Fannie Mae Form 236, Application for Release of Security: LTV and Proceeds

Fannie Mae Form 236, the Application for Release of Security, is the document you file with your mortgage servicer when you want part of your mortgaged property released from the lien — to sell off a parcel, grant an easement, lease mineral rights, subdivide, or respond to a government condemnation. You can download it as a free PDF from Fannie Mae’s Selling and Servicing Guide Forms page at singlefamily.fanniemae.com, or request a copy from your servicer.¹ Your servicer, not Fannie Mae, receives the application, and in most cases has delegated authority to approve or deny it without sending it up the chain.

Eligibility Requirements You Must Meet First

Before filling anything out, confirm your loan qualifies. Fannie Mae’s Servicing Guide lists conditions that apply to every partial release request, and missing any of them means the servicer must deny it:²

Your mortgage is not delinquent when you submit the request.
The loan was originated more than 12 months before the request date.
You have not been more than 30 days late more than once in the past 12 months, and the loan has not otherwise been in default during that period.
The release will not compromise Fannie Mae’s first-lien position.
The remaining property will still have access by public roads.

If your loan falls short of one of these conditions but you believe your situation warrants an exception, the servicer can escalate to Fannie Mae for a non-delegated review rather than issuing an outright denial. Requests involving Texas Section 50(a)(6) home equity loans must be escalated to Fannie Mae in every case.²

Completing the Form

Page 1: Borrower and Property Information

The top of Page 1 collects identifiers the servicer uses to pull your file. Enter the Fannie Mae loan number, the servicer’s own loan number, and your full legal name exactly as it appears on the note. Give the property’s physical street address, not a mailing address, so the servicer can match the request to the correct tax parcel.³

Then select the type of release you are requesting and describe the purpose. The form asks for the future use of a new easement, the reason for a subdivision, or the proposed use of land subject to an eminent domain action. Be specific about how much land is involved and what the buyer or grantee intends to do with it. Vague descriptions slow the review because the servicer needs enough detail to judge whether the remaining property still adequately secures the loan.³

Compensation and Borrower Agreement

Report the amount of compensation you expect to receive: the gross sale price, easement payment, or condemnation award. Report the figure accurately because it feeds directly into the loan-to-value analysis the servicer performs on Page 2.

By signing the borrower agreement, you authorize Fannie Mae to apply any of the proceeds toward taxes, assessments, ground rents, insurance, improvement costs, or your outstanding mortgage balance, at its discretion.³ That does not mean the money will automatically go to your principal. Whether it does depends on your post-release LTV.

Page 2: What the Servicer Adds

You do not fill in Page 2 yourself. The servicer records the original LTV, the combined LTV, the current market value of the whole property, and the estimated value after the release. The valuation used must be no more than six months old and must show three figures: the value before the release, the value after, and the value of the land being released or added.³ The servicer then recommends how much of the proceeds, if any, should be applied to your unpaid principal balance.

Supporting Documents to Attach

An incomplete package is the fastest way to stall a request. Page 3 of the form lists what must accompany the application whether the servicer reviews it directly or forwards it to Fannie Mae.³

Original and revised legal descriptions of the property, prepared by a licensed surveyor or an attorney familiar with your county’s recording standards.
A survey, plat, or aerial map showing the location of the area to be released in relation to any structures. For mineral or subsurface lease requests, the map must also show any applicable drill site and required access routes across the property.³
The draft deed or easement agreement. It stays in draft until Fannie Mae or the servicer gives written consent; the servicer’s legal team reviews it to confirm remaining road access and lien priority.
A property valuation supporting the before-and-after values, current within six months. Fannie Mae may also request the origination appraisal.³

Professional land surveys can run from a few hundred dollars to several thousand depending on the property’s size, terrain, and location. Schedule the survey early. It is the document most likely to hold up the rest of the package.

How the 60% LTV Threshold Affects Your Proceeds

The single most important number in the process is your post-release loan-to-value ratio. The Servicing Guide draws a bright line at 60% LTV, and which side you land on decides whether you keep all the proceeds or must pay down the mortgage:²

If the post-release LTV is below 60%, the servicer can approve the release on Fannie Mae’s behalf with no required principal reduction, and you keep the full proceeds.
If the post-release LTV is at or above 60%, the servicer can still approve, but you must agree to reduce the mortgage balance enough to maintain the higher of your LTV immediately before the release or 60%.

The same framework applies to easement grants, mineral leases, property additions, partitions, and subdivisions.² For mineral rights leases at or above 60% LTV, the servicer can approve the lease, but the borrower must apply royalties toward the balance until the LTV drops to the required level.

A quick example. If you owe $180,000 on a property worth $400,000, your LTV is 45%, so even after carving off a parcel you have room before hitting 60%. If you owe $280,000 on a $350,000 property, your LTV is already 80%, and any release will almost certainly require a principal curtailment from the sale proceeds.

Submitting to Your Servicer and What Happens Next

Send the completed Form 236 and all supporting documents to your mortgage servicer. Do not send them to Fannie Mae. The servicer is the gatekeeper and follows a structured evaluation process from the Servicing Guide.⁴

If the application meets every eligibility condition and the LTV math works, the servicer has delegated authority to approve without contacting Fannie Mae. Escalation is required in a handful of situations: when the standard conditions are not met but extenuating circumstances exist, when the property valuation does not produce a reliable confidence score from an approved automated valuation model, when a condemnation award falls outside a 10% threshold compared to the model’s value, or when the request involves substitution of the property securing the loan.²

Neither the form nor the Servicing Guide sets a fixed review timeline. Straightforward requests inside the servicer’s delegated authority tend to move faster than escalated ones. Ask your servicer for an estimated timeline at submission and follow up if you have not heard back within 30 days.

How Sale Proceeds Are Distributed After Approval

Once the release is approved, the servicer decides how the cash is distributed. The Servicing Guide sets the rules based on how the proceeds compare to your outstanding debt:⁴

When proceeds are less than the total mortgage debt, the servicer applies the money first to any past-due installments, then as an additional principal payment. If applying the full amount would push the LTV below the pre-release ratio, the servicer must require only the portion needed to maintain that prior ratio and let you keep the excess.
Cash consideration can, in some cases, be designated for improvements to the remaining property instead of the loan balance. For large amounts, the servicer may hold the funds and release them as specific improvements are completed.
When proceeds are enough to satisfy the entire remaining debt, most common in full condemnation takings, the servicer removes the loan from Fannie Mae’s investor reporting system.

After approval, the servicer prepares a formal partial release document. You are responsible for recording that release with your local county recorder’s office so public records reflect that the released parcel is no longer encumbered. Recording fees vary by county.

Special Rules for Mineral Leases and Condemnation

Oil, Gas, and Mineral Rights Leases

Form 236 also covers requests to lease subsurface mineral rights, and these carry extra scrutiny because drilling can affect the property’s value and habitability. The servicer must consider how the lease affects neighboring properties, whether the terms allow physical access to the surface of your land, and what hazards such as fire, explosion, or subsidence might result from extraction.²

On top of the standard eligibility conditions, granting such leases must be customary in your area, and the exercise of the lease must not prevent the property from being used as a residence or expose its occupants to health or safety hazards. Below 60% LTV, the servicer can approve the lease and waive Fannie Mae’s interest in royalties. At 60% or above, royalties must be applied toward the mortgage balance.

Condemnation and Eminent Domain

When a government entity takes part of your property through eminent domain, you still submit Form 236. The servicer evaluates the condemnation award through the same general framework, but when the government-provided property value differs by more than 10% from an approved automated valuation model, the servicer must contact Fannie Mae’s SF CPM division for guidance rather than deciding on its own.² In a full taking where the entire property is condemned, the proceeds are used to satisfy the mortgage debt, and any remaining balance Fannie Mae agrees to charge off.

Tax Considerations

Selling part of your land or receiving a condemnation award is a taxable event. A few IRS rules are worth knowing before you close.

When you sell part of a property, you allocate your original cost basis between the portion sold and the portion you keep. IRS Publication 551 gives the formula: multiply your total cost in the property by a fraction whose numerator is the fair market value of the portion sold and whose denominator is the fair market value of the entire property.⁵ The result is the basis you subtract from the sale price to determine your taxable gain on the released parcel, and the remaining basis carries forward on the portion you still own.

If you are selling vacant land adjacent to your home, IRS Publication 523 allows you to treat that sale as part of the sale of your home, potentially qualifying for the capital gains exclusion of up to $250,000 ($500,000 for married couples filing jointly), but only if you owned and used the land as part of your home, both sales occur within two years of each other, and both meet the ownership and use eligibility test.⁶ A partial release where you sell a back lot but keep the house may not fit this rule if no separate sale of the home occurs within that two-year window.

The buyer or settlement agent will generally report the transaction to the IRS on Form 1099-S.⁷ Keep detailed records of your original purchase price, any improvements, and the professional appraisal used in the Form 236 process. That appraisal is often the best evidence of fair market value allocation if the IRS later questions your basis calculation.

1
Fannie Mae. Selling and Servicing Guide Forms
2
Fannie Mae. Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan
3
Fannie Mae. Fannie Mae Form 236 Application for Release of Security
4
Fannie Mae. Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan
5
Internal Revenue Service. Publication 551 (12/2025), Basis of Assets
6
Internal Revenue Service. Publication 523 (2025), Selling Your Home
7
Internal Revenue Service. About Form 1099-S, Proceeds from Real Estate Transactions