C-2.3-01, Processing ARM Conversions to Fixed Rate Mortgage Loans (05/15/2019)

This topic provides requirements for processing ARM loan conversions to fixed rate mortgage loans.

The servicer must also follow the procedures in  F-1-01, Servicing ARM LoansF-1-01, Servicing ARM Loans  in order to complete the conversion of an ARM loan to a fixed rate mortgage loan.

To be eligible for conversion to a fixed rate mortgage loan, the servicer must confirm that an ARM loan

• is current (or must be brought current by the conversion date),

• has an LTV ratio of 95% or less, and

• satisfies any other conditions specified under a negotiated contract.

If the mortgage loan has negatively amortized, the servicer must obtain a new appraisal to determine

• the current LTV of the property, and

• whether the borrower will have to pay any funds to reduce the UPB to the amount required to achieve an LTV ratio equal to 95% of the current value of the property.

The following table provides a list of all items required before the servicer can complete the conversion of an ARM to a fixed rate mortgage loan.