A borrower obtaining a Fannie Mae first mortgage at 72% loan-to-value requests a waiver of tax and property-insurance escrows. Assume no legal or program requirement prohibits this waiver. What should the borrower understand about approval and any waiver fee?
Correct Answer
C) Approval depends on lender policy and ability to pay property bills; any imposed waiver fee must be disclosed
C. A low LTV alone neither guarantees a waiver nor establishes that it is free. Fannie Mae requires a written waiver policy that considers financial ability to pay property charges, not solely LTV. For a covered Closing Disclosure, any fee imposed for waiving escrow is disclosed as an Escrow Waiver Fee. Scope and exceptions: The borrower remains responsible for timely property bills without escrow. Applicable law and specific program restrictions still control; the question excludes those prohibitions. A disclosure requirement does not require a lender to charge a fee or independently authorize a fee prohibited elsewhere. Source: Waiver of Escrow Requirements — https://guide-selling.fanniemae.com/sel/b2-1.5-04/escrow-accounts Section 1026.38(l)(7)(i)(B) — https://www.consumerfinance.gov/rules-policy/regulations/1026/38/
Why This Is the Correct Answer
C. A low LTV alone neither guarantees a waiver nor establishes that it is free. Fannie Mae requires a written waiver policy that considers financial ability to pay property charges, not solely LTV. For a covered Closing Disclosure, any fee imposed for waiving escrow is disclosed as an Escrow Waiver Fee. Scope and exceptions: The borrower remains responsible for timely property bills without escrow. Applicable law and specific program restrictions still control; the question excludes those prohibitions. A disclosure requirement does not require a lender to charge a fee or independently authorize a fee prohibited elsewhere.
Why the Other Options Are Wrong
Option A: Always available on request, and never priced into the loan terms
Neither automatic approval nor universal free pricing follows from the facts.
Option B: Never available, because escrows are required on every mortgage loan
Waivers are permitted in eligible circumstances.
Option D: Available only above 80% loan-to-value, where the risk is greater
The cited policy does not make an LTV above 80% a prerequisite.
Exam Tip
Verify waiver eligibility, payment ability and actual disclosed terms instead of assuming an LTV shortcut.
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