B3-4.2-03: Individual Development Accounts (12/01/2010)

Owned by Benjamin Mahan
Last updated: Nov 17, 2018 by Kacey Olson (Unlicensed)
3 min read

© Fannie Mae Single Family Selling Guide


Individual Development Accounts


Some nonprofit agencies will match the funds a borrower regularly deposits into a savings account that has been designated as an account that is used solely for the accumulation of funds to purchase a home. Such accounts are referred to as individual development accounts, or IDAs.
Nonprofit agencies that offer IDA programs have options with respect to accumulating and holding the matching funds, which include:

  • the use of a parallel "savings" account that is separate from the home buyer's savings account;
  • separately designated matching funds within a single agency account via accounting processes to allocate matching funds to a particular home buyer; and
  • the use of a trustee account that contains both the home buyer's funds and the agency's matching funds.


When a home buyer reaches the target amount and is ready to complete the home purchase, the funds are disbursed from the nonprofit agency account to the closing agent via a single check or multiple checks.

If the agency's matching funds are held in an account that is separate from the home buyer's account, the matching funds need not be commingled with the home buyer's funds prior to disbursement to the closing agent. It is acceptable to allow the separate disbursement of funds from the agency and from the home buyer, as long as the terms of the IDA program are met.

Funds that the borrower deposited into an IDA may be used for either closing costs or the down payment.

Use of IDA Funds to Meet Borrower Minimum Contribution Requirements


Funds that the borrower deposited into an IDA may be used for either the closing costs or the down payment. Depending on the repayment terms of the IDA program, the borrower may or may not be required to meet the minimum down payment requirements from his or her own funds, as outlined below:

IDA Repayment Terms

Allowable Use of Matching Funds

The nonprofit agency

  • requires repayment of the matching funds,
  • agrees to defer or forgive repayment provided that certain conditions are met, or
  • files a lien against the property.

The borrower may use the matching funds to supplement the down payment provided he or she has met the minimum borrower contribution requirements.
The minimum borrower contribution must come from the borrower's own funds unless:

  • the LTV or CLTV ratio is less than or equal to 80%; or
  • the borrower is purchasing a one-unit principal residence and meets the requirements to use gifts, donated grant funds, or funds received from an employer to pay for some or all of the borrower's minimum contributions. See B3-4.3-04, Personal Gifts[ (09/29/2015)

B3-4.3-04, Personal Gifts (09_29_2015)];[ B3-4.3-06, Donations From Entities

B3-4.3-06, Donations From Entities (05_01_2018)][ (05/01/2018)

B3-4.3-06, Donations From Entities (05_01_2018)]; and[ B3-4.3-08, Employer Assistance

B3-4.3-08, Employer Assistance (09_29_2015)][ (09/29/2015)

B3-4.3-08, Employer Assistance (09_29_2015)], for additional information.

The nonprofit agency

  • does not require repayment of the matching funds and
  • does not file a lien against the property.

The borrower may use the matching funds for some or all of the down payment without first being required to meet the minimum borrower contribution requirement from his or her own funds.


Note: If the IDA program includes provisions for a second mortgage that will be sold to Fannie Mae, the lender must have a negotiated contract for the sale of said second mortgage and the second mortgage must be in compliance with the requirements set forth in the negotiated contract.

Lender Checklist for IDAs


The lender must ensure that all of the following requirements for an IDA are satisfied:

✓

Lender Checklist for IDAs


Document how the nonprofit agency's IDA program operates.


Verify the rate at which the agency matches borrower deposits into the account.


Determine that the borrower satisfied the program's vesting requirements.


Document the borrower's regular payments into the account and the agency's regular deposits of matching funds into the account.