source:
  type: guide
  id: fnma-sel-a2-3.1-01
  authority: Fannie Mae Selling Guide A2-3.1-01 — Lender Breach of Contract
  description: Fannie Mae Selling Guide A2-3.1-01 — Lender Breach of Contract.
  coverage_tier: operative
obligations:
- id: fnma-sel-a2-3.1-01-full
  canonical_id: fnma-sel-a2-3.1-01-full
  section: Fannie Mae Selling Guide A2-3.1-01 — Lender Breach of Contract
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide A2-3.1-01 — Lender Breach of Contract
    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: 'A2-3.1-01, Lender Breach of Contract (08/05/2020) Introduction
      This topic contains information on the lender’s breach of its Lender Contract,
      including: Lender Breach of Contract Alternatives to Contract Termination Lender
      Breach of Contract Fannie Mae may terminate the Lender Contract (in its entirety
      or its individual selling arrangement or servicing arrangement) with cause at
      any time and immediately, if the lender breaches any provisions of its Lender
      Contract, including (among other things) a failure to follow the requirements
      of Fannie Mae’s Guides, to meet Fannie Mae’s net worth and other ﬁnancial requirements,
      or to meet any of the other eligibility requirements speciﬁed in the Lender
      Contract. A lender also breaches the Lender Contract in the event of a change
      in the lender’s ﬁnancial or business condition, or in its operations, which
      in Fannie Mae’s sole judgment, is material and adverse. It is within Fannie
      Mae’s discretion to determine whether a particular occurrence—or the Published
      May 6, 2026 39 aggregate eﬀect of multiple occurrences—warrants termination
      of the entire Lender Contract or a speciﬁc arrangement. Fannie Mae’s decision
      to terminate a lender’s selling arrangement, servicing arrangement, or the entire
      Lender Contract does not entitle the lender to recover any exemplary, punitive,
      or consequential damages. Fannie Mae will not pay a termination fee in such
      cases and it may make the termination eﬀective immediately. Fannie Mae may oﬀset
      any obligations that it may owe the lender against any obligations the lender
      may owe Fannie Mae under any existing agreement, whether or not Fannie Mae has
      made any demand under such agreement and even though such obligations may not
      yet be immediately due. If Fannie Mae’s decision to terminate is based on the
      lender’s breach of the Lender Contract related to its selling arrangement, Fannie
      Mae may declare the lender’s outstanding cash commitments and MBS pool purchase
      contracts to be void—and Fannie Mae has the right to terminate the entire Lender
      Contract (including the lender’s servicing arrangement) for cause. When Fannie
      Mae terminates a lender’s servicing arrangement for cause based on the lender’s
      breach of its Lender Contract related to its servicing arrangement or in connection
      with the termination of the entire Lender Contract, the lender will have no
      further rights in the servicing of the mortgages it had been servicing for Fannie
      Mae. Alternatives to Contract Termination The Lender Contract provides remedies
      to Fannie Mae for the lender’s nonperformance. Any remedies that are applied
      will, in Fannie Mae’s sole judgment, be commensurate with the associated level
      of risk. Generally, Fannie Mae pursues these remedies when it believes that
      the lender should have an opportunity to correct the breach of the Lender Contract.
      Instead of terminating all or a part of the Lender Contract (or the lender’s
      selling arrangement or servicing arrangement) when it has cause to do so, Fannie
      Mae may elect to pursue a variety of other remedies and/or may impose additional
      requirements as a condition for not terminating all or a part of the Lender
      Contract (or the lender''s selling arrangement or servicing arrangement). The
      following list provides some possible requirements that Fannie Mae may impose
      as a condition for not undertaking remedies to which it is entitled by virtue
      of a lender’s breach: requiring the lender to indemnify Fannie Mae for actual
      and prospective Fannie Mae losses; requiring the lender to repurchase a mortgage
      loan or an acquired property or remit a make whole payment; imposing a compensatory
      fee; imposing a suspension or some other formal sanction against the lender;
      requiring additional and more frequent ﬁnancial and operational reporting; accelerating
      the processing and rebuttal time periods and payment of outstanding repurchases
      and repurchase/indemniﬁcation obligations; requiring the lender to take steps
      to sell and transfer all of its Fannie Mae servicing, or portions thereof as
      designated by Fannie Mae, to an unrelated entity upon 90 days'' written notice
      from Fannie Mae; limiting the lender from acquiring additional Fannie Mae servicing
      (over and above its existing servicing) in either its servicing or its subservicing
      portfolio; Published May 6, 2026 40 modifying or suspending any contract or
      agreement with a lender, including termination, suspension, or rescission of
      any variance approved under the terms thereof; requiring the lender to post
      collateral in the form of cash or cash equivalents reasonably acceptable to
      Fannie Mae in an amount determined by Fannie Mae based on the particular circumstances;
      imposing limitations on early funding products or recourse transactions; imposing
      limits on trading desk transactions; or requiring advance payment of fees for
      technology services. Fannie Mae is willing to work with lenders and consider
      other solutions that can correct or adequately address the concerns of Fannie
      Mae. Fannie Mae has no obligation to pursue any of these alternatives, and its
      decision to pursue one or more of the alternatives does not waive, limit, or
      aﬀect Fannie Mae’s right to terminate the Lender Contract (or one or more individual
      arrangements) at any time that Fannie Mae deems it appropriate to do so under
      the provisions of the Lender Contract. Fannie Mae’s decision not to take action
      against a lender at any point in time does not mean that Fannie Mae condones
      any action or inaction by the lender, or that Fannie Mae is waiving its right
      to take action in the future. Also see the Servicing Guide for information related
      to termination for cause. Recent Related Announcements The table below provides
      references to recently issued Announcements that are related to this topic.
      Announcements Issue Date Announcement SEL-2020-04 August 05, 2020'
  judgment: false
