicative of the actual value of the property in
      the event of a foreclosure or acceptance of a deed-in-lieu of foreclosure (disregarding
      factors that may aﬀect value after origination and prior to foreclosure). Accordingly,
      for these types of transactions, lenders must use the "Aﬀordable LTV" calculation
      to determine LTV, CLTV, and HCLTV ratios. The Aﬀordable LTV calculation divides
      the loan amount by the appraised value of the property, rather than the lesser
      of the sales price or the appraised value. The following table provides an example
      of the Aﬀordable LTV calculation method. Item Amount Appraised value $200,000
      Shared equity program subsidy amount $40,000 Subsidized sales price $160,000
      First mortgage loan amount $160,000 Aﬀordable LTV Ratio (ﬁrst mortgage loan
      amount divided by the appraised value) 80% When using the Aﬀordable LTV calculation,
      the lender must for DU loans, enter "Aﬀordable LTV" in the Product Description
      ﬁeld in the online application, which will result in DU calculating the LTV,
      CLTV, and HCLTV ratios based solely on the appraised value for purchase transactions
      (and not the lesser of the sales price or appraised value); and for all loans,
      use the appraised value to determine the minimum down payment; the borrower
      contribution, if applicable, that must be made from the borrower''s own resources;
      and the level of mortgage insurance required. LTV Calculation: Resale Restrictions
      that Survive Foreclosure When resale restrictions survive foreclosure or a deed-in-lieu
      of foreclosure, the lender must use the lesser of the sales price or appraised
      value of the property with resale restrictions when calculating the LTV, CLTV,
      and HCLTV ratios, which is the standard method of calculation. Fannie Mae requires
      use of the standard calculation on the lower value due to the presence of resale
      restrictions, which limit the property''s sales price in the event Published
      May 6, 2026 788 of foreclosure or acceptance of a deed-in-lieu of foreclosure.
      Note: This does not apply to loans secured by community land trust properties,
      which require the resale restrictions to terminate automatically upon foreclosure
      (or the expiration of any applicable redemption period), or acceptance of a
      deed-in-lieu of foreclosure. Appraisal Requirements For properties in a community
      land trust, the appraisal requirements can be found in B4-1.4-06, Community
      Land Trust Appraisal Requirements. For properties with income and resale price
      restrictions, the following requirements apply: In cases where the resale restrictions
      terminate automatically upon foreclosure (or the expiration of any applicable
      redemption period), or upon recordation of a deed-in-lieu of foreclosure, the
      appraisal should reﬂect the market value of the property without resale restrictions.
      The lender must ensure that the borrower and appraiser are aware of the resale
      restrictions and should advise the appraiser that they must include the following
      statement in the appraisal report: "This appraisal is made on the basis of a
      hypothetical condition that the property rights being appraised are without
      resale and other restrictions that are terminated automatically upon the latter
      of foreclosure or the expiration of any applicable redemption period, or upon
      recordation of a deed-in-lieu of foreclosure." In cases where the resale restrictions
      survive foreclosure or deed-in-lieu of foreclosure, the appraisal must reﬂect
      the impact the restrictions have on value and be supported by comparable sales
      with similar restrictions. The appraisal report must note the existence of the
      resale restrictions and comment on any impact the resale restrictions have on
      the property''s value and marketability. Title Insurance and Delivery Requirements
      The following table describes title insurance and delivery requirements for
      shared equity transactions. Published May 6, 2026 789 Criteria Community Land
      Trusts Income and Resale Price Restrictions Title insurance requirements The
      title insurance policy or an endorsement to the policy must expressly conﬁrm
      all of the following: • the recording of the complete community land trust ground
      lease or ground lease memorandum; • the recording of the Community Land Trust
      Ground Lease Rider; • the community land trust loan is secured by a ﬁrst lien
      on the leasehold estate and the improvements; • there are no existing loans
      or other liens on the fee estate, except as may be permitted under the Community
      Land Trust Ground Lease Rider; • the ground lessor''s reversionary interest
      is subordinate to the community land trust loan; and • there are no related
      community land trust ground lease occupancy and resale restrictions, covenants,
      or agreements that "run with the land," and that have been recorded apart from
      the ground lease, except as may be permitted under the Community Land Trust
      Ground Lease Rider. The title insurance policy or an endorsement to the policy
      must expressly reﬂect the source and terms of the resale restrictions are included
      in the public land records so that they are readily identiﬁable in a routine
      title search. Pre-delivery considerations Prior to delivering the loan to Fannie
      Mae, the lender must conﬁrm • any payments or assessments required to be paid
      by the borrower under the legal documentation (including ground lease rents
      for community land trusts) are not past due, and • the borrower is not in default
      under any other provisions of the legal documentation, nor has the shared equity
      provider claimed such a default. Special feature codes and delivery requirements
      The lender must include the following in the delivery data: • SFC 054, • the
      value of the leasehold (inclusive of the improvements) as the appraisal amount,
      and • the Aﬀordable LTV ratio. The lender must include the following in the
      delivery data: • SFC 630 and the Aﬀordable LTV when the resale restrictions
      terminate automatically upon foreclosure (or the expiration of any applicable
      redemption period), or the recordation of a deed-in-lieu of foreclosure. • SFC
      631 when the resale restrictions survive foreclosure or a deed-in- lieu of foreclosure.
      • SFC 177 when the Grounded Solutions Network 2021 Model Declaration of Aﬀordability
      Covenants with Reﬁnance and Resale Restriction and Purchase Option form was
      used. Recent Related Announcements The table below provides references to recently
      issued Announcements that are related to this topic. Published May 6, 2026 790
      Announcements Issue Date Announcement SEL-2025-01 February 05, 2025 Announcement
      SEL-2024-04 June 05, 2024 Announcement SEL-2024-03 May 01, 2024 Announcement
      SEL-2023-11 December 13, 2023 Announcement SEL-2023-04 May 03, 2023'
  judgment: false
