source:
  type: guide
  id: fnma-sel-b5-4.2-02
  authority: Fannie Mae Selling Guide B5-4.2-02 — Disaster-Related Limited Cash-Out
    Refinance Flexibilities
  description: Fannie Mae Selling Guide B5-4.2-02 — Disaster-Related Limited Cash-Out
    Refinance Flexibilities.
  coverage_tier: operative
obligations:
- id: fnma-sel-b5-4.2-02-full
  canonical_id: fnma-sel-b5-4.2-02-full
  section: Fannie Mae Selling Guide B5-4.2-02 — Disaster-Related Limited Cash-Out
    Refinance Flexibilities
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B5-4.2-02 — Disaster-Related Limited Cash-Out
      Refinance Flexibilities
    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: 'B5-4.2-02, Disaster-Related Limited Cash-Out Reﬁnance Flexibilities
      (10/08/2025) Introduction This topic contains information on disaster-related
      limited cash-out reﬁnance ﬂexibilities, including: Disaster-Related Limited
      Cash-Out Reﬁnance Flexibilities Overview Location of Property Occupancy Status
      Transaction Types Documentation of Eligible Disaster-Related Expenses and Financing
      Limited Cash-Out Reﬁnance DU Requirements Appraisal Requirements Delivery Special
      Feature Codes Uniform Appraisal Dataset (UAD) 3.6 Policy Disaster-Related Limited
      Cash-Out Reﬁnance Flexibilities Overview Fannie Mae provides ﬂexibilities to
      standard limited cash-out reﬁnance policies for borrowers who have been impacted
      by a natural disaster. These guidelines: permit the reﬁnance of non-purchase
      money subordinate loans obtained to ﬁnance disaster-related property repairs,
      and provide for a higher cash-out amount to reimburse borrowers for documented
      out-of-pocket expenses related to disaster-related property repairs. This topic
      outlines the speciﬁc eligibility requirements for these additional ﬂexibilities.
      Location of Property These ﬂexibilities may be applied to loans on properties
      located in any counties, cities, or parishes that are designated by the Federal
      Emergency Management Agency (FEMA) as eligible for Individual Assistance as
      a result of a natural disaster (these areas are referred to as “FEMA Disaster
      Areas”). Occupancy Status These guidelines are applicable only to loans secured
      by the borrower’s principal residence, and may not be used in connection with
      second homes or investment properties. Published May 6, 2026 762 Transaction
      Types A borrower may obtain: a limited cash-out reﬁnance to consolidate non-purchase
      money subordinate ﬁnancing used for repair of disaster-related property damage
      to their principal residence. To be eligible, the subordinate ﬁnancing, including
      any draws on an existing HELOC, must post-date the disaster. However, the borrower
      may pay oﬀ the entire HELOC through the limited cash-out reﬁnance, provided
      that a portion of the amount was used for disaster-related expenses to repair
      property damage to the principal residence. cash-out for reimbursement of documented
      out-of-pocket expenses for the completed repair of disaster- related property
      damage to their principal residence in an amount not to exceed the lesser of
      10% of the balance of the new reﬁnance loan or $15,000. All existing guidelines
      and requirements for limited cash-out reﬁnance transactions listed in this section
      continue to apply, including those for Texas Section 50(a)(6) loans (see B5-4.1-01,
      Texas Section 50(a)(6) Loans). Documentation of Eligible Disaster-Related Expenses
      and Financing The lender must document that the subordinate ﬁnancing (or a portion
      of the HELOC) or the entire requested cash-out amount represents funds used
      for completed disaster-related property repairs. Generally, documentation includes
      copies of receipts, work orders, canceled checks, etc., related to the cost
      of materials and labor. The borrower may not receive any reimbursement for amounts
      representing their sweat equity in connection with the repairs. Note: All documentation
      must post-date the disaster and be directly related to completed repairs of
      damage to the property resulting from the disaster. Limited Cash-Out Reﬁnance
      DU Requirements Certain messages on the DU Underwriting Findings Report will
      not apply to loans originated under the disaster- related limited cash-out reﬁnance
      requirements. When the loan complies with the requirements of this section,
      lenders may disregard the following messages: This case is ineligible because
      the amount of cash taken out of the subject property equity exceeds the limit
      of the greater of 1% of the loan amount or $2,000 for limited cash-out reﬁnances.
      If any subordinate lien that was not used to acquire the subject property is
      to be paid oﬀ with ﬁrst mortgage proceeds, the loan is ineligible as a limited
      cash-out reﬁnance. The loan must be resubmitted as a cash-out reﬁnance. If subordinate
      liens are being paid oﬀ with the ﬁrst mortgage proceeds, obtain written documentation
      that the subordinate lien was used to acquire the subject property. Fannie Mae
      will grant the lender the limited waiver of underwriting representations and
      warranties for these Published May 6, 2026 763 loans, including those mortgages
      that receive an Approve/Ineligible recommendation, provided the loan meets the
      requirements contained in this section as well as those contained in A2-2-04,
      Limited Waiver and Enforcement Relief of Representations and Warranties. Appraisal
      Requirements The appraisal for the property must follow standard requirements
      contained in Chapter B4–1, Appraisal Guidelines. Those guidelines allow an appraisal
      to be based on the “as is” condition of the property provided there are no conditions
      that aﬀect the safety, soundness, or structural integrity of the property. If
      those conditions do exist, the property must be appraised subject to completion
      of the speciﬁc alterations or repairs (“as repaired”) and a completion report
      must be obtained from the appraiser prior to delivery of the mortgage to Fannie
      Mae. Delivery Loans originated in accordance with this section must be delivered
      to Fannie Mae no later than two years from the date of the disaster declaration
      by FEMA. Special Feature Codes Loans delivered under these guidelines must include
      SFC 416 as part of the delivery data. Uniform Appraisal Dataset (UAD) 3.6 Policy
      Lenders using UAD 3.6 must follow the requirements in the UAD 3.6 Policy Supplement.
      Recent Related Announcements The table below provides references to recently
      issued Announcements that are related to this topic. Announcements Issue Date
      Announcement SEL-2025-08 October 08, 2025 Announcement SEL-2025-04 June 04,
      2025 Published May 6, 2026 764'
  judgment: false
