Fannie Mae Single Family Selling Guide B5-4.1-02, Texas Section 50(a)(6) Loan Eligibility (12/16/2020)
Fannie Mae Single Family Selling Guide topic B5-4.1-02 (Texas Section 50(a)(6) Loan Eligibility). Gap-fill (verbatim, ID-diff).
Verbatim regulatory text
Verbatim provisions from Fannie Mae Single Family Selling Guide B5-4.1-02, Texas Section 50(a)(6) Loan Eligibility (12/16/2020) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
Fannie Mae Single Family Selling Guide B5-4.1-02
Introduction This topic contains information on Texas Section 50(a)(6) loan eligibility, including: Refinance Classifications Eligible Loan Products and Transaction Types Texas Section 50(a)(6) Loan Security Property Refinance Classifications Lenders should be aware that Fannie Mae’s classification of loan transactions as “cash-out refinance” or “limited cash-out refinance” may differ from the way loans are classified under Texas law. Lenders should not rely on Fannie Mae’s categorization of refinance loans for purposes of determining whether compliance with the provisions of Texas Constitution Section 50(a)(6) is required. Rather, such lenders should consult with their counsel to determine the applicability of Texas Constitution Section 50(a)(6) to a particular loan transaction. Texas law determines whether or not a loan is a Texas Section 50(a)(6) loan, and Fannie Mae’s policy determines whether the loan must be delivered as a cash-out refinance transaction or as a limited cash-out refinance transaction. The lender is responsible for determining: the applicability of Texas Constitution Section 50(a)(6) regardless of Fannie Mae’s definitions of cash-out and limited cash-out refinance transactions; and if the loan should be delivered to Fannie Mae as a cash-out refinance or a limited cash-out refinance transaction, including the applicable special feature codes and payment of all applicable LLPAs. All loans that constitute Texas Section 50(a)(6) loans under Texas law must comply with these provisions, regardless of whether the loan is classified as a “cash-out refinance” or “limited cash-out refinance” in the
Fannie Mae Single Family Selling Guide B5-4.1-02
Texas Section 50(a)(6) Loan Underwriting, Collateral, and Closing Considerations For any refinance of a Texas Section 50(a)(6) loan that results in a loan originated in accordance with and secured by a lien permitted by Article XVI, Section 50(a)(4) of the Texas Constitution, an affidavit referenced in Section 50(f-1) Article XVI of the Texas Constitution must be prepared and recorded in connection with each such transaction. Eligible Loan Products and Transaction Types Texas Section 50(a)(6) loans must be fully amortizing loans with payments due on a monthly basis. The following are eligible as Texas Section 50(a)(6) loans:
Fannie Mae Single Family Selling Guide B5-4.1-02
, 2026 755 first lien mortgages only; fixed-rate loans; and five-, seven-, and ten-year ARM plans (4927, 4928, and 4929 Texas 50(a)(6), respectively). Note: These ARM plans should be structured in the same way that they are for other loans, except that the loan may not be assumable at any time over its full term. Only the ARM plans listed above are eligible, due to the MBS disclosure impact resulting from the non-assumable nature of these ARMs. The following are not eligible as Texas Section 50(a)(6) loans: loans that are not in first-lien position, ARM plans not listed above, and loans with temporary interest rate buydowns. Texas Section 50(a)(6) Loan Security Property A Texas Section 50(a)(6) loan must be secured by a single-unit principal residence constituting the borrower’s homestead under Texas law. Loans secured by two- to four-unit properties, investment properties, or second homes are not eligible. The security property may be a detached dwelling, an attached dwelling, a unit in a PUD project, a unit in a condo project, or a manufactured home. (A manufactured home is eligible only if it is classified as real property under Texas law, and satisfies all special Fannie Mae eligibility criteria for manufactured homes.) The borrower’s homestead property may not exceed the applicable acreage limit as determined by Texas law when the Texas Section 50(a)(6) loan is originated. A borrower that owns adjacent land must submit appropriate evidence, such as a survey, that the mortgaged homestead property is a separate parcel that does not exceed the permissible acreage. Note: An inter vivos revocable trust that meets Fannie Mae's borrower eligibility criteria (as described in
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Inter Vivos Revocable Trusts), may be a borrower under a Texas Section 50(a)(6) loan, provided that the trust meets the requirements for a "qualifying trust" under Texas law for purposes of owning residential property that qualifies for the homestead exemption. Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic.
Fannie Mae Single Family Selling Guide B5-4.1-02
, 2026 756 Announcements Issue Date Announcement SEL-2020-07 December 16, 2020 Announcement SEL-2020-02 April 01, 2020
Fannie Mae Single Family Selling Guide B5-4.1-02
Texas Section 50(a)(6) Loan Underwriting, Collateral, and Closing Considerations (03/04/2026) Introduction This topic contains information on Texas Section 50(a)(6) loan underwriting, collateral, and closing considerations, including: LTV/CLTV Ratios Underwriting Property Valuation and Survey Loan Documentation Title Insurance LTV/CLTV Ratios Per Texas law, the maximum allowable LTV and combined LTV for any Texas Section 50(a)(6) loan is 80%, notwithstanding any conflicting provisions of this Guide or any specific DU recommendation or finding. HELOC subordinate financing is not permitted, hence a maximum HCLTV ratio is not applicable. Underwriting Texas Section 50(a)(6) loans are eligible for the reduced documentation requirements recommended by DU, provided that all other terms and conditions described herein for Texas Section 50(a)(6) loans shall apply. For a Texas Section 50(a)(6) loan that represents the refinance of a prior Texas Section 50(a)(6) loan, the borrower must requalify even if the lender is currently servicing the existing loan that is being refinanced. Manually underwritten Texas Section 50(a)(6) loans are subject to minimum credit score requirements per the
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, based on the transaction as either a cash-out refinance or a limited cash-out refinance, as applicable.
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, 2026 757 Property Valuation and Survey Lenders must obtain a new appraisal to determine the property's current value even if DU offers value acceptance, or a value acceptance + property data option. If the appraisal is deemed deficient, refer to Guidance on Addressing Appraisal Deficiencies in
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Appraisal Quality Matters. The appraisal (together with any applicable desk review or field review) must be attached to the written acknowledgment of "fair market value". Note: When a desk review or field review is requested by the lender in connection with a Texas Section 50(a)(6) loan, it must be obtained prior to the date of the note and mortgage. The appraisal for the property and the acknowledgment of fair market value must not include any property other than the homestead. The survey (or other acceptable evidence) must demonstrate that: the homestead property and any adjacent land are separate parcels, and the homestead property is a separately platted and subdivided lot for which full ingress and egress is available. The lender selling the loan to Fannie Mae must not have any interest (such as an option to purchase, a security interest, or an easement) in any parcel adjacent to the homestead property that is owned by the borrower, if such interest could constitute additional security for the Texas Section 50(a)(6) loan. Loan Documentation There is a special security instrument, notes, and riders that must be used in connection with Texas Section 50(a)(6) loans and a special affidavit that must be prepared and recorded in connection with each Texas Section 50(a)(6) loan transaction. Lenders must use the following documents: Texas Home Equity Security Instrument (First Lien) (Form 3044.1) the specific Texas Section 50(a)(6) loan notes and riders, and Texas Home Equity Affidavit and Agreement (First Lien) (Form 3185) Because of the complexities involved in closing Texas Section 50(a)(6) loans, lenders must provide the title company with a detailed closing instruction letter and require an acknowledgment of its receipt. The closing instructions must require the title company to conduct its closings properly to ensure compliance with Texas Constitution Section 50(a)(6). To assist in this endeavor, the Texas Home Equity Affidavit and Agreement First Lien (Form 3185) must be prepared and recorded in connection with each Texas Section 50(a)(6) loan transaction. Fannie Mae suggests that a lender also require each borrower to sign a closing receipt that itemizes the documents that they received at closing. For additional Texas Section 50(a)(6) loan documentation (also called “Texas Home Equity” documentation) refer to Standard Texas Home Equity Notes (under Standard Instruments). Note: Texas Section 50(a)(6) loans are not eligible for delivery as eMortgages.
Fannie Mae Single Family Selling Guide B5-4.1-02
, 2026 758 Title Insurance For all Texas Section 50(a)(6) loans, a title insurance policy written on Texas Land Title Association forms (standard or short form), supplemented by an Equity Loan Mortgage Endorsement (Form T-42) and a Supplemental Coverage Equity Loan Mortgage Endorsement (Form T-42.1), is required. Note: There may be no exceptions or deletions to the coverage provided by Paragraphs 2(a) through (e) (other than an exception or deletion relating to the exclusion of agricultural homestead property) of the T-42 endorsement. The endorsement must include the optional coverage provided by Paragraph 2(f), as well as the additional coverage provided by Endorsement T-42.1. The title insurance policy cannot include language that: excludes coverage for a title defect that arises because financed origination expenses are held not to be “reasonable costs necessary to refinance”, or defines the “reasonable costs necessary to refinance” requirement as a “consumer credit protection” law since the standard title policy excludes coverage when lien validity is questioned due to a failure to comply with consumer credit protection laws. Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2026-02 March 04, 2026 Announcement SEL-2025-07 September 03, 2025 Announcement SEL-2023-02 March 01, 2023 Announcement SEL-2019-07 August 07, 2019 Announcement SEL-2019-04 May 01, 2019