Servicing Guide

Published November 10, 2020

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A1-4.2-02: Compensatory Fees for Delays in the Liquidation Process (02/13/2019)

Periodically, Fannie Mae reviews the servicer’s handling of seriously delinquent portfolio mortgage loans or MBS mortgage loans when serviced under the special servicing option to determine whether specific actions, such as referral to foreclosure, foreclosure sale, conveyance or claim filing, are being taken in a timely manner. Fannie Mae reserves the right to review any seriously delinquent mortgage loan and pursue any remedy available to it for delays when it deems appropriate, which may be prior to or after the liquidation of the mortgage loan. If the servicer fails to complete a foreclosure action within the time frame prescribed by Fannie Mae, one of the remedies that Fannie Mae may pursue is the assessment of compensatory fees.

If Fannie Mae selects compensatory fees as the appropriate remedy for delays in connection with a completed foreclosure, compensatory fees will be assessed if the entire period from the date the delinquency began, the LPI date, through the foreclosure sale date is longer than Fannie Mae’s allowable foreclosure time frame in the applicable jurisdiction as described in Assessing the Foreclosure Time Frame. This also includes foreclosure sales that result in a third-party sale.

Fannie Mae has the right to rely on the delinquent mortgage loan status data submitted by the servicer as definitively and conclusively reflecting the status of a mortgage loan for purposes of the assessment and collection of compensatory fees for delays in liquidating delinquent mortgage loans. Accordingly, Fannie Mae may choose to reject any information provided by the servicer to support a status code that is different from the one reported.

The servicer’s failure to report on an accurate and timely basis and to otherwise comply with the requirements of the Servicing Guide may result in the imposition of compensatory fees separate from compensatory fees that may be imposed for foreclosure time frame non-compliance. See A1-4.2-01, Compensatory Fees Other Than Delays in the Liquidation Process for additional information.

For mortgage loans with a foreclosure sale date on or after January 1, 2019, compensatory fees will be assessed if, after identification of a chronic issue with a servicer’s compliance with foreclosure time frames, the servicer does not meet the terms of a performance improvement plan designed to remediate the issues as described in A1-1-03, Evaluating a Servicer’s Performance.

Note: Servicers may be exempt from compensatory fee assessments based upon the number of mortgage loans serviced as well as the number of mortgage loans in excess of Fannie Mae’s allowable foreclosure time frame. These specific thresholds are determined as part of the STAR™ Program servicer inclusion criteria for time frame management.

Fannie Mae may assess the servicer a compensatory fee of $1,000 for internal administrative costs plus any third-party costs if the servicer must rescind a foreclosure sale due to the servicer’s failure to follow Fannie Mae guidelines or other servicer error or alleged error. Fannie Mae will not reimburse foreclosure fees and costs that are required to complete a new foreclosure following rescission.

This topic contains the following:


Assessing the Foreclosure Time Frame

When determining the servicer’s compliance with Fannie Mae’s time frames for completing foreclosure, adjustments are made for allowable delays. Allowable delays and the applicable number of days permitted for each delay are shown in the Foreclosure Time Frames and Compensatory Fee Allowable Delays Exhibit. See also E-3.2-15, Allowable Time Frames for Completing Foreclosure.

Delays due to urgent or unforeseeable circumstances or for situations in which applicable law necessitates additional time may also be considered; however, such circumstances should be rare.


Calculating Compensatory Fees

Compensatory fees will be applied based on the UPB of the mortgage loan, the applicable PTR, the length of the delay, and any additional costs that are directly attributable to the delay. Fannie Mae assesses the servicer’s foreclosure time frame performance on a monthly basis at the mortgage loan level using the process in the following table.

Step Calculating Compensatory Fees
1

a. Calculate the number of days the servicer took to complete the foreclosure process, from the LPI date through the foreclosure sale date.

b. Determine if the days are in excess of the allowable time frame.

2

The compensatory fee for each mortgage loan will be calculated using

  • the UPB of the mortgage loan,

  • the applicable PTR, and

  • the number of days the mortgage loan exceeded the allowable time frame.

Note: A compensatory fee bill will be issued only for those servicers identified as having a chronic issue in meeting foreclosure time frames and only after the completion of a performance improvement plan. The total compensatory fee bill amount will be adjusted based on the results of the mortgage loan level review as described in A2-4-01, Quality Control Reviews and the servicer’s implementation of remediation under the performance improvement plan as described in A1-1-03, Evaluating a Servicer’s Performance.

See F-2-03, Compensatory Fee Calculation Examples for examples that illustrate how compensatory fees are calculated.

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