Servicing Guide

Published September 9, 2020

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How is a non-escrowed loan managed when a borrower has not made the timely payment for property taxes or insurance bills?

The servicer must promptly advance the funds to cover an expense when an escrow account has insufficient funds to pay an expense in a timely manner. The servicer must require the borrower to reimburse it for advances because the escrow deposit account did not have sufficient funds to cover an expense or emergency repairs to the property. Any funds the servicer advances must stay in the T&I custodial account until the borrower remits funds sufficient to cure the deficit.

The following table outlines the requirements when the servicer waives the escrow account requirement and the borrower fails to pay the insurance premiums, taxes, or other related charges. 

The servicer must...
 

Advance the payment, including any late payment penalties, from its own funds.

 

Revoke any escrow waiver and establish an escrow account in accordance with Fannie Mae’s requirements to collect funds to repay the advances and pay future bills.

The servicer must follow the procedures in General Expense Reimbursement Requirements in F-1-05, Expense Reimbursement to determine how to obtain reimbursement from future payments, and how to obtain reimbursement from Fannie Mae.

For more information please see: B-1-01, Administering an Escrow Account and Paying Expenses.

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If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Guide Resources

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Visit Selling and Servicing Guide Communications and Forms

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