Servicing Guide

Published September 9, 2020

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For investor reporting, what are Fannie Mae's requirements for correcting the interest rate and payment for a single family ARM mortgage loan?

When an ARM adjustment error involves an interest rate and payment change error and the error results in the use of a lower interest rate (and related monthly payment, if applicable):

  • the mortgage loan amortizes at a faster pace, and  
  • the UPB is lower than it would have been from the amortization of the borrower's actual payment at the correct, higher interest rate.  

Since Fannie Mae has decided that the borrower will not be required to make up undercharges, the servicer must not change the mortgage loan balance in Fannie Mae's investor reporting system records even though too little of the borrower's payment would have been applied to interest and too much to principal. The following table provides additional information depending on mortgage loan type. 

When an ARM adjustment error involves an interest rate and payment change error and the error results in the use of a higher interest rate (and related monthly payment) than was required  

  • the mortgage loan amortizes at a slower pace, and  
  • the UPB is higher than it would have been from the amortization of the borrower's actual payment at the correct interest rate.  

Although the servicer would have applied too much of the borrower's payment to interest and too little to principal, the servicer must not change the mortgage loan balance in Fannie Mae's investor reporting system records since Fannie Mae does not require it to change the borrower's actual UPB. Fannie Mae will recover the principal under-remittance as the higher UPB amortizes. Fannie Mae is not obligated to pay the servicer any interest on the amount of its over-remittance because the servicer is responsible for the accuracy of its ARM adjustments. The following table provides the servicer with additional information on how Fannie Mae will treat the error depending on mortgage loan type.

 

For more information see Investor Reporting Manual Chapter 4, Special Loan Handling 

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