This topic contains the following:
- Servicer Responsibilities
- Disbursing Insurance Loss Proceeds Based on the Mortgage Loan Status and the Borrower's Intent
- Performing Remote Insured Loss Repair Inspections
- Depositing the Insurance Loss Proceeds Not Disbursed
Servicer Responsibilities
When a property securing a mortgage loan experiences an insured loss, the servicer must ensure the proof of loss claim is filed within the time period specified in the insurance policy and monitor the disbursement of insurance loss proceeds (see Disbursing Insurance Loss Proceeds Based on the Mortgage Loan Status and the Borrower’s Intent for additional information).
If a property inspection reveals an insurable loss event and the proof of loss claim is not filed, is denied, or is curtailed due to the servicer’s failure to file a timely claim, the servicer must make Fannie Mae whole for any losses relating to the property damage, expenses, or fees Fannie Mae incurs.
Additional responsibilities depend upon whether the property can be legally rebuilt, as described in the following table.
| If… | Then the servicer must… |
|---|---|
| the property cannot be legally rebuilt |
use any insurance loss proceeds to reduce the outstanding mortgage loan debt. |
| the property can be legally rebuilt | determine the appropriate actions based on the status of the mortgage loan at the time of the loss event, as described below. |
The following table provides a list of the servicer’s responsibilities when there is an insurable loss on a property securing a mortgage loan and the property can be legally rebuilt.
| ✓ | The servicer must… |
|---|---|
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Obtain complete details on the damage to the property and determine the needed repairs. |
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Discuss with the borrower any plans for repairing the property. |
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| Immediately issue the borrower a check for any amount designated for contents (for example personal property) or living expenses. | |
| Disburse the insurance loss proceeds in accordance with this Guide (see Disbursing Insurance Loss Proceeds Based on the Mortgage Loan Status and the Borrower’s Intent for additional information). | |
| Deposit any funds not disbursed into an interest-bearing account (see Depositing the Insurance Loss Proceeds Not Disbursed for additional information). | |
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Review and approve the final plans for repair, including obtaining the necessary bids to repair the property. |
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Monitor and inspect repairs as completed to verify the repairs comply with the final repair plan.
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Conduct a final inspection to ensure all repairs are completed if the mortgage loan is 31 days or more delinquent at the time of the loss event. |
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Obtain the proper lien releases, if applicable. |
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Prohibit payment of fees out of the insurance loss proceeds to any public adjusters or other third parties retained by the borrower to assist with the recovery of those proceeds, unless otherwise agreed to by Fannie Mae in writing.
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Disbursing Insurance Loss Proceeds Based on the Mortgage Loan Status and the Borrower's Intent
The servicer must release the insurance loss proceeds received from the insurance carrier based on the status of the mortgage loan at the time of the loss event.
Mortgage Loans Current or Less Than 31 Days Delinquent:
The servicer must follow the requirements described in the following table for a mortgage loan that is current or less than 31 days delinquent at the time of the loss event.
| If the insurance proceeds are… | Then the servicer… |
|---|---|
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less than or equal to $40,000 |
is authorized to release the insurance loss proceeds in one payment. |
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greater than $40,000 |
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Mortgage Loans 31 Days or More Delinquent:
The servicer must evaluate the borrower for a workout option in accordance with D2-3.1-01, Determining the Appropriate Workout Option and disburse the insurance loss proceeds as outlined in the following table.
| If the insurance loss proceeds are… | Then the servicer… |
|---|---|
| less than or equal to $5,000 | is authorized to make the disbursement in one payment. |
| greater than $5,000 |
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Mortgage Loans for Properties that are Abandoned and/or Have a Scheduled Foreclosure Sale Date:
If the borrower wants to repair or restore the property, then the servicer must take the actions described in the following table.
| ✓ | The servicer must… |
|---|---|
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Evaluate the borrower for a workout option in accordance with D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options. |
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Follow the requirements in E-3.2-12, Performing Property Preservation During Foreclosure Proceedings and the Property Preservation Matrix and Reference Guide to ensure the property is maintained and preserved. |
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Submit a Report of Property Insurance Loss (Form 176) to Fannie Mae’s SF CPM division (see F-4-03, List of Contacts within five business days of the servicer receiving notification of the damages. |
When the Borrower Does Not Intend to Make Repairs:
If a borrower does not want to repair or restore the property, the servicer must take the actions described in the following table.
| ✓ | The servicer must… |
|---|---|
| Follow the requirements in E-3.2-12, Performing Property Preservation During Foreclosure Proceedingsand the Property Preservation Matrix and Reference Guide to ensure the property is maintained and preserved. | |
| Submit Form 176 to Fannie Mae’s SF CPM division (see F-4-03, List of Contacts within five business days of learning of the borrower’s intent not to repair or restore the property. |
If the borrower is eligible for a workout option in accordance with D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options, the servicer must ensure the borrower has assigned any insurance loss proceeds to Fannie Mae, if required.
If the borrower is not eligible for a workout option in accordance with D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options, but the servicer has determined that a workout option is appropriate, it must submit the case to Fannie Mae for review through Fannie Mae’s servicing solutions system.
If the mortgage loan progresses to foreclosure sale, the servicer must follow the requirements in E-3.3-05, Issuing Bidding Instructions for determining the foreclosure sale bid amount.
The servicer must remit insurance loss proceeds to Fannie Mae depending upon the circumstance of the mortgage loan, as outlined in the following table.
| If the mortgage loan progresses to a… | Then the servicer must… |
|---|---|
| short sale | at closing, remit the remaining balance of any insurance loss proceeds via CRS using remittance code 332. |
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Mortgage Release or foreclosure sale |
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Insured Loss Repair Inspection Costs:
The servicer is authorized to request reimbursement for insured loss repair inspection costs incurred on current and delinquent mortgage loans when required to disburse additional funds or complete a final inspection of repairs. To request reimbursement, the servicer must follow the procedures in Reimbursement for Property Inspections and Property Preservation Expenses in F-1-05, Expense Reimbursement.
Performing Remote Insured Loss Repair Inspections
For mortgage loans that are current or less than 31 days delinquent at the time of the loss event, the servicer is authorized to use borrower-submitted photos and/or video, or conduct servicer-directed video calls with the borrower to document the progress or completion of repairs of the property, provided that the conditions listed in the following table are met.
| ✓ | The photo and/or video must… |
|---|---|
| Allow the servicer to determine the repairs are from the location of the property. | |
| Authenticate when taken and that such photos or video were not altered in any way. | |
Clearly identify the repairs that are being documented and confirm the repairs
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Depositing the Insurance Loss Proceeds Not Disbursed
The servicer must deposit the insurance loss proceeds not disbursed to the borrower in an interest-bearing account. The following table provides a list of account requirements.
| ✓ | The interest-bearing account must… |
|---|---|
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Be a T&I custodial account with a depository institution that meets Fannie Mae’s eligibility criteria for custodial depositories. |
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Be for the borrower’s benefit. |
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Yield interest equivalent to the interest the borrower could expect to obtain from a savings or money market account. |
The servicer must pay the accumulated interest to the borrower once the repairs to the property have been completed, unless
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the borrower requests an earlier disbursement of the interest, or
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applicable law allows for the accumulated interest to be applied to the UPB.