Several state and local governments have instituted mortgage assistance programs for COVID-19 impacted borrowers, most of which programs make payments directly to the servicer on a borrower’s behalf.

Several state and local governments have instituted mortgage assistance programs for COVID-19 impacted borrowers, most of which programs make payments directly to the servicer on a borrower’s behalf. Is a servicer authorized to accept and apply these funds toward the borrower’s mortgage payment?  

Servicers must accept such funds on behalf of a borrower (i.e. treat as borrower-paid funds) and apply the funds in accordance with the state mortgage assistance program requirements, so long as doing so will not impair the borrower’s rights under applicable law or Fannie Mae’s rights under the mortgage. If such mortgage assistance funds are insufficient to bring the mortgage loan current, the servicer must not waive any rights under the mortgage to collect the unpaid amounts.

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

See below for more information on COVID-19:

• Fannie Mae’s COVID-19 page
• The Impact of COVID-19 on Servicing
• Fannie Mae Servicing Lender Letter LL 2020 02