Selling Guide Announcement (SEL-2026-08)

The Selling Guide has been updated to include changes to the following:

• Rental income: restructuring rental income requirements to improve navigation and application of policy
• Highest and best use requirements for Uniform Appraisal Dataset (UAD) 3.6: clarifying highest and best use requirements for UAD 3.6 appraisal assignments to support the new URAR reporting requirements
• Expansion of Native American Conventional Lending Initiative (NACLI): expanding lender eligibility and clarifying eligible transactions to result in more contributions to Duty to Serve goals

View the list of impacted topics.

Rental income

Rental income policy has become increasingly complex. Previous policy provided comprehensive guidance on using rental income for qualifying purposes, but lenders reported it was difficult to navigate and apply consistently to more specific rental income scenarios. We have revised our rental income policy to simplify its overall structure, improve clarity, address policy gaps, and better align policy with real-world execution. Key policy updates include:

• new requirements for the use of short-term rental income, including alternative documentation options and conservative qualifying income treatment;
• standardized requirements for investment properties purchased within 45 days of the subject property to improve consistency in rental income determination;
• a new framework for departing residences that relies on market-supported rents, reserve requirements, and PITIA offset limitations rather than lease agreements; and
• strengthened lease agreement standards through minimum lease term requirements, enhanced validation requirements, and restrictions on non-arm’s-length lease arrangements.

For a more detailed explanation of policy changes and clarifications included with this update, see the Attachment to this announcement.

Effective: Lenders are encouraged to implement these changes immediately but must do so for all loans with application dates on and after Nov. 1, 2026. Lenders using UAD 3.6 must follow the requirements in the UAD 3.6 Policy Supplement.

Highest and best use requirements for Uniform Appraisal Dataset (UAD) 3.6

This policy updates the highest and best use requirements for appraisal reports completed using Uniform Appraisal Dataset (UAD) 3.6. These changes apply only to UAD 3.6 appraisal assignments to support the new Uniform Residential Appraisal Report (URAR) reporting requirements and do not apply to appraisal reports completed using legacy appraisal report forms.

We updated our policy to:

• require the property’s highest and best use, as improved or as proposed, to be a residential use, rather than requiring it to be the property’s present use;
• define present use, residential use, and subordinate use in the context of highest and best use;
• require the property to be a primarily residential one- to four-unit property, with any non-residential use subordinate to the residential use, replacing the previous “residential in nature” guidance; and
• establish the eligibility criteria and reporting requirements for one- to four-unit residential properties when the present use does not satisfy one or more of the highest and best use tests.

The UAD 3.6 Policy Supplement has been updated to reflect these changes.

Effective: This policy change is effective immediately for appraisal reports completed using UAD 3.6.

Expansion of Native American Conventional Lending Initiative (NACLI)

This policy update expands NACLI eligibility by allowing lenders to sell NACLI loans to Fannie Mae without obtaining special approval. The program extends eligibility to federally recognized tribes that are either approved to participate in HUD’s Section 184 program or have entered into a Memorandum of Understanding with Fannie Mae. Additional updates clarify eligible transactions and leverage the use of Fannie Mae’s NACLI documents. Lenders may obtain appraisals based solely on the cost approach when insufficient market data exists to develop a reliable opinion of value using the sales comparison approach.

The UAD 3.6 Policy Supplement and Special Feature Codes List have been updated to reflect these changes.

Effective: Lenders may take advantage of this policy change immediately.

Attachment

The following tables provide additional details regarding the reorganization and updates made to Chapter B3-3.8, Rental Income.

B3-3.8-01, General Rental Income Information

B3-3.8-02, Rental Income from the Subject Property (New Topic)

B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental (New Topic)

B3-3.8-04, Rental Income from Non-Subject Property (New Topic)

B3-3.8-05, Rental Income from Non-Subject Property: Departing Residence (New Topic)

B3-3.8-06, Rental Income from Non-Subject Property: Investment Properties Purchased within 45 Days of the Subject Property (New Topic)

Impacted Topics