Browse the Guide
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Part A Doing Business with Fannie Mae
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Subpart A1, Contractual Obligations
- Chapter A1-1, Understanding the Lender Contract
- Chapter A1-2, Termination of the Lender Contract without Cause
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Chapter A1-3, Repurchases, Indemnifications, and Make Whole Payment Requests
- A1-3-01, Requirements for Voluntary Repurchase
- A1-3-02, Fannie Mae-Initiated Repurchases, Indemnifications, Make Whole Payment Requests and Deferred Payment Obligations
- A1-3-03, Repurchase Obligations Related to Bifurcated Mortgage Loans
- A1-3-04, Reporting the Repurchase
- A1-3-05, Redelivering a Mortgage Loan
- A1-3-06, Automatic Reclassification of MBS Mortgage Loans
- Chapter A1-4, Breach of Contract and Nonperformance
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Subpart A2, Getting Started with Fannie Mae
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Chapter A2-1, Servicer Duties and Responsibilities
- A2-1-01, General Servicer Duties and Responsibilities
- A2-1-02, Servicer’s Duties and Responsibilities Related to MBS Mortgage Loans
- A2-1-03, Servicer's Duties and Responsibilities Related to Mortgage Loans with Resale Restrictions or Shared Equity Transactions
- A2-1-04, Execution of Legal Documents
- A2-1-05, Note Holder Status for Legal Proceedings Conducted in the Servicer’s Name
- A2-1-06, Use of Fannie Mae Trademarks
- A2-1-07, Subservicing
- A2-1-08, First Lien Mortgage Loan Requirements
- A2-1-09, Compliance with Requirements and Laws
- Chapter A2-2, Refinance and Lending Practices
- Chapter A2-3, Servicer Compensation
- Chapter A2-4, Fannie Mae’s Quality Control Review
- Chapter A2-5, Individual Mortgage Loan Files and Records
- Chapter A2-6, Custodial Documents
- Chapter A2-7, Servicing Transfers
- Chapter A2-8, Mortgage Electronic Registration System
- Chapter A2-9, Mortgage Assignments to Fannie Mae
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Chapter A2-1, Servicer Duties and Responsibilities
- Subpart A3, Maintaining Fannie Mae Seller/Servicer Status
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Subpart A4, Setting Up Servicer Operations
- Chapter A4-1, Establishing and Implementing Internal Operations for All Mortgage Loans and Acquired Properties
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Chapter A4-2, Requirements for Delinquent Mortgage Loans and Mortgage Loans at Risk of Default
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Section A4-2.1, Establishing Default Management Strategies
- A4-2.1-01, Preventing Defaults and Managing Delinquencies
- A4-2.1-02, Property Inspection Vendor Management and Oversight
- A4-2.1-03, Managing Short Sales
- A4-2.1-04, Establishing Contact with the Borrower
- A4-2.1-05, Requirements for Collection and Foreclosure Prevention Strategies Unique to Second Lien Mortgage Loans
- A4-2.1-06, Adverse Action Notification Certification
- A4-2.1-07, Servicer's Duties and Responsibilities Related to Mortgage Loans with an Outstanding Non-Interest-Bearing Balance
- Section A4-2.2, Requirements for Default-Related Law Firms
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Section A4-2.1, Establishing Default Management Strategies
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Subpart A1, Contractual Obligations
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Part B Escrow, Taxes, Assessments, and Insurance
- Chapter B-1, Escrow Account Administration
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Chapter B-2, Property Insurance Requirements
- B-2-01, Property Insurance Requirements Applicable to All Property Types
- B-2-02, Property Insurance Requirements for One- to Four-Unit Properties
- B-2-03, Master Property Insurance Requirements for Project Developments
- B-2-04, Individual Property Insurance Requirements for Units in Project Developments
- Chapter B-3, Flood Insurance Requirements
- Chapter B-4, Additional Insurance Requirements
- Chapter B-5, Property and Flood Insurance Loss Events and Claim Settlements
- Chapter B-6, Lender-Placed Insurance
- Chapter B-7, Liability and Fidelity/Crime Insurance Requirements for Project Developments
- Chapter B-8, Mortgage Insurance
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Part C Mortgage Loan Payment Processing, Remitting, Accounting, and Reporting
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Chapter C-1, Processing Mortgage Loan Payments
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Section C-1.1, Processing Scheduled Mortgage Loan Payments
- C-1.1-01, Servicer Responsibilities for Processing Mortgage Loan Payments
- C-1.1-02, Processing Payment Shortages or Funds Received When a Mortgage Loan Modification Is Pending
- C-1.1-03, Automatically Drafting Payments from the Borrower’s Bank Account
- C-1.1-04, Accepting Biweekly Payments from Third-Party Payment Contractors
- Section C-1.2, Processing Unscheduled Mortgage Loan Payments
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Section C-1.1, Processing Scheduled Mortgage Loan Payments
- Chapter C-2, Servicing ARM Loans
- Chapter C-3, Remitting and Accounting
- Chapter C-4, Reporting
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Chapter C-1, Processing Mortgage Loan Payments
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Part D Providing Solutions to a Borrower
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Subpart D1, Assisting the Borrower with Property-Related Issues and Legal Actions
- Chapter D1-1, Requests for the Release of Property and/or Charge-Off of a Mortgage Loan
- Chapter D1-2, Servicing Renovation Mortgage Loans
- Chapter D1-3, Providing Assistance to a Borrower Impacted by a Disaster Event
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Chapter D1-4, Transfers of Ownership
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Section D1-4.1, Information Relating to Transfers of Ownership Applicable to All Mortgage Loans
- D1-4.1-01, Determining Whether a Transfer of Ownership Is Permitted
- D1-4.1-02, Allowable Exemptions Due to the Type of Transfer
- D1-4.1-03, Allowable Exceptions Due to State Law Restrictions (“Window-Period” Mortgage Loans)
- D1-4.1-04, Transfers of Ownership by Grant Deed
- D1-4.1-05, Enforcing the Due-on-Sale (or Due-on-Transfer) Provision
- Section D1-4.2, Information Relating to Transfers of Ownership on Conventional Mortgage Loans
- Section D1-4.3, Information Relating to Transfers of Ownership on Government Mortgage Loans
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Section D1-4.1, Information Relating to Transfers of Ownership Applicable to All Mortgage Loans
- Chapter D1-5, Call Provision Enforcement
- Chapter D1-6, Addressing Notices of Liens, Legal Action, Property Forfeitures or Seizures, or Other Actions
- Subpart D2, Assisting a Borrower Who is Facing Default or in Default
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Subpart D1, Assisting the Borrower with Property-Related Issues and Legal Actions
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Part E Default-Related Legal Services, Bankruptcy, Foreclosure Proceedings, and Acquired Properties
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Chapter E-1, Referring Default-Related Legal Matters and Non-Routine Litigation to Law Firms
- Section E-1.1, Referring a Mortgage Loan to a Law Firm
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Section E-1.2, Timing of the Referral to a Law Firm
- E-1.2-01, Timing of the Bankruptcy Referral
- E-1.2-02, Timing of the Foreclosure Referral for Mortgage Loans Generally
- E-1.2-03, Timing of the Foreclosure Referral for Second Lien Conventional Mortgage Loans Not Secured by a Principal Residence
- E-1.2-04, Timing of the Foreclosure Referral for Government Mortgage Loans
- Section E-1.3, Handling Non-Routine Litigation
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Chapter E-2, Managing Bankruptcy Proceedings
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Section E-2.1, Bankruptcy Proceedings in General
- E-2.1-01, General Servicing Requirements for Mortgage Loans Under Bankruptcy Protection
- E-2.1-02, Confirming Bankruptcy Information
- E-2.1-03, Suspending Debt Collection Efforts
- E-2.1-04, Expected Servicer/Attorney Interaction During Bankruptcy Proceedings
- E-2.1-05, Filing a Notice of Appearance and Sending Proper Notices
- E-2.1-06, Reviewing Bankruptcy Reorganization Plans
- E-2.1-07, Preparing and Filing a Proof of Claim
- E-2.1-08, Monitoring Borrower Payments and Critical Dates
- E-2.1-09, Identifying Workout Opportunities
- E-2.1-10, Dealing with Delays in the Bankruptcy Process
- E-2.1-11, Remitting P&I for MBS Mortgage Loans That Are Part of a Bankruptcy
- Section E-2.2, Managing Bankruptcies by Chapter
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Section E-2.3, Servicing Special Circumstance Bankruptcies
- E-2.3-01, Identifying Abusive Filers
- E-2.3-02, Addressing Individuals with Fractional Interests in a Security Property
- E-2.3-03, Handling Cramdowns of the Mortgage Debt
- E-2.3-04, Bankruptcies Involving Mortgage Loans Secured by Investment Properties
- E-2.3-05, Bankruptcies Involving Multiple Fannie Mae Mortgage Loans
- E-2.3-06, Responding to Bankruptcies Identified After Foreclosure Sale
- E-2.3-07, Cross-Border Insolvency Proceedings
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Section E-2.1, Bankruptcy Proceedings in General
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Chapter E-3, Managing Foreclosure Proceedings
- Section E-3.1, Foreclosure Proceedings in General
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Section E-3.2, Initiating and Processing Foreclosure Proceedings
- E-3.2-01, Conducting Prereferral Review
- E-3.2-02, Initiating Foreclosure Proceedings on a First Lien Conventional Mortgage Loan
- E-3.2-03, Initiating Foreclosure Proceedings on a Second Lien Conventional Mortgage Loan
- E-3.2-04, Postponing Foreclosure Referral for Mortgage Loans Not Secured by a Principal Residence
- E-3.2-05, Expected Servicer/Attorney Interaction During Foreclosure Proceedings
- E-3.2-06, Conducting Borrower Outreach During Foreclosure
- E-3.2-07, Impact of Engagement with a Mortgage Assistance Fund Program Provider
- E-3.2-08, Processing Reinstatements During Foreclosure
- E-3.2-09, Conducting Foreclosure Proceedings
- E-3.2-10, Paying Certain Expenses During the Foreclosure Process
- E-3.2-11, Collecting Under an Assignment of Rents
- E-3.2-12, Performing Property Preservation During Foreclosure Proceedings
- E-3.2-13, Addressing Title Defects Generally
- E-3.2-14, Addressing Title Defects for Bifurcated Mortgage Loans
- E-3.2-15, Allowable Time Frames for Completing Foreclosure
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Section E-3.3, Preparing for the Foreclosure Sale
- E-3.3-01, Completing Preforeclosure Sale Review
- E-3.3-02, Certifying the Status of Workout Negotiations Prior to Foreclosure Sale
- E-3.3-03, Inspecting Properties Prior to Foreclosure Sale
- E-3.3-04, Marketing the Foreclosure Sale and Using Foreclosure Auction Services
- E-3.3-05, Issuing Bidding Instructions
- E-3.3-06, Handling a Suspension or Reduction of the Redemption Period
- E-3.3-07, Pursuing a Deficiency Judgment
- Section E-3.4, When Foreclosure Proceedings Must Be Suspended or Canceled
- Section E-3.5, Servicer Responsibilities Following the Foreclosure Sale
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Chapter E-4, Managing Acquired Properties
- Section E-4.1, Notifying Fannie Mae of Property Acquisitions
- Section E-4.2, Conveying Title to an Acquired Property
- Section E-4.3, Preserving and Managing Properties
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Section E-4.4, Property and Flood Insurance Coverage Requirements
- E-4.4-01, Continuing or Canceling Property Insurance Coverage
- E-4.4-02, Remitting Property Insurance Settlement Proceeds or Unearned Premium Refunds
- E-4.4-03, Canceling Flood Insurance Coverage for Acquired Properties
- E-4.4-04, Remitting Flood Insurance Settlement Proceeds or Unearned Premium Refunds
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Section E-4.5, Filing MI Claims for Liquidated Properties
- E-4.5-01, Filing MI Claims for Conventional Mortgage Loans or for Other Mortgage Loans for which Fannie Mae Bears the Risk of Loss
- E-4.5-02, Filing MI Claims for FHA Mortgage Loans
- E-4.5-03, Filing MI Claims for FHA Coinsured Mortgage Loans
- E-4.5-04, Filing MI Claims for FHA Title I Loans
- E-4.5-05, Filing MI Claims for HUD Section 184 Mortgage Loans
- E-4.5-06, Filing MI Claims for VA Mortgage Loans
- E-4.5-07, Filing MI Claims for RD Mortgage Loans
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Chapter E-5, Requesting Reimbursement for Expenses Associated with Default-Related Legal Matters
- E-5-01, Requesting Reimbursement for Expenses
- E-5-02, Servicer Responsibilities Prior to Requesting Reimbursement of Attorney Fees and Costs
- E-5-03, Allowable Bankruptcy Fees
- E-5-04, Allowable Foreclosure Fees
- E-5-05, Reimbursing Law Firms/Reimbursement of Uncollected Fees, Costs or Advances
- E-5-06, Technology Fees and Electronic Invoicing
- E-5-07, Other Reimbursable Default-Related Legal Expenses
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Chapter E-1, Referring Default-Related Legal Matters and Non-Routine Litigation to Law Firms
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Part F Servicing Guide Procedures, Exhibits, and Quick Reference Materials
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Chapter F-1, Servicing Guide Procedures
- F-1-01, Servicing ARM Loans
- F-1-02, Escrow, Taxes, Assessments, and Insurance
- F-1-03, Establishing and Implementing Custodial Accounts
- F-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan
- F-1-05, Expense Reimbursement
- F-1-06, Filing an MI Claim for a Liquidated Mortgage Loan or Acquired Property
- F-1-07, Handling Property Forfeitures and Seizures
- F-1-08, Managing Foreclosure Proceedings
- F-1-09, Processing Mortgage Loan Payments and Payoffs
- F-1-10, Obtaining and Executing Legal Documents
- F-1-11, Post-Delivery Servicing Transfers
- F-1-12, Preparing to Implement a Workout Option
- F-1-13, Processing a Fannie Mae Mortgage Release (Deed-In-Lieu of Foreclosure)
- F-1-14, Processing a Fannie Mae Short Sale
- F-1-15, Processing a Government Mortgage Loan Modification
- F-1-16, Processing a Repayment Plan
- F-1-17, Processing a Transfer of Ownership
- F-1-18, Processing a Workout Incentive Fee
- F-1-19, Processing a Military Indulgence
- F-1-20, Remitting and Accounting to Fannie Mae
- F-1-21, Reporting a Delinquent Mortgage Loan via Fannie Mae’s Servicing Solutions System
- F-1-22, Reporting a Workout Option via Fannie Mae’s Servicing Solutions System
- F-1-23, Reporting to Third Parties
- F-1-24, Requesting Fannie Mae’s Approval via Fannie Mae’s Servicing Solutions System
- F-1-25, Reclassifying or Voluntary Repurchasing an MBS Mortgage Loan
- F-1-26, Servicing eMortgages
- F-1-27, Processing a Fannie Mae Flex Modification
- F-1-28, Reviewing a Transfer of Ownership for Credit and Financial Capacity
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Chapter F-2, Exhibits
- F-2-01, Bankruptcy Referral and Completion Timelines
- F-2-02, Incentive Fees for Workout Options
- F-2-03, Compensatory Fee Calculation Examples
- F-2-04, Firm Minimum Requirements
- F-2-05, Historical Yield Differential Adjustment Provisions
- F-2-06, Mortgage Insurer Delegations for Workout Options
- F-2-07, Reporting the Principal Amount for Mortgage Loans with Principal Forbearance
- F-2-08, Servicing Fees for MBS Mortgage Loans
- F-2-09, Servicing Fees for Portfolio Mortgage Loans
- F-2-10, Fannie Mae’s Workout Hierarchy
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Chapter F-3, Acronyms and Glossary of Defined Terms
- F-3-01, Acronyms and Glossary of Defined Terms: A
- F-3-02, Acronyms and Glossary of Defined Terms: B
- F-3-03, Acronyms and Glossary of Defined Terms: C
- F-3-04, Acronyms and Glossary of Defined Terms: D
- F-3-05, Acronyms and Glossary of Defined Terms: E
- F-3-06, Acronyms and Glossary of Defined Terms: F
- F-3-07, Acronyms and Glossary of Defined Terms: G
- F-3-08, Acronyms and Glossary of Defined Terms: H
- F-3-09, Acronyms and Glossary of Defined Terms: I
- F-3-10, Acronyms and Glossary of Defined Terms: J
- F-3-11, Acronyms and Glossary of Defined Terms: K
- F-3-12, Acronyms and Glossary of Defined Terms: L
- F-3-13, Acronyms and Glossary of Defined Terms: M
- F-3-14, Acronyms and Glossary of Defined Terms: N
- F-3-15, Acronyms and Glossary of Defined Terms: O
- F-3-16, Acronyms and Glossary of Defined Terms: P
- F-3-17, Acronyms and Glossary of Defined Terms: Q
- F-3-18, Acronyms and Glossary of Defined Terms: R
- F-3-19, Acronyms and Glossary of Defined Terms: S
- F-3-20, Acronyms and Glossary of Defined Terms: T
- F-3-21, Acronyms and Glossary of Defined Terms: U
- F-3-22, Acronyms and Glossary of Defined Terms: V
- F-3-23, Acronyms and Glossary of Defined Terms: W
- F-3-24, Acronyms and Glossary of Defined Terms: X
- F-3-25, Acronyms and Glossary of Defined Terms: Y
- F-3-26, Acronyms and Glossary of Defined Terms: Z
- Chapter F-4, Servicing Guide Resources
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Chapter F-1, Servicing Guide Procedures
D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure) (12/21/2022)
- General Requirements When Processing a Fannie Mae Mortgage Release
- Evaluating a Borrower to Determine Eligibility for a Fannie Mae Mortgage Release
- Evaluating a Borrower for Fannie Mae Mortgage Release Transition Options
- Evaluating the Credit Report for New Mortgage Loans Obtained
- Obtaining a Property Valuation and Evaluating the Condition of the Property
- Allowable Payments to Subordinate Lienholders
- Incentive Payments to Assist a Borrower with Relocation Expenses
- Evaluating a Borrower’s Ability to Make a Cash Contribution
- Requirements for Accepting a Fannie Mae Mortgage Release
- Providing a Deficiency Waiver for Certain Mortgage Loans
- Processing a Fannie Mae Mortgage Release for a Mortgage Loan with Mortgage Insurance
General Requirements When Processing a Fannie Mae Mortgage Release
The following table provides some of the servicer’s responsibilities in connection with processing a Fannie Mae Mortgage Release for a first lien mortgage loan.
✓ | The servicer must... |
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Ensure that the borrower is not involved in or party to litigation other than foreclosure or bankruptcy involving the subject property or mortgage loan. |
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Evaluate the borrower’s eligibility and cash contribution requirements, if any, based on the status of the mortgage loan at the time of the respective evaluation. |
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Inform the borrower of the three exit options: 1. Immediate move. 2. A three-month transition lease with no rent payment required. 3. A twelve-month lease at market rent payment. See Evaluating a Borrower for Fannie Mae Mortgage Release Transition Options for information on options #2 and #3. |
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Advise the borrower that there may be possible tax consequences if any portion of the outstanding debt is forgiven, and refer the borrower to IRS Publication 544, Sales and Other Dispositions of Assets, particularly the section captioned “Foreclosure, Repossession, or Abandonment.” |
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Work with the borrower to complete all requirements associated with completing and executing the Mortgage Release and ensure that there is sufficient time to complete the processing of the Mortgage Release, including sending the Mortgage Release offer to the borrower, so that an executed deed can be received no later than 30 days prior to the foreclosure sale date, or in applicable foreclosure actions where there is no foreclosure sale and title is transferred by court order, the estimated court order docket date (if known). |
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Work with the title company to resolve any issues that may delay the closing, including assisting the borrower in subordinate lien releases, and ensure that the borrower can convey clear and marketable title. The servicer must follow the procedures in Verifying Clear and Marketable Title in for ensuring that clear and marketable title can be conveyed.
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Submit the deed for recordation within five business days of the servicer’s acceptance of the executed deed from the borrower. |
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Ensure the property is vacant and broom swept, unless the borrower is eligible in accordance with Evaluating a Borrower for Fannie Mae Mortgage Release Transition Options. |
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Release the first lien mortgage loan within the time required by applicable state or local law or, if state or local law does not require release of the first lien mortgage loan within a specific time frame, within 30 business days after the occurrence of the following:
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Appropriately manage liquidation workout options that involve the borrower’s relinquishing ownership of the property to ensure that the borrower’s rights are appropriately protected. |
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Provide evidence of the borrower’s indication of intent to pursue a Mortgage Release to Fannie Mae upon request. |
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Ensure the mortgage loan is removed from the MBS trust (if applicable) as soon as possible and prior to transfer of title to the servicer or Fannie Mae (see also | ).
The servicer must refer to the Property Preservation Matrix and Reference Guide for further clarification on handling delinquent and vacant or abandoned properties during the Mortgage Release process.
Evaluating a Borrower to Determine Eligibility for a Fannie Mae Mortgage Release
The following table provides the requirements for evaluating the borrower to determine eligibility for a Fannie Mae Mortgage Release based on the delinquency status of the mortgage loan at the time of the evaluation.
If the mortgage loan delinquency status at the time of evaluation is... | Then the servicer must evaluate the borrower for a Fannie Mae Mortgage Release... |
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current or less than 90 days delinquent |
based on a complete BRP (see ).
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between 90 days and 18 months delinquent |
based on a complete BRP, unless one of the following conditions applies, in which case the servicer must evaluate the borrower for a Fannie Mae Mortgage Release without receiving a complete BRP:
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greater than 18 months delinquent | without receiving a complete BRP. |
Note: Fannie Mae also will agree to a deed-in-lieu of foreclosure for FHA, VA, or RD mortgage loans if they comply with all of the insurer’s or guarantor’s guidelines and do not result in a loss to Fannie Mae.
If the borrower’s debt has been discharged pursuant to Chapter 7 of the U.S. bankruptcy code, the servicer must evaluate the borrower for a Fannie Mae Mortgage Release without receiving a complete BRP regardless of the delinquency status of the mortgage loan at the time of evaluation. The servicer must obtain proof that the mortgage loan was included in the borrower’s Chapter 7 bankruptcy filing, such as notification from the court or a copy of the order of discharge showing the mortgage loan as discharged.
If the servicer determines the borrower is eligible for a Fannie Mae Mortgage Release or if the borrower has non-retirement cash reserves greater than $50,000, the servicer must follow the procedures in Requesting Approval for a Non-Delegated Mortgage Release Case in
for requesting Fannie Mae’s approval.If the servicer evaluated the borrower without receiving a complete BRP and the borrower fully reinstated the mortgage loan after the initial Mortgage Release evaluation, the borrower is no longer eligible for a Mortgage Release based on the initial eligibility evaluation.
If the servicer determined the borrower originally qualified for a Fannie Mae short sale without a complete BRP, and the borrower subsequently transitions to a Mortgage Release, the servicer must use the borrower’s short sale qualifications for the Mortgage Release, unless the borrower fully reinstated the mortgage loan.
Evaluating a Borrower for Fannie Mae Mortgage Release Transition Options
Once the servicer determines that the borrower is eligible for a Mortgage Release and the borrower expresses interest in a Mortgage Release transition option, the servicer must screen the borrower for eligibility for a Mortgage Release transition option (exit options #2 and #3 as described in General Requirements When Processing a Fannie Mae Mortgage Release). The servicer must refer the Mortgage Release to Fannie Mae when both the mortgage loan and borrower meet the eligibility criteria described in the following table.
✓ | Mortgage loan and borrower eligibility criteria for Mortgage Release transition options |
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The mortgage loan must be a first lien mortgage loan secured by a single-family property. |
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The mortgage loan must not be guaranteed, insured, or held by FHA, HUD, VA, or the RD. |
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The subject property must be
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At least three monthly payments must have been made since origination or since the last mortgage loan modification, if applicable.
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The mortgage loan must not have 12 or more payments past due when referred to Fannie Mae for consideration for a Mortgage Release transition option.
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The borrower must not be involved in an active bankruptcy proceeding or party to litigation involving the subject property or mortgage loan.
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Clear and marketable title must be able to be conveyed. |
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Subordinate lien releases must be able to be obtained, if applicable. |
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The occupant must have verifiable income.
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The servicer must follow the procedures in Processing a Mortgage Release Transition Option in
for processing a Mortgage Release transition option.Evaluating the Credit Report for New Mortgage Loans Obtained
For all Mortgage Release cases except those in which the servicer evaluated the borrower for a Mortgage Release without receiving a complete BRP in accordance with Evaluating a Borrower to Determine Eligibility for a Fannie Mae Mortgage Release, the servicer must review each borrower’s credit report to determine
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if the borrower(s) obtained a new mortgage loan in the six months preceding the delinquency on the mortgage loan secured by the subject property; or
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in the case of a current mortgage loan, in the six months preceding the evaluation for a Mortgage Release.
If the servicer determines that the borrower obtained a new mortgage loan in the six months preceding the delinquency, or preceding the evaluation for a Mortgage Release, as applicable, the mortgage loan is only eligible if the hardship, which must be documented in accordance with the Mortgage Assistance Application (Form 710), was due to
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a distant employment transfer/relocation greater than 50 miles one way from the property securing the mortgage loan and the property securing the mortgage loan is the borrower’s principal residence,
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new employment greater than 50 miles one way from the property securing the mortgage loan and the property secuing the mortgage loan is the borrower’s principal residence, or
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PCS orders relocating a servicemember greater than 50 miles one way from the property securing the mortgage loan and the property securing the mortgage loan was or currently is the servicemember’s principal residence.
In all other instances, the servicer must submit a recommendation to Fannie Mae for review. The servicer must follow the procedures in Requesting Approval for a Non-Delegated Mortgage Release Case in
for requesting Fannie Mae’s approval.Obtaining a Property Valuation and Evaluating the Condition of the Property
If the servicer determines that the borrower meets the eligibility criteria stated above for a Fannie Mae Mortgage Release, it must obtain a property valuation to determine the market value of the property securing the mortgage loan. The servicer must follow the procedures in Obtaining a Property Valuation in
for obtaining a property valuation.Prior to the borrower executing a Fannie Mae Mortgage Release, the servicer must schedule property inspections to ensure that the property is free of environmental contamination and does not pose potential legal risks. See the Property Preservation Matrix and Reference Guide for additional information. The servicer’s action will depend on whether the servicer previously ordered an interior BPO, as described in the following table.
If the servicer has… | Then the servicer… |
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previously ordered an interior BPO |
is authorized to use the interior BPO to determine whether the property condition is acceptable prior to final execution of the Mortgage Release, as long as the BPO is dated within 90 days of the borrower’s approval for a Mortgage Release. |
not previously ordered an interior BPO |
must order an interior inspection of the property and verify the property is in acceptable condition within 60 days of the borrower’s acceptance of the Mortgage Release. |
See
and for the requirements related to performing property inspections.If the property inspection or property valuation reveals that the subject property has been poorly maintained, needs major repairs, or has structural or foundation problems, see
for additional information.The servicer must submit the Mortgage Release request to Fannie Mae to receive prior written approval if the property inspection or property valuation reveals that the subject property contains environmental contamination or poses potential legal risks and the servicer determines that a Mortgage Release is the appropriate workout option. The servicer must follow the procedures in Requesting Approval for a Non-Delegated Mortgage Release Case in
for requesting Fannie Mae’s approval.Allowable Payments to Subordinate Lienholders
The following table provides the requirements that apply to allowable payments to subordinate lienholders for a Mortgage Release.
✓ | Requirements for payment to subordinate lienholders |
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Payments to subordinate lienholders must be in exchange for
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Payments to all subordinate lienholders to facilitate lien releases must not exceed $6,000 in aggregate. If an individual subordinate lien or total subordinate liens are less than $6,000, the payoff must not exceed the subordinate lien amount owed. If there are multiple subordinate lienholders, the servicer has discretion to divide the subordinate lien payments among the subordinate lienholders. |
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Funds must only be used for subordinate mortgage liens or deeds of trust recorded in the land records that constitute a valid lien against the subject property. Examples of other types of liens which funds must not be used for include, but are not limited to, the following:
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Prior to releasing any funds to a subordinate lienholder, the servicer must obtain written commitment from the subordinate lienholder that it will
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release the borrower from all claims and liability relating to the subordinate lien in exchange for receiving the agreed-upon payoff amount,
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waive all rights to seek a deficiency judgment against the borrower, and
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not require a cash contribution in addition to any funds provided by Fannie Mae as a condition for releasing its lien and releasing the borrower from personal liability.
If a subordinate a lienholder chooses to release its lien to allow the Mortgage Release to close, but does not agree to release the borrower from liability on the note, it cannot receive a payment from Fannie Mae. Regardless of whether payment is made to a subordinate lienholder, the servicer must obtain written commitment from the subordinate lienholder(s) to release the lien(s).
Incentive Payments to Assist a Borrower with Relocation Expenses
If the property securing the mortgage loan is the borrower’s principal residence at the time of the Evaluation Notice, the borrower is entitled to an incentive payment of $7,500 from Fannie Mae to assist with relocation expenses following the successful completion of a Fannie Mae Mortgage Release unless one of the following apply:
-
the borrower is required to contribute cash, even if the borrower fails to contribute; or
Note: If the servicer believes relocation assistance is warranted despite the borrower’s failure to contribute, the servicer must submit its relocation assistance recommendation to Fannie Mae for prior written approval.
-
the borrower has PCS orders and receives a DLA or other government relocation assistance.
Note: If government relocation assistance is not provided to a borrower with PCS orders, the servicer must submit its relocation assistance recommendation to Fannie Mae for prior written approval.
The servicer must adjust the amount of Fannie Mae’s relocation assistance in accordance with the following table.
If... | Then the servicer must... |
---|---|
the servicer elects to provide an additional incentive payment from its own funds | not deduct that amount from Fannie Mae’s incentive payment amount. |
another source provides assistance | deduct that amount from Fannie Mae’s incentive payment amount. |
the property inspection report indicates that the subject property is vacant, but that there is damage to the subject property caused by the borrower or that the subject property was not left in broom swept condition | reduce Fannie Mae’s incentive payment by the estimate or actual, if known, cost of remediating the issues. |
The servicer must adhere to the requirements in the following table related to the payment of the borrower’s relocation incentive payment.
✓ | The servicer must... |
---|---|
Not attempt to renegotiate the relocation incentive payment amount to a lesser amount | |
Not require the borrower to apply the relocation incentive payment to obtain the release of other liens or non-real estate title impediments. |
The timing and distribution for the payment of the borrower incentive is outlined in the following table.
If the borrower... | Then... |
---|---|
is not participating in a Mortgage Release transition option |
the servicer must distribute the incentive payment to the borrower within 30 days after the servicer’s acceptance of the executed deed from the borrower. |
is participating in either a 3- or 12-month Mortgage Release transition option |
Fannie Mae’s property management company must distribute the incentive payment to the borrower within 30 days after the property becomes vacant. |
Evaluating a Borrower’s Ability to Make a Cash Contribution
The servicer must evaluate the borrower’s ability to make a cash contribution based on the status of the mortgage loan at the time the servicer evaluated the borrower for eligibility for a Mortgage Release.
The servicer must not evaluate the borrower for a cash contribution if
-
prohibited by applicable law;
-
the servicer evaluated the borrower for a Fannie Mae Mortgage Release without receiving a complete BRP in accordance with Evaluating a Borrower to Determine Eligibility for a Fannie Mae Mortgage Release; or
-
they are a servicemember with PCS orders relocating them greater than 50 miles one way from the property securing the mortgage loan and the property securing the mortgage loan was or currently is the servicemember’s principal residence.
In all other instances, the servicer must evaluate the borrower for a cash contribution and request a cash contribution, if
-
the borrower’s non-retirement cash reserves, as stated on the Mortgage Assistance Application (Form 710) are in excess of $10,000; or
Note: The servicer must verbally verify the assets stated on Form 710 and obtain documentation to reconcile any inconsistencies. See Determining Whether a Borrower Response Package is Complete in D2-2-05, Receiving a Borrower Response Package for additional information.
-
the borrower’s housing expense-to-income ratio is less than or equal to 40% as calculated in accordance with Calculating the Borrower’s Housing Expense-to-Income Ratio in
The servicer must initially request a cash contribution of the greater of the following, rounded to the nearest $100 and not to exceed the amount of the deficiency:
-
20% of the borrower’s non-retirement cash reserves, or
-
four times the contractual monthly mortgage loan payment including PITI. If the servicer does not escrow for T&I, it must estimate the borrower’s monthly tax and insurance premium amounts.
If the servicer determines it is warranted based on its assessment of the borrower’s individual situation and circumstances and ability to contribute, it is authorized to
-
request a lower initial cash contribution amount,
-
negotiate a lower cash contribution amount, or
-
agree to no cash contribution.
Note: If the mortgage loan is current or less than 60 days delinquent, the borrower must contribute a minimum of 20%of their non-retirement cash reserves.
The servicer must follow the procedures inRequesting Approval for a Non-Delegated Mortgage Release Case in
for requesting Fannie Mae’s approval if-
the borrower refuses to make a cash contribution in an amount the servicer determines is reasonable, or
-
the mortgage loan is current or less than 60 days delinquent and the borrower refuses to contribute a minimum of 20% of their non-retirement cash reserves.
The requirement for a cash contribution is waived if the contribution amount is less than $500.
Note: The servicer must not request updated documentation from the borrower when evaluating the borrower’s ability to make a cash contribution and the complete BRP is greater than 90 days old. However, if the borrower’s credit report is greater than 90 days when the servicer evaluates the borrower’s ability to make a cash contribution, the servicer must obtain a new credit report.
Requirements for Accepting a Fannie Mae Mortgage Release
The servicer must obtain all of the items listed in the following table within 60 days of the borrower’s acceptance of the offer for a Fannie Mae Mortgage Release.
✓ | Documentation that must be obtained within 60 days of the borrower’s acceptance of a Mortgage Release |
---|---|
The deed and a personal property release executed by the borrower.
|
|
The mortgage insurer’s approval, if applicable, if Fannie Mae has not obtained a delegation of authority. |
|
Agreement(s) that the subordinate lienholder(s) will release
|
|
Clear and marketable title. |
|
The cash contribution, if applicable. |
|
The interior property inspection report, if applicable, indicating that there are no environmental hazards or potential legal risks, and that the property is vacant, secure, and in broom swept condition, unless the borrower is eligible in accordance with Evaluating a Borrower for Fannie Mae Mortgage ReleaseTransition Options.
|
If the servicer is unable to resolve all issues within 60 days, an extension of 30 days is permitted as long as the servicer provides the borrower with written or verbal weekly status updates indicating the reason that the Mortgage Release is still pending.
The servicer must request Fannie Mae’s approval to accept the deed if it receives the executed deed less than 30 days prior to the foreclosure sale date, or in applicable foreclosure actions where there is no foreclosure sale and title is transferred by court order, the estimated court order docket date (if known). The servicer is responsible for any costs incurred due to the acceptance of a Mortgage Release that results in a delay in acquisition of the property.
The servicer must take the action described in the following table if it determines that the borrower has left personal property in the subject property.
If, at the time of the property inspection, the servicer determines that the personal property left by the borrower has… | Then the servicer… |
---|---|
an actual cash value less than $500 |
is authorized to proceed with the Mortgage Release. |
an actual cash value equal to or greater than $500 |
must get Fannie Mae’s prior written approval before completing a Mortgage Release. |
The servicer must follow the procedures in Reimbursement for Expenses Associated with Workout Options in
for requesting reimbursement of allowable fees.Providing a Deficiency Waiver for Certain Mortgage Loans
The servicer must release the borrower from liability for any deficiency associated with the Fannie Mae mortgage loan upon successful completion of a Fannie Mae Mortgage Release for the following mortgage loans:
-
mortgage loans that do not have MI, and
-
mortgage loans that have MI, but the mortgage insurer has granted Fannie Mae delegation of authority (see Processing a Fannie Mae Mortgage Release for a Mortgage Loan With Mortgage Insurance).
The servicer must provide a deficiency waiver to the borrower after the servicer’s acceptance of the executed deed from the borrower, if applicable.
While use of the Deficiency Waiver Agreement (Form 189) is optional, it reflects a minimum level of information that the servicer must include.
Processing a Fannie Mae Mortgage Release for a Mortgage Loan with Mortgage Insurance
The servicer must see
for the list of mortgage insurers from which Fannie Mae has obtained delegation of authority on behalf of all servicers, which allows the servicer to process a Fannie Mae Mortgage Release in accordance with this Guide without obtaining separate mortgage insurer approval at the company or loan level.For mortgage insurers from which Fannie Mae has not obtained delegation of authority, the servicer must not agree to a Fannie Mae Mortgage Release unless the mortgage insurer agrees in writing to the following:
-
to waive its property acquisition rights before the claim is filed, and
-
to settle the claim by paying the lesser of the full percentage option under the terms of the master policy or the amount required to make Fannie Mae whole.
The table below provides references to recently issued Announcements that are related to this topic.
Announcements | Issue Date |
---|---|
Announcement SVC-2022-08 | December 21, 2022 |
Announcement SVC-2022-01 | February 9, 2022 |
Announcement SVC-2021-07 | October 13, 2021 |
Announcement SVC-2021-06 | September 8, 2021 |
Announcement SVC-2021-03 | June 9, 2021 |
Announcement SVC-2019-02 | April 10, 2019 |