If the servicemember is unable to make the full monthly payment after the interest rate is reduced to 6%, see Chapter D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options for additional information on workout options that may be available. In addition to reducing the interest rate to 6%, the servicer must reapply any prepaid monthly payments with due dates during the period of active duty at the 6% interest rate. If the servicemember fails to notify the servicer when he or she enters active duty status, but subsequently provides evidence of the active duty status, the servicer must reapply any monthly payments made during the period of active duty at the 6% interest rate. Installments that are delinquent when the servicemember enters active duty status must be paid at the interest rate that was in effect when the payments came due. The servicer must provide the following options to the servicemember regarding the treatment of any remaining funds after any reapplication:
application as a monthly payment, if sufficient;
application as a principal curtailment; or
a refund to the servicemember.
For more information please see: D2-3.4-01: Military Indulgence