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Here's what we mean by "ADU": an Accessory Dwelling Unit is a separate living space that includes a kitchen, bathroom, and separate entrance, is independent of the primary dwelling unit, and is smaller than the primary unit. VA and Freddie Mac both confirm this basic definition. Fannie Mae's updated rules (effective March 31, 2026, for lenders using UAD 3.6) now allow up to three ADUs on a single-unit property and permit two- to three-unit properties to include ADUs as long as the total dwelling units plus ADUs does not exceed four—a significant expansion from earlier limits of one ADU per property. The appraisal report must describe the ADU in detail, specify its condition and room count including bedrooms and bathrooms, report its finished square footage separately, and note any effect it has on market value. When you're reporting the property, you count the primary units in one field (excluding ADUs) and then list the number of ADUs in a separate field, and you must identify which specific unit is the ADU. Straight from Fannie Mae Selling Guide, Freddie Mac Seller/Servicer Guide, VA Lenders Handbook (Pamphlet 26-7), and UAD 3.6/URAR — nothing added.

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© Copyright Notice: © Fannie Mae. UAD 3.6 / URAR reference materials shown for research and reference only. Full documents available at fanniemae.com/uad. Reproduction restricted per Fannie Mae copyright policy.

Chief Appraiser Picks · Related Video How Much Do Accessory Dwelling Units (ADUs) Add to a Home's Value? (Class Valuation)

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#1 HUD/FHA Single Family Handbook 4000.1 Page 573

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B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 548 Last Revised: 8/12/2026 the Borrower is responsible for notifying the…

HUD/FHA Single Family Handbook 4000.1 · HUD_FHA_4000.1.pdf · Page 573 · View at official source (HUD.gov — SFH Handbook 4000.1) →

B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 548 Last Revised: 8/12/2026 the Borrower is responsible for notifying the Mortgagee of absences from the Property in excess of two months to avoid determinations that the Borrower’s Principal Residence has changed; • FHA insures fixed rate HECMs, as well as annual and monthly adjustable rate HECMs; • the amount of funds made available to the Borrower is based on the age of the youngest Borrower or Eligible NBS; • principal limit growth for all payment plan options; the Principal Limit may increase monthly but there are restrictions for disbursing those funds during the First 12-Month Disbursement Period; • the Initial Mortgage Insurance Premium (IMIP) payment methods and the formula used to calculate the IMIP amount; • the costs of obtaining the HECM: provide the Borrower with a Good Faith Estimate (GFE), giving the Borrower an estimate of closing costs and explaining which charges are required to obtain the HECM and which charges are not required to obtain the HECM, including the disclosure of third-party fees; and inquire whether the HECM proceeds will be used to pay any cost associated with estate planners and inform the Borrower that such services are unnecessary to obtain a HECM and are ineligible for payment from HECM proceeds; • the Borrower may incur the cost of a second appraisal, if required by the collateral risk assessment, which is used to determine whether additional support for the collateral value is required; • the Property must meet FHA’s Minimum Property Requirements (MPR) or Minimum Property Standards (MPS) and the provisions for completing required repairs either prior to or after closing; • insurance is required for all improvements on the Property that serves as collateral for the HECM, whether in existence at the time of origination or subsequently erected, against any hazards, casualties, and contingencies, including fire and flood, for which the Mortgagee requires insurance. Such insurance must be maintained in the amount and for the period of time that is necessary to protect the Mortgagee’s investment; • the Borrower and NBS, if any, will be required to disclose and certify their marital status at closing: an NBS may be eligible for the deferral of the Due and Payable status upon the death of the last surviving Borrower if the NBS meets and continues to meet the Qualifying Attributes or the NBS continues to reside

#2 HUD/FHA Single Family Handbook 4000.1 Page 574

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B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 549 Last Revised: 8/12/2026 other Borrower obtaining the HECM and acknowledging…

HUD/FHA Single Family Handbook 4000.1 · HUD_FHA_4000.1.pdf · Page 574 · View at official source (HUD.gov — SFH Handbook 4000.1) →

B. Title II Insured Housing Programs Reverse Mortgages 2. Origination/Processing Handbook 4000.1 549 Last Revised: 8/12/2026 other Borrower obtaining the HECM and acknowledging the terms and conditions of the Mortgage; • repayment and prepayment features; and • the Borrower’s rights, obligations, and remedies with respect to temporary absences from the home, late payments, and payment default by the Mortgagee and all conditions requiring satisfaction of the HECM. For fixed rate HECMs, Mortgagees must also explain: • the Borrower is limited to the single lump sum payment option, which provides a single Disbursement at closing with no opportunity for future Disbursements to or on behalf of the Borrower, except as allowed from a Set-Aside established at closing; and • Disbursement of HECM proceeds during the First 12-Month Disbursement Period is limited to the amount of the Borrower’s Advance, plus Disbursements from a Set-Aside that was established at closing. For adjustable rate HECMs: • the Borrower may choose from five, flexible payment options, allowing for future Disbursements, and the Borrower may change payment plans to one of the other available payment options at any time provided funds are available; • the frequency of annual and monthly adjustable rate changes; and • Disbursement of HECM proceeds during the First 12-Month Disbursement Period is subject to an Initial Disbursement Limit. (2) Required Documentation At initial application, the Mortgagee must obtain the HECM Program Description disclosure signed and dated by the Borrower. (B) Compliance with All Applicable Laws, Rules, and Requirements The Mortgagee is required to comply with all federal, state, and local laws, rules, and requirements applicable to the HECM transaction, including all applicable disclosure requirements and the requirements of the Consumer Financial Protection Bureau (CFPB), including those related to: • Truth in Lending Act (TILA); and • Real Estate Settlement Procedures Act (RESPA). (C) Nondiscrimination Policy The Mortgagee must fully comply with all applicable provisions of: • the Fair Housing Act, 42 U.S.C. §§ 3601–3619; • the Fair Credit Reporting Act, 15 U.S.C. §§ 1681‒1681x; and • the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691‒1691f.

#3 UAD 3.6 / URAR (FNMA) Page 14

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Overview Appendix F-1: URAR Reference Guide Page 14 of 375 Version 1.3 Units and ADUs Defining the Property (Units and ADUs) Report Field ID Report Label When to Include Allowable…

UAD 3.6 / URAR (FNMA) · Appendix F-1 URAR Reference Guide v1.3.pdf · Page 14 · View at official source (fanniemae.com/uad) →

Overview Appendix F-1: URAR Reference Guide Page 14 of 375 Version 1.3 Units and ADUs Defining the Property (Units and ADUs) Report Field ID Report Label When to Include Allowable Answers / Format Definition / Additional Guidance 3.005 Units Excluding ADUs Always required Number Number of separate living units on the subject property, not counting any ADUs. ADUs are entered in a separate field (3.006) but are considered in the overall unit count. Examples: • A single-family property (with or without an ADU) is reported as 1 unit in this field. • A three-unit property (with or without an ADU) is reported as 3 units in this field. 3.006 Accessory Dwelling Units Always required Number Number of ADUs on Subject Property Notes: • Enter zero (0) if there are no ADUs on the property. • ADUs may be in the dwelling, attached to the dwelling, or associated with a separate building (outbuilding). 10.011 ADU Always required Yes | No Unit is an ADU: Indicates whether the unit is considered an accessory dwelling unit. Notes: • If Number of ADUs on Subject Property 3.006 is zero, this question does not display. • If Number of ADUs on Subject Property is 1 or more, this question displays in each instance of Unit Interior to identify which unit is the ADU. PUD, Project, and Site Owned in Common Defining the Property (PUD, Project, and Site Owned in Common) Report Field ID Report Label When to Include Allowable Answers / Format Definition / Additional Guidance 3.010 Planned Unit Development (PUD) Always required Yes | No Property in a PUD Indicates whether the property is in a PUD. A PUD is a subdivision that consists of common property and improvements that are owned and maintained by a homeowners association (HOA) for the benefit and use of the individual PUD unit owners. A unit owner in the PUD has title to a residential property (parcel and dwelling) and an interest in the HOA that owns or manages the common areas and facilities of the PUD. 3.011 3.012 3.013 Condominium Cooperative Condop Always required Yes | No Property in a Project • Yes (the property is in a condominium, cooperative, or condop) • No (the property is not in a condominium, cooperative, or condop) 3.011 3.012 3.013 Condominium Cooperative Condop Required if Property in a Project is Yes Condominium, Cooperative, or Condop Project Legal Structure 3.015 Subject

#4 UAD 3.6 / URAR (FNMA) Page 346

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Appendix 1: Glossary Appendix F-1: URAR Reference Guide Page 346 of 375 Version 1.3 Appendix 1: Glossary Term Definition Accessory Dwelling Unit (ADU) An additional living area…

UAD 3.6 / URAR (FNMA) · Appendix F-1 URAR Reference Guide v1.3.pdf · Page 346 · View at official source (fanniemae.com/uad) →

Appendix 1: Glossary Appendix F-1: URAR Reference Guide Page 346 of 375 Version 1.3 Appendix 1: Glossary Term Definition Accessory Dwelling Unit (ADU) An additional living area that is independent of the primary dwelling unit that includes a kitchen, full bathroom, and sleeping area. It has a separate ingress and egress from the primary dwelling unit. It is generally subordinate in size and location to the primary dwelling, and may be attached to a house or garage, or built as a stand-alone unit. Generally, it will use the utility connections of the primary house. Apparent Environmental Condition A contamination (hazard or nuisance) that may affect the value and marketability of the site. Assessor Record Recorded information that identifies and describes real estate property (e.g., a record of transactions, value for taxation purposes), sometimes referred to as a property record, tax card, or public record. Below Grade A level that is either entirely or partially below the ground level. If any portion of an area is below ground level, then the entire level is considered below grade. Community Land Trust (CLT) A non-profit entity, or federal, state, or local government that owns land and leases it under a long-term ground lease to a homebuyer who purchases the improvements on the land. The ground lease contains certain land use restrictions that preserve use of the property for affordable housing. Deferred Maintenance Lack of normal maintenance and upkeep that may result in repairs or replacement of items. Dwelling Any building containing living unit(s) designed to be used as residence(s). A portion of the dwelling may also contain ADU(s). Extraordinary Assumption An assumption as of the effective date of the appraisal results, which, if found to be false, could alter the appraiser’s opinions or conclusions. In essence, an extraordinary assumption is what the appraiser assumes to exist (e.g., evidence of termite infestation). Finished Area Whether above or below grade, an area is considered finished when it is enclosed, suitable for year-round living, and meets locally accepted standards. Reference published guidelines by the GSEs, government agencies, or other identified secondary market participants for specific guidance. Floor Plan A visual representation or diagram that shows the interior and exterior walls, doors, and stairs of a dwelling. Hypothetical Condition A condition that is contrary to what is known by the appraiser to exist on the effective date of the assignment. The hypothetical condition is used to value

#5 Freddie Mac Seller/Servicer Guide Page 47

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the mandatory effective November 2, 2026 version of this section. This section contains requirements related to: Eligible properties with ADUs Ineligible properties with ADUs…

Freddie Mac Seller/Servicer Guide · Freddie_Mac_Guide_2026-06-25.txt · Page 47 · View at official source (guide.freddiemac.com) →

the mandatory effective November 2, 2026 version of this section. This section contains requirements related to: Eligible properties with ADUs Ineligible properties with ADUs Appraisal requirements Manufactured Home ADUs (a) Eligible properties with ADUs Freddie Mac will purchase an eligible Mortgage secured by a 1-, 2- or 3-unit property that has one ADU. For Mortgages secured by Manufactured Homes, including CHOICEHomes®, with an ADU, the primary dwelling unit must be a multiwide Manufactured Home. An ADU is classified as an additional finished area that: Includes a kitchen, bathroom and separate entrance. Note: The absence of cooking appliance(s) in a kitchen does not change the classification as an ADU. Is independent of the primary dwelling unit Is smaller in size than the primary dwelling unit (i.e., the ADU's finished area is less than the primary dwelling unit's finished area) and Contributes less to the value of the property than the primary dwelling unit Examples of eligible ADU configurations include: A 1-, 2-, or 3-unit dwelling with an ADU above a garage or outbuilding, A dwelling with an attached or detached ADU, or A dwelling with an ADU in the basement (b) Ineligible properties with ADUs Mortgages secured by the following ADU configurations are not eligible for purchase by Freddie Mac: A 2- or 3-unit property with an ADU that does not comply with zoning and land use requirements (illegal zoning) A 1-, 2- or 3-unit property with two or more ADUs A 4-unit property with an ADU (c) Appraisal requirements The appraiser must determine whether the subject property has an ADU and report the appraisal on the appropriate form. When determining whether the subject property has an ADU, the appraiser must consider zoning and land use requirements and all property characteristics, specifically the unit's utility and the property’s highest and best use. If the appraiser determines the subject property has an ADU, the appraisal report must include: A detailed description of the ADU Any effect the ADU has on the market value or marketability of the subject property Specific information about the ADU, including but not limited to its general condition, its room count (including the number of bedrooms and baths) and the finished square footage area (i) For properties with legal or legal non-conforming zoning compliance or locations without zoning If the subject property ADU complies with the zoning and land use requirements (legal or legal non-conforming or locations without

#6 VA Lenders Handbook (Pamphlet 26-7) Page 388

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Appraisal Report 11-10 6. Accessory Dwelling Unit Change Date February 22, 2019 • This Chapter has been revised in its entirety. a. Single Real Estate Entity An Accessory Dwelling…

VA Lenders Handbook (Pamphlet 26-7) · VA-Lender-Handbook.pdf · Page 388 · View at official source (VA.gov — Appraisers/Staff Appraisal Reviewer) →

Appraisal Report 11-10 6. Accessory Dwelling Unit Change Date February 22, 2019 • This Chapter has been revised in its entirety. a. Single Real Estate Entity An Accessory Dwelling Unit (ADU) is a living unit including kitchen, sleeping, and bathroom facilities added to or created within a single-family dwelling, or detached on the same site. A manufactured home on the site could be an ADU. The dwelling and the ADU together constitute a single real estate entity. b. Highest and Best Use As part of the highest and best use analysis, the appraiser must determine if the property is a single-family dwelling with an ADU, or a two-family dwelling. The highest and best use must be a legal use (see Topic 10). A two-family dwelling must be appraised on the Fannie Mae Form 1025, Small Residential Income Property Appraisal Report. c. ADU Valued Separately An ADU is usually subordinate in size, location, and appearance to the primary dwelling unit and may or may not have separately metered utilities and separate means of ingress and egress. The appraiser must not include the living area of the ADU in the calculation of the GLA of the primary dwelling. The ADU must be valued separately as a line item on the market data grid. d. Notify the Lender if More than One Unit The appraiser must notify the lender if a property has more than one ADU. e. Detached Buildings A manufactured home, shed, or other detached building on the property which does not have kitchen, sleeping, and bathroom facilities or cannot be legally used as a dwelling, may be valued as storage space if it does not present any health or safety issues.

#7 Fannie Mae Selling Guide Page 3

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Accessory dwelling units and manufactured homes updates We expanded our accessory dwelling unit (ADU) criteria to meet the growing demand for flexible and affordable housing…

Fannie Mae Selling Guide · Selling Guide Announcement SEL-2025-10.pdf · Page 3 · View at official source (selling-guide.fanniemae.com) →

Accessory dwelling units and manufactured homes updates We expanded our accessory dwelling unit (ADU) criteria to meet the growing demand for flexible and affordable housing solutions. ADU expanded eligibility updates to our Selling Guide UAD 3.6 Policy Supplement include: • Multi-unit properties: Allows two- to three-unit properties to include ADUs, provided the number of dwelling units in the primary structure plus the ADUs does not exceed four. • Multiple ADUs on single-unit properties: Extends eligibility to one-unit properties with up to three ADUs. • One ADU for standard manufactured housing: Extends eligibility to single-unit manufactured homes (single- or multi- section) as the primary dwelling with a single ADU classified as real property. • Multiple ADUs for MH Advantage®: Extends eligibility to (single- or multi-section) MH Advantage as the primary dwelling, to include ADUs provided the number of dwelling units plus the ADUs (which must all be classified as real property) does not exceed four. Properties with multiple ADUs must still be classified as either single-unit or two- to three-unit principal residences. Manufactured Homes expanded eligibility reflects a significant step toward expanding financing access and modernizing appraisal standards for diverse manufactured housing configurations. The revisions include: • Single- and Multi-section: Updates to definitions • Manufactured Home: Extends eligibility to two- to four-unit properties. • Multi-story Manufactured Homes: Extends eligibility to multi-story manufactured homes. Effective: These changes are effective Mar. 31, 2026, and are only available to lenders utilizing UAD 3.6 policy. Preventing, detecting, and reporting mortgage fraud clarifications We eliminated duplicative and overly specific language regarding closing attorneys, settlement agents, and appraiser selection criteria. We added references to additional seller/servicer resources for identifying fraud and clarified that any valid match to the Department of Treasury Office of Foreign Assets Control (OFAC) sanctions list must be reported to Fannie Mae within 24-hours of identification. Effective: Lenders may take advantage of these clarifications immediately. Miscellaneous update B2-1.3-01, Purchase Transactions, B2-2-03, Multiple Financed Properties for the Same Borrower, B2-2-06, Homeownership Education and Housing Counseling, and B3-5.4-01, Eligibility Requirements for Loans with Nontraditional Credit: We made additional miscellaneous changes to align these topics with updates previously communicated in Selling Guide Announcement SEL-2025-09. The minor clarifications relate to the removal of minimum credit score requirements for DU loans. Lenders may contact their Fannie Mae Account Team if they have questions about this Announcement. Have guide questions? Get answers to all your policy questions, straight from the

#8 Fannie Mae Selling Guide Page 1136

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accrual rate The rate at which interest is calculated. For a particular remittance date for an MBS pool, it is the mortgage interest rate due under the terms of the mortgage note…

Fannie Mae Selling Guide · Selling Guide - 06-03-2026.pdf · Page 1136 · View at official source (selling-guide.fanniemae.com) →

accrual rate The rate at which interest is calculated. For a particular remittance date for an MBS pool, it is the mortgage interest rate due under the terms of the mortgage note during the period beginning on the second day of the month preceding the remittance date and ending on the first day of the month in which such remittance date occurs, less the lender’s servicing spread. ACH Automated Clearing House actual/actual remittance type A remittance type that requires the lender to remit to Fannie Mae only the actual interest due (if it is collected from borrowers) and the actual principal payments collected from borrowers. adjustable-rate mortgage (ARM) A mortgage loan that permits the lender to periodically adjust the interest rate on the basis of changes in a specified index. ADU accessory dwelling unit affiliate An entity that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a seller. For the purposes of this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity through ownership, by contract, or otherwise. affiliated projects Condo, co-op, and PUD projects that are under the same master association or share the use of common facilities that are either owned individually or as part of a master association or development are considered affiliated projects. Condo, co-op, or PUD projects that do not meet this criteria, are not considered affiliated projects, even if they are managed by the same management company. AFS Audited Financial Statement allonge An attachment to a legal document that is used to insert language or signatures when there is no space for them on the document itself. Frequently used to add endorsements to the mortgage note. ALTA American Land Title Association amenities

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