Servicing Guide

Published October 14, 2020

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What are Fannie Mae’s requirements for evaluating a borrower impacted by COVID-19 for a payment deferral or loan modification after a forbearance plan?

NOTE: The response to this Q&A is directly from Fannie Mae Lender Letter (LL-2020-02), Impact of COVID-19 on Servicing.

Evaluating the borrower for a payment deferral or mortgage loan modification after a forbearance plan UPDATED May 14, 2020

For borrowers who have received a forbearance plan in response to COVID-19, the servicer must begin attempts to contact the borrower no later than 30 days prior to the expiration of the forbearance plan term, must continue outreach attempts until either QRPC is achieved or the forbearance plan term has expired. When evaluating the borrower for a workout option prior to expiration of the forbearance plan, we are providing flexibility with regard to achieving QRPC. We are eliminating the requirement that the servicer determine the occupancy status of the property and will consider the servicer obtaining the following as achieving QRPC for purposes of evaluating a borrower who has experienced a hardship resulting from COVID-19::

  • determining the reason for the delinquency and whether it is temporary or permanent in nature;
  • determining whether or not the borrower has the ability to repay the mortgage loan debt;
  • educating the borrower on the availability of workout options, as appropriate; and
  • obtaining a commitment from the borrower to resolve the delinquency.

With LL-2017-09R we introduced the Fannie Mae Extend Modification for Disaster Relief (Extend Mod), a temporary post-disaster forbearance mortgage loan modification, as well as the order of evaluation for Extend Mod and other post-forbearance mortgage loan modifications when the property securing the mortgage loan or the borrower's place of employment is located in a FEMA-Declared Disaster Area eligible for Individual Assistance. While COVID-19 is not a disaster as defined in the Servicing Guide, with this Lender Letter, we are extending the availability of these post-disaster forbearance mortgage loan modifications to borrowers impacted by COVID-19. The servicer must analyze each case carefully in accordance with the requirements in the following table before determining which mortgage loan modification is most appropriate for the borrower.

If the servicer is…

And…

Then the servicer must evaluate the borrower for…

able to establish QRPC with the borrower during the forbearance plan

determines that the borrower is capable of maintaining the current contractual monthly PITI payment, including any escrow amounts disbursed by the servicer during the forbearance plan term and escrow shortage needed to pay future escrow that is required to be repaid by the borrower over the 60-month escrow repayment period

an Extend Mod; and if eligible, offer the borrower the Extend Mod. The servicer must disclose how the escrow analysis was determined, and that disbursed escrow amounts will not be capitalized but will be added to the escrow shortage needed to pay future escrow amounts resulting in an increase of the borrower’s current contractual monthly PITI payment over the 60-month escrow repayment period.

determines that the borrower can maintain the current contractual monthly PITI payment, but cannot manage the additional escrow repayment obligation to cover amounts disbursed by the servicer during the forbearance plan term

a Fannie Mae Cap and Extend Modification for Disaster Relief; and if eligible, offer the borrower a Fannie Mae Cap and Extend Modification for Disaster Relief (see D2-3.2-05, Fannie Mae Cap and Extend Modification for Disaster Relief).

determines that the borrower is not capable of maintaining the current contractual monthly PITI payment

a Fannie Mae Flex Modification based on the Unique Requirements for a Borrower Impacted by a Disaster Event (see D2-3.2- 07, Fannie Mae Flex Modification); and if eligible, offer a Fannie Mae Flex Modification.

 not able to establish QRPC during the forbearance plan

the mortgage loan is 90 or more days delinquent

a Fannie Mae Flex Modification based on the Unique Requirements for a Borrower Impacted by a Disaster Event (see D2-3.2- 07, Fannie Mae Flex Modification; and if eligible, solicit the borrower for a Fannie Mae Flex Modification.

For these mortgage loan modifications, the following changes to the eligibility criteria apply:

Current Requirement

Requirement for Borrowers Impacted by COVID-19

The property securing the mortgage loan or the borrower’s place of employment must be located in a FEMA-Declared Disaster Area eligible for Individual Assistance.

The borrower must have experienced a hardship resulting from COVID-19 (for example, unemployment, reduction in regular work hours, or illness of a borrower/co-borrower or dependent family member), which has impacted their ability to make their monthly mortgage loan payment.

N O T E: The servicer is not required to obtain documentation of the borrower’s hardship.

The mortgage loan must have been current or less than 31 days delinquent when the disaster occurred

The mortgage loan must have been current or less than 31 days delinquent as of Mar. 13, 2020, the date of the National Emergency declaration related to COVID-19.

N O T E: The servicer must make appropriate changes to the Flex Modification Solicitation Cover Letter and Evaluation Notices, including the applicable Frequently Asked Questions, when using for a borrower impacted by COVID-19.

In Lender Letter LL-2020-07, Covid-19 Payment Deferral we we introduced COVID-19 payment deferral, a new home retention workout option jointly developed with Freddie Mac at the direction of FHFA, to assist borrowers who have resolved their COVID-19 related hardship. Once the servicer implements COVID-19 payment deferral, it must evaluate borrowers impacted by COVID-19 for a COVID-19 payment deferral in accordance with the eligibility requirements and evaluation hierarchy described in Lender Letter LL-2020-07, Covid-19 Payment Deferral. This supersedes our guidance on Mar. 25, 2020 which instructed that once the servicer implemented payment deferral, to evaluate borrowers impacted by COVID-19 for a payment deferral in accordance with the eligibility requirements and workout option hierarchy described in Lender Letter LL-2020-05, Payment Deferralprior to evaluating the borrower for a post-forbearance mortgage loan modification as described above

For more information see Fannie Mae Lender Letter (LL-2020-02), Impact of COVID-19 on Servicing.

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