Servicing Guide

Published September 9, 2020

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When is an MBS mortgage loan subject to a forbearance plan reclassified from the trust?

Fannie Mae generally removes MBS mortgage loans from the trust in the month when the fourth payment is delinquent (see Servicing Guide A1-3-06, Automatic Reclassification of MBS Mortgage Loans). However, most MBS mortgage loans reported in an active forbearance plan are excluded from auto-reclass rules until they reach 24 months delinquent, at which point they must be removed from the trust (see Servicing Guide A1-3-02, Fannie Mae-Initiated Repurchases, Indemnifications, Make Whole Payment Requests and Deferred Payment Obligations). 

There is an exception to this rule—if an MBS mortgage loan subject to a forbearance plan has a pool issue date on or after June 1, 2007 through December 1, 2008, the mortgage loan generally must be removed from the trust if the forbearance plan is extended beyond six consecutive months (unless applicable law requires the extended forbearance plan). Because forbearance plans offered to borrowers impacted by COVID-19 may be extended up to 12 months under the CARES Act, we are no longer required to remove such loans from these trusts if a CARES Act forbearance plan extends beyond six months. As a result, we are updating our reclassification process for mortgage loans in these MBS pools when a borrower impacted by COVID-19 is provided a forbearance plan; such mortgage loans will not be removed from the MBS pool for the duration of the forbearance plan under the CARES Act.

Note: This FAQ is from the Fannie Mae COVID-19 Frequently Asked Questions.

See below for more information on COVID-19:

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