source:
  type: guide
  id: fnma-sel-b5-5.1-03
  authority: 'Fannie Mae Selling Guide B5-5.1-03 — Community Seconds: Shared Appreciation
    Transactions'
  description: 'Fannie Mae Selling Guide B5-5.1-03 — Community Seconds: Shared Appreciation
    Transactions.'
  coverage_tier: operative
obligations:
- id: fnma-sel-b5-5.1-03-full
  canonical_id: fnma-sel-b5-5.1-03-full
  section: 'Fannie Mae Selling Guide B5-5.1-03 — Community Seconds: Shared Appreciation
    Transactions'
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: 'Fannie Mae Selling Guide B5-5.1-03 — Community Seconds: Shared Appreciation
      Transactions'
    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: 'B5-5.1-03, Community Seconds: Shared Appreciation Transactions
      (11/01/2023) Introduction This topic contains information on shared appreciation
      transactions, including: Overview Provider Requirements Eligibility Repayment
      Distribution Requirements Delivery Requirements Overview Shared appreciation
      programs are a type of Community Seconds oﬀering that create aﬀordability for
      eligible borrowers by providing down payment, closing cost assistance, and/or
      funding for renovations to the property, including energy-related improvements,
      in exchange for repayment of an interest-free loan and a share in any future
      appreciation to the property. The program provider receives the original amount
      advanced and a predetermined percentage of any appreciation in value upon the
      occurrence of speciﬁed events deﬁned in the program''s legal documentation.
      Events may include the subsequent sale (or other transfer) of the home and be
      dependent on the availability of funds. Appreciation in value is deﬁned as the
      positive diﬀerence between the original sales price of the property and the
      subsequent value of the property determined in accordance with the shared appreciation
      program''s legal documents (which may but is not required to take into account
      amounts paid by the borrower to improve the property with the knowledge or consent
      of the shared appreciation program). Note: This topic pertains only to shared
      appreciation loans. For information on shared equity transactions, see Section
      B5-5.3, Shared Equity Transactions. Provider Requirements The provider of a
      shared appreciation loan must be an eligible Community Seconds provider, Published
      May 6, 2026 773 be responsible for the administration and oversight of the program,
      and advance its own funds (or those of other parties for whom it is administering
      the program, so long as each such party is an eligible Community Seconds provider)
      to the borrower. Note: The lender of the ﬁrst mortgage may advance the funds
      for the shared appreciation loan if within six months of loan closing the lender
      assigns the loan to a housing ﬁnance agency as deﬁned in 23 C.F.R. §266.5. In
      this scenario, the housing ﬁnance agency will be considered an acceptable Community
      Seconds shared appreciation provider. Eligibility Shared appreciation loans
      are only eligible as Community Seconds loans. Fannie Mae will purchase ﬁrst
      mortgages that are originated with this type of subordinate ﬁnancing, but the
      ﬁrst mortgage must be a purchase or limited cash-out reﬁnance transaction and
      otherwise meet the requirements of this Guide. The following table provides
      additional eligibility requirements for shared appreciation loans. ✓ Requirements
      The shared appreciation loan must comply with the requirements in B5-5.1-01,
      Community Seconds Loans and B5-5.1-02, Community Seconds Loan Eligibility. Interest
      (deferred or otherwise) is not permitted, other than default interest on overdue
      principal or a share in appreciation. Expenses or fees must not be imposed on
      the borrower after loan origination, except in cases of default or in connection
      with borrower-initiated transactions, as deﬁned in the program''s legal documentation.
      After completion of the obligations to the shared appreciation provider (or
      its assignee), including payment of any shared appreciation in value, the borrower
      must not have any further obligation to the shared appreciation provider or
      any assignee. Repayment Distribution Requirements The following table describes
      the requirements related to repayment of a shared appreciation loan. Published
      May 6, 2026 774 Criteria Requirements Repayment of the Community Seconds loan
      and payout of appreciation The shared appreciation loan and any share in appreciation
      must only be payable in connection with one or more of the following events
      as speciﬁed in the shared appreciation program''s legal documentation: • a speciﬁc
      date, which must not be earlier than the scheduled maturity date of the ﬁrst
      mortgage granted in connection with the purchase of the property; • repayment
      in full of the ﬁrst mortgage (except when the shared appreciation loan is being
      resubordinated in connection with a reﬁnance; • acceleration of the ﬁrst mortgage
      in accordance with its terms (for purchase mortgages only, this is limited to
      acceleration after the conclusion of loss mitigation or other measures to cure
      a delinquency); or • an unauthorized transfer, or unauthorized change in occupancy
      status, of the property, or an event of default relating to the failure to maintain
      collateral (after notice and an opportunity to cure). In addition, the program''s
      legal documents must allow the borrower an option to prepay the loan in its
      entirety at any time and to pay all other amounts due to the provider, including
      any shared appreciation. If the shared appreciation loan becomes due and payable,
      all amounts then due and payable to the ﬁrst mortgagee must be paid ﬁrst, followed
      by other entitled parties, such as the shared appreciation provider and the
      borrower. Basis for determining the amount of appreciation In the program''s
      legal documentation, the appreciation in value must be based on one of the following:
      • When the property is sold on the open market, the appreciation must be based
      on the actual sales price of the property. • In any other instance, the appreciation
      must be based on an appraisal from a state- licensed or state-certiﬁed appraiser
      obtained in accordance with the program''s terms, or if explicitly indicated
      as permitted in the program''s legal documents, a current value established
      by a third-party, commercial automated valuation model (AVM). For limited cash-out
      reﬁnances, appreciation in value may be based on any method included in the
      program''s legal documentation. Published May 6, 2026 775 Criteria Requirements
      Provider''s share of appreciation Except as permitted below, the provider''s
      share of appreciation must not exceed the "Standard Percentage" which is derived
      by dividing the original shared appreciation loan amount by the original sales
      price. For example, if the provider contributed a 10% down payment towards the
      purchase of a home, the provider cannot share in appreciation greater than 10%
      (the Standard Percentage) when the home is sold. Exceptions The provider''s
      share of appreciation may be greater than the Standard Percentage in either
      of the two scenarios below: 1. The borrower must ﬁrst recover the following
      (which will result in a reduction in the amount of appreciation) before the
      provider is able to share in appreciation: • any portion of the down payment
      that came from the borrower''s own funds, • reasonable costs of selling the
      property (such as a sales commission), • the costs of any improvements made
      by the borrower to the property (provided they were allowed under the program''s
      legal documentation and not otherwise taken into account in determining the
      amount of appreciation), and • the principal portion of all payments the borrower
      made on the ﬁrst mortgage. 2. The provider may share in appreciation greater
      than the Standard Percentage if • in the ﬁrst year following origination of
      the shared appreciation loan, the share does not initially exceed 75%, or •
      after the ﬁrst year following origination of the shared appreciation loan, the
      share is reduced at least proportionally each year, so the share is equal to
      or less than the Standard Percentage no later than ﬁve years following origination
      of the shared appreciation loan. For example, if the provider''s share of appreciation
      is 70% in the ﬁrst year, and the Standard Percentage is 10%, then the provider''s
      share must decrease by at least 15% annually (70% minus 10%, divided by 4),
      so that in the second, third, and fourth years, the provider''s share of appreciation
      must not exceed 55%, 40%, and 25%, respectively. Delivery Requirements Lenders
      must report SFC 176 when delivering a loan with shared appreciation. Recent
      Related Announcements The table below provides references to recently issued
      Announcements that are related to this topic. Announcements Issue Date Announcement
      SEL-2023-10 November 01, 2023 Announcement SEL-2023-08 September 06, 2023 Announcement
      SEL-2023-04 May 03, 2023 Published May 6, 2026 776 Section B5-5.2, Loans with
      Resale Restrictions'
  judgment: false
