source:
  type: guide
  id: fnma-svc-d1-4.1-02
  authority: Fannie Mae Servicing Guide D1-4.1-02 — Allowable Exemptions Due to the
    Type of Transfer
  description: Fannie Mae Servicing Guide D1-4.1-02 — Allowable Exemptions Due to
    the Type of Transfer.
  coverage_tier: operative
obligations:
- id: fnma-svc-d1-4.1-02-full
  canonical_id: fnma-svc-d1-4.1-02-full
  section: Fannie Mae Servicing Guide D1-4.1-02 — Allowable Exemptions Due to the
    Type of Transfer
  type: do
  tags:
  - regulator-direct
  - fnma
  - servicing-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Servicing Guide D1-4.1-02 — Allowable Exemptions Due to
      the Type of Transfer
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/servicing-guide
    snapshot_id: cf63a82bbb4adfba
    fetched_at: '2026-05-22T23:53:19Z'
    content_hash: sha256:89df66c43baad07f8a8dd9d224492fff7d15e8839edba02ad0e74c7e50fe5da3
    paragraph_quote: 'D1-4.1-02, Allowable Exemptions Due to the Type of Transfer
      (08/13/2025) Introduction This topic contains information on allowable exemptions
      due to the type of transfer. The servicer is responsible for ensuring the transfer
      of ownership complies with applicable law, including with respect to the preemption
      of due-on-sale prohibitions. Unless the previous borrower requests a release
      of liability, the servicer must process the following exempt transactions without
      reviewing or approving the terms of the transfer: A transfer of the property
      to the surviving party in the event of the death of a joint tenant or a tenant
      by the entirety; a junior lienholder as a result of a foreclosure or acceptance
      of a deed-in-lieu of foreclosure for the subordinate mortgage loan; one of the
      borrowers if the property is jointly owned by unrelated co-borrowers, as long
      as the borrower who is gaining full ownership of the property continues to occupy
      it and the transfer occurs after at least 12 months have elapsed since the mortgage
      loan was closed; a related or unrelated natural person, provided the transferee
      acknowledges in writing that they are assuming all of the obligations under,
      and will be bound by the note and the security interest; and will occupy the
      property with the transferor as their principal residence. The granting of a
      leasehold interest that has a term of three or fewer years and does not provide
      an option to purchase the property. If the lease has a renewal option that would
      allow the term to extend beyond three years, this exemption does not apply.
      The creation of a subordinate lien, as long as it does not relate to a transfer
      of occupancy rights. The creation of a purchase money security interest for
      household appliances. A transfer of the property to any of the below exempt
      transferees: a relative of the deceased borrower, as long as the transferee
      occupies the property; the spouse, child(ren), parent(s), brother(s) or sister(s),
      grandparent(s), or grandchild(ren) of the borrower, as long as the transferee
      occupies the property; a spouse of the borrower under a divorce decree or legal
      separation agreement or from an incidental property settlement agreement, as
      long as the transferee will occupy the property; an inter vivos trust in which
      the borrower is and remains a beneﬁciary and which does not relate to a transfer
      of rights of occupancy in the property. Note: If a borrower is an inter vivos
      revocable trust, a transfer of a beneﬁcial interest in the trust to any such
      transferee (including to a new inter vivos trust) is exempt provided that the
      transferee''s relationship is to the individual who established the trust. In
      the case of a transfer of a beneﬁcial interest in an inter vivos revocable trust
      into a new inter vivos trust, the individual who established the original inter
      vivos revocable trust must be the beneﬁciary of the new trust and such trust
      must not relate to a transfer of the rights of occupancy type to an investment
      property. A change in occupancy type must not violate the security instrument
      (for example, the 12-month occupancy requirement for a principal residence).
      Published May 13, 2026 271 Note: For all such transfers aﬀecting mortgage loans
      purchased or securitized by Fannie Mae on or after June 1, 2016, the transferee
      is not required to occupy the property. a limited liability company (LLC), provided
      that the mortgage loan was purchased or securitized by Fannie Mae on or after
      June 1, 2016, and the LLC is controlled by the original borrower or the original
      borrower owns a majority interest in the LLC, and if the transfer results in
      a permitted change of occupancy type to an investment property, such change
      does not violate the security instrument (for example, the 12 month occupancy
      requirement for a principal residence). Note: The servicer must notify the borrower
      that a property transferred to an LLC must be transferred back to a natural
      person in order to qualify for a reﬁnance loan and to meet Fannie Mae’s Selling
      Guide underwriting requirements. For a mortgage loan acquired by Fannie Mae
      after June 1, 2007, if a servicer reasonably believes that a due-on- transfer
      provision is unenforceable by law or would not be enforced by a court, the servicer
      is authorized to approve a transfer of an interest in the mortgaged property
      or a direct or indirect interest in the borrower (if an entity), provided the
      servicer has notiﬁed Fannie Mae’s Legal department (see F-4-02, List of Contacts)
      of the reason for its belief and Fannie Mae has either sent a notice of non-objection
      to the proposed transfer or not responded within 60 days of its receipt of the
      notice. The servicer must notify the applicable property insurance companies,
      tax authorities, the mortgage insurer, and any other interested parties when
      it processes a transfer of ownership. ​The servicer must follow the procedures
      in Obtaining MI Approval for a Conventional Mortgage Loan in F-1-17, Processing
      a Transfer of Ownership for information on obtaining mortgage insurer approval
      and in Completing a Transfer of Ownership in F-1-17, Processing a Transfer of
      Ownership for detailed requirements related to executing the assumption or assumption
      and release agreement, as applicable. ​If the mortgage loan is delinquent and
      the transferee is unable to bring the mortgage loan current, the servicer must
      evaluate them for all available workout options in accordance with D2-2, Requirements
      for Contacting a Borrower and D2-3, Fannie Mae''s Home Retention and Liquidation
      Workout Options and oﬀer the transferee the appropriate workout option for which
      they are eligible. If the servicer determines that a mortgage loan modiﬁcation
      is an appropriate workout solution, the servicer must ​ensure that the transfer
      is an exempt transaction, and review the transferee for a mortgage loan modiﬁcation
      as if they were a borrower based on the requirements in this Servicing Guide
      and applicable law. If the transferee satisﬁes all the requirements of a mortgage
      loan modiﬁcation, then the servicer must require the transferee to sign an assumption
      agreement (which would be signed in conjunction with the modiﬁcation agreement).
      If the previous borrower requests a release of liability, the servicer must
      determine that the transferee’s credit and ﬁnancial capacity is acceptable (see
      F-1-28, Reviewing a Transfer of Ownership for Credit and Financial Capacity).
      Recent Related Announcements The table below provides references to recently
      issued Announcements that are related to this topic. Published May 13, 2026
      272 Announcements Issue Date Announcement SVC-2025-05 August 13, 2025 Announcement
      SVC-2023-06 December 20, 2023 Announcement SVC-2022-02 April 13, 2022 Announcement
      SVC-2020-04 September 9, 2020 D1-4.1-03, Allowable Exceptions Due to State Law
      Restrictions (“Window-Period” Mortgage Loans) (11/08/2017) Introduction This
      topic contains information on allowable exceptions due to state law restrictions
      (“window-period” mortgage loans). The Garn-St. Germain Depository Institutions
      Act of 1982, which authorized enforcement of due-on-sale (or due- on-transfer)
      provisions, exempted certain mortgage loans that were already subject to state
      law restrictions on due-on-sale (or due-on-transfer) enforcement. Mortgage loans
      originated or assumed between the time the state enacted its restrictions and
      the date the Garn-St. Germain Depository Institutions Act went into eﬀect are
      “window-period” mortgage loans. A list of the states having window-period mortgage
      loans, the term of the exemption, and Fannie Mae’s speciﬁc enforcement policy
      related to a ﬁxed-rate ﬁrst lien mortgage loan or a second lien mortgage loan
      secured by a property located in one of these states are shown below: Michigan:
      Mortgage loan may be assumed at a blended rate, in accordance with state law.
      Window period runs from January 5, 1977, to October 15, 1982. Restrictions are
      in eﬀect for the full term of the mortgage loan. New Mexico: Mortgage loan may
      be assumed with a 2% increase in the existing interest rate, subject to any
      maximum limitation speciﬁed in the state law. Window period runs from March
      15, 1979, to October 15, 1982. Restrictions are in eﬀect for the full term of
      the mortgage loan. Utah: Mortgage loan may be assumed with a 1% increase in
      the existing interest rate and an additional 1% increase ﬁve years later. Window
      period runs from May 12, 1981 to October 15, 1982. Restrictions are in eﬀect
      for the full term of the mortgage loan. The servicer must verify whether a mortgage
      loan is a “window-period” mortgage loan. If the mortgage loan is a “window-period”
      mortgage loan, the servicer is authorized to approve a transfer of ownership
      as long as the criteria listed in the following table are satisﬁed. Published
      May 13, 2026 273 ✓ Criteria required to approve a transfer of ownership on window-period
      mortgage loans The purchaser’s credit and ﬁnancial capacity are acceptable under
      Fannie Mae’s current underwriting guidelines (see F-1-28, Reviewing a Transfer
      of Ownership for Credit and Financial Capacity). The mortgage insurer approves
      the transfer and the mortgage insurer’s speciﬁed conditions are satisﬁed, if
      applicable. The servicer must follow the procedures in Obtaining MI Approval
      for a Conventional Mortgage Loan in F-1-17, Processing a Transfer of Ownership
      for information on obtaining mortgage insurer approval. Note: If the mortgage
      insurer denies the transfer or imposes conditions for approval, the servicer
      must inform the parties involved in the transaction of the mortgage insurer’s
      decision as its reason for not approving the request or the imposition of conditions
      for approval. When the state law allows an increase in the mortgage loan interest
      rate, the servicer should determine the new rate for a whole mortgage loan or
      a participation pool mortgage loan by adding the allowable increase to the existing
      mortgage loan interest rate, unless the state law requires a diﬀerent method.
      That new interest rate for the mortgage loan should be used to evaluate the
      purchaser’s ﬁnancial ability. The servicer must not change the interest rate
      if the mortgage loan is in an MBS pool, even though the state law would permit
      an increase. If the transfer of ownership is not approved or the required eligibility
      criteria are not satisﬁed and the transfer of ownership occurs, the servicer
      must take all steps necessary to enforce the due-on-sale (or due-on-transfer)
      provision. If the funds required to satisfy the mortgage loan debt are not received
      after the mortgage loan is accelerated, the servicer must initiate foreclosure
      proceedings. The servicer must follow the procedures in Completing a Transfer
      of Ownership in F-1-17, Processing a Transfer of Ownership for detailed requirements
      related to executing an assumption (or assumption and release) agreement. The
      servicer must notify the applicable property insurance companies, tax authorities,
      and any other interested parties. If the purchaser did not provide a new property
      insurance policy, the servicer must obtain an endorsement to the existing property
      insurance policy. Recent Related Announcements There are no recently issued
      Announcements related to this topic.'
  judgment: false
