source:
  type: guide
  id: fnma-sel-c3-5-01
  authority: Fannie Mae Selling Guide C3-5-01 — Creating Weighted-Average ARM MBS
  description: Fannie Mae Selling Guide C3-5-01 — Creating Weighted-Average ARM MBS.
  coverage_tier: operative
obligations:
- id: fnma-sel-c3-5-01-full
  canonical_id: fnma-sel-c3-5-01-full
  section: Fannie Mae Selling Guide C3-5-01 — Creating Weighted-Average ARM MBS
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide C3-5-01 — Creating Weighted-Average ARM MBS
    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: '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.'
  judgment: false
