source:
  type: guide
  id: fnma-sel-b7-1-04
  authority: Fannie Mae Selling Guide B7-1-04 — Financed Borrower-Purchased Mortgage
    Insurance
  description: Fannie Mae Selling Guide B7-1-04 — Financed Borrower-Purchased Mortgage
    Insurance.
  coverage_tier: operative
obligations:
- id: fnma-sel-b7-1-04-full
  canonical_id: fnma-sel-b7-1-04-full
  section: Fannie Mae Selling Guide B7-1-04 — Financed Borrower-Purchased Mortgage
    Insurance
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B7-1-04 — Financed Borrower-Purchased Mortgage
      Insurance
    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: 'B7-1-04, Financed Borrower-Purchased Mortgage Insurance (12/15/2021)
      Introduction This topic contains information on ﬁnanced borrower-purchased mortgage
      insurance, including: Financed Mortgage Insurance Requirements Ineligible Transactions
      Delivery Requirements Prepaid Mortgage Insurance Transactions Financed Mortgage
      Insurance Requirements Financed mortgage insurance transactions are deﬁned by
      all of the following characteristics: All or a portion of the borrower-purchased
      mortgage insurance premium (split and single-premium plans) is included in the
      loan amount. The loan amount including the ﬁnanced mortgage insurance premium
      cannot exceed the applicable maximum Fannie Mae loan limit. See B2-1.5-01, Loan
      Limits. The loan purpose is purchase, construction, or limited cash-out reﬁnance.
      The loan is secured by a one-unit property that is the borrower’s principal
      residence or second home. The mortgage insurance coverage amount can be standard
      coverage (which does not require an LLPA) or minimum coverage (with a corresponding
      LLPA). The mortgage insurance coverage amount is determined based on the base
      (or net) LTV ratio – the LTV ratio calculated without the ﬁnanced premium. The
      gross LTV ratio – the LTV ratio calculated with the ﬁnanced premium – is used
      to determine the maximum LTV ratio permitted for the transaction. The LTV ratio
      may never exceed the LTV ratio allowed per the Eligibility Matrix. If the loan
      is subject to any LLPAs, the LLPAs are based on the gross LTV ratio, except
      for minimum mortgage insurance LLPAs, which are based on the base (or net) LTV
      ratio. The lender must ensure that language related to any ﬁnanced mortgage
      insurance premium is included either directly in the applicable mortgage insurance
      master primary policy or in an endorsement to that policy, which language provides
      that the insurance beneﬁt paid pursuant to the “percentage option” in satisfaction
      of a claim be calculated as: [the claim amount minus the unamortized portion
      of the ﬁnanced mortgage insurance premium] multiplied by the applicable coverage
      percentage, PLUS the unamortized portion of the ﬁnanced mortgage insurance premium.
      Certain delivery requirements for ﬁnanced mortgage insurance transactions must
      be met. See Delivery Requirements below. Published May 6, 2026 839 Note: Fannie
      Mae provides two options for limited cash-out reﬁnance transactions that include
      mortgage insurance in the loan amount. A “ﬁnanced mortgage insurance transaction”
      requires the lender to identify the upfront ﬁnanced mortgage insurance amount
      separately and provide the required special feature code at delivery such that
      the base LTV can be determined. All of the above requirements must be met for
      the transaction to be deﬁned as a ﬁnanced mortgage insurance transaction. A
      “prepaid mortgage insurance transaction” permits the lender to include the amount
      of the upfront mortgage insurance premium and other allowable closing costs
      and prepaid items in the loan amount, and not separately identify the prepaid
      mortgage insurance at delivery. See Prepaid Mortgage Insurance Transactions
      below for additional information. Ineligible Transactions The following mortgage
      loans are not eligible for delivery to Fannie Mae if they include ﬁnanced borrower-
      purchased mortgage insurance: mortgage loans secured by two- to-four-unit properties,
      mortgage loans secured by investment properties, and cash-out reﬁnance loans.
      Note: Lender-paid mortgage insurance premiums cannot be ﬁnanced into the loan
      amount and are therefore not considered ﬁnanced mortgage insurance transactions.
      Delivery Requirements The following delivery requirements apply to ﬁnanced mortgage
      insurance transactions: The Financed MI Amount and MI Financed Indicator must
      be delivered. The delivery ﬁle must also contain the purchase price (for purchase
      transactions) and appraised value (for purchase and reﬁnance transactions) to
      allow for accurate calculation of the base LTV ratio. The loan must be delivered
      with SFC 281. All other mortgage insurance-related data elements must be provided
      (MI Company Name, Percent of MI Coverage, Certiﬁcate Number, and MI Source).
      For additional information, see Uniform Loan Delivery Dataset (ULDD) on Fannie
      Mae''s website. Prepaid Mortgage Insurance Transactions Fannie Mae’s reﬁnance
      guidelines permit borrowers to ﬁnance the payment of closing costs, prepaid
      items, and points in the loan amount. When the borrower includes any portion
      of the borrower-paid mortgage insurance premium or monthly escrows into the
      loan amount (with other closing costs or prepaid items), it is considered a
      “prepaid mortgage insurance transaction” and not a ﬁnanced mortgage insurance
      transaction. For a loan to be eligible for delivery to Fannie Mae with prepaid
      mortgage insurance, the loan must meet all the standard requirements of this
      Selling Guide, and the following requirements applicable to this type of loan:
      Published May 6, 2026 840 The mortgage insurance coverage amount is determined
      based on the LTV ratio that is calculated after the inclusion of all the closing
      costs, prepaid items, and points. (The concept of “gross LTV ratio” and “base
      LTV ratio” are not applicable to prepaid mortgage insurance transactions because
      the ﬁnanced mortgage insurance amount is not identiﬁed at loan delivery.) The
      loan is not to be delivered as a ﬁnanced mortgage insurance transaction – lenders
      should not deliver SFC 281 or the other ﬁnanced mortgage insurance data elements.
      The Financed MI Premium Endorsement to the mortgage insurance policy should
      not be obtained. Recent Related Announcements The table below provides references
      to the Announcements that have been issued that are related to this topic. Announcements
      and Release Notes Issue Date Announcement SEL-2021-11 December 15, 2021'
  judgment: false
