Browse the Guide
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Part A Doing Business with Fannie Mae
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Subpart A1, Contractual Obligations
- Chapter A1-1, Understanding the Lender Contract
- Chapter A1-2, Termination of the Lender Contract without Cause
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Chapter A1-3, Repurchases, Indemnifications, and Make Whole Payment Requests
- A1-3-01, Requirements for Voluntary Repurchase
- A1-3-02, Fannie Mae-Initiated Repurchases, Indemnifications, Make Whole Payment Requests and Deferred Payment Obligations
- A1-3-03, Repurchase Obligations Related to Bifurcated Mortgage Loans
- A1-3-04, Reporting the Repurchase
- A1-3-05, Redelivering a Mortgage Loan
- A1-3-06, Automatic Reclassification of MBS Mortgage Loans
- Chapter A1-4, Breach of Contract and Nonperformance
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Subpart A2, Getting Started with Fannie Mae
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Chapter A2-1, Servicer Duties and Responsibilities
- A2-1-01, General Servicer Duties and Responsibilities
- A2-1-02, Servicer’s Duties and Responsibilities Related to MBS Mortgage Loans
- A2-1-03, Servicer's Duties and Responsibilities Related to Mortgage Loans with Resale Restrictions or Shared Equity Transactions
- A2-1-04, Execution of Legal Documents
- A2-1-05, Note Holder Status for Legal Proceedings Conducted in the Servicer’s Name
- A2-1-06, Use of Fannie Mae Trademarks
- A2-1-07, Subservicing
- A2-1-08, First Lien Mortgage Loan Requirements
- A2-1-09, Compliance with Requirements and Laws
- Chapter A2-2, Refinance and Lending Practices
- Chapter A2-3, Servicer Compensation
- Chapter A2-4, Fannie Mae’s Quality Control Review
- Chapter A2-5, Individual Mortgage Loan Files and Records
- Chapter A2-6, Custodial Documents
- Chapter A2-7, Servicing Transfers
- Chapter A2-8, Mortgage Electronic Registration System
- Chapter A2-9, Mortgage Assignments to Fannie Mae
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Chapter A2-1, Servicer Duties and Responsibilities
- Subpart A3, Maintaining Fannie Mae Seller/Servicer Status
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Subpart A4, Setting Up Servicer Operations
- Chapter A4-1, Establishing and Implementing Internal Operations for All Mortgage Loans and Acquired Properties
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Chapter A4-2, Requirements for Delinquent Mortgage Loans and Mortgage Loans at Risk of Default
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Section A4-2.1, Establishing Default Management Strategies
- A4-2.1-01, Preventing Defaults and Managing Delinquencies
- A4-2.1-02, Property Inspection Vendor Management and Oversight
- A4-2.1-03, Managing Short Sales
- A4-2.1-04, Establishing Contact with the Borrower
- A4-2.1-05, Requirements for Collection and Foreclosure Prevention Strategies Unique to Second Lien Mortgage Loans
- A4-2.1-06, Adverse Action Notification Certification
- A4-2.1-07, Servicer's Duties and Responsibilities Related to Mortgage Loans with an Outstanding Non-Interest-Bearing Balance
- Section A4-2.2, Requirements for Default-Related Law Firms
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Section A4-2.1, Establishing Default Management Strategies
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Subpart A1, Contractual Obligations
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Part B Escrow, Taxes, Assessments, and Insurance
- Chapter B-1, Escrow Account Administration
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Chapter B-2, Property Insurance Requirements
- B-2-01, Property Insurance Requirements Applicable to All Property Types
- B-2-02, Property Insurance Requirements for One- to Four-Unit Properties
- B-2-03, Master Property Insurance Requirements for Project Developments
- B-2-04, Individual Property Insurance Requirements for Units in Project Developments
- Chapter B-3, Flood Insurance Requirements
- Chapter B-4, Additional Insurance Requirements
- Chapter B-5, Property and Flood Insurance Loss Events and Claim Settlements
- Chapter B-6, Lender-Placed Insurance
- Chapter B-7, Liability and Fidelity/Crime Insurance Requirements for Project Developments
- Chapter B-8, Mortgage Insurance
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Part C Mortgage Loan Payment Processing, Remitting, Accounting, and Reporting
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Chapter C-1, Processing Mortgage Loan Payments
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Section C-1.1, Processing Scheduled Mortgage Loan Payments
- C-1.1-01, Servicer Responsibilities for Processing Mortgage Loan Payments
- C-1.1-02, Processing Payment Shortages or Funds Received When a Mortgage Loan Modification Is Pending
- C-1.1-03, Automatically Drafting Payments from the Borrower’s Bank Account
- C-1.1-04, Accepting Biweekly Payments from Third-Party Payment Contractors
- Section C-1.2, Processing Unscheduled Mortgage Loan Payments
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Section C-1.1, Processing Scheduled Mortgage Loan Payments
- Chapter C-2, Servicing ARM Loans
- Chapter C-3, Remitting and Accounting
- Chapter C-4, Reporting
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Chapter C-1, Processing Mortgage Loan Payments
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Part D Providing Solutions to a Borrower
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Subpart D1, Assisting the Borrower with Property-Related Issues and Legal Actions
- Chapter D1-1, Requests for the Release of Property and/or Charge-Off of a Mortgage Loan
- Chapter D1-2, Servicing Renovation Mortgage Loans
- Chapter D1-3, Providing Assistance to a Borrower Impacted by a Disaster Event
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Chapter D1-4, Transfers of Ownership
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Section D1-4.1, Information Relating to Transfers of Ownership Applicable to All Mortgage Loans
- D1-4.1-01, Determining Whether a Transfer of Ownership Is Permitted
- D1-4.1-02, Allowable Exemptions Due to the Type of Transfer
- D1-4.1-03, Allowable Exceptions Due to State Law Restrictions (“Window-Period” Mortgage Loans)
- D1-4.1-04, Transfers of Ownership by Grant Deed
- D1-4.1-05, Enforcing the Due-on-Sale (or Due-on-Transfer) Provision
- Section D1-4.2, Information Relating to Transfers of Ownership on Conventional Mortgage Loans
- Section D1-4.3, Information Relating to Transfers of Ownership on Government Mortgage Loans
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Section D1-4.1, Information Relating to Transfers of Ownership Applicable to All Mortgage Loans
- Chapter D1-5, Call Provision Enforcement
- Chapter D1-6, Addressing Notices of Liens, Legal Action, Property Forfeitures or Seizures, or Other Actions
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Subpart D2, Assisting a Borrower Who is Facing Default or in Default
- Chapter D2-1, Working with a Borrower Who is Facing Default
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Chapter D2-2, Requirements for Contacting a Borrower
- D2-2-01, Achieving Quality Right Party Contact with a Borrower
- D2-2-02, Outbound Contact Attempt Requirements
- D2-2-03, Sending a Payment Reminder Notice
- D2-2-04, Sending a Borrower a Solicitation Package for a Workout Option
- D2-2-05, Receiving a Borrower Response Package
- D2-2-06, Sending a Breach or Acceleration Letter
- D2-2-07, Resolving an Appeal of a Mortgage Loan Modification Trial Period Plan Denial for a Principal Residence
- D2-2-08, Interviewing Face-to-Face with a Borrower for Certain FHA and HUD Mortgage Loans
- D2-2-09, Additional Borrower Contact Requirements for the Servicer of a Second Lien Mortgage Loan
- D2-2-10, Requirements for Performing Property Inspections
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Chapter D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options
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Section D2-3.1, Preparing to Implement a Home Retention or Liquidation Workout Option
- D2-3.1-01, Determining the Appropriate Workout Option
- D2-3.1-02, Conditions of a First and Second Lien Mortgage Loan Modification for an MBS Mortgage Loan
- D2-3.1-03, Working with a Borrower that has a Group Home Mortgage Loan
- D2-3.1-04, Offering a Workout Option When Also Servicing a Subordinate Lien Mortgage Loan
- D2-3.1-05, Interacting with Mortgage Assistance Fund Program Providers
- D2-3.1-06, Notifying Fannie Mae of Lead-Based Paint Citations
- Section D2-3.2, Home Retention Workout Options
- Section D2-3.3, Home Liquidation Workout Options
- Section D2-3.4, Other Workout Options to Assist a Borrower
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Section D2-3.1, Preparing to Implement a Home Retention or Liquidation Workout Option
- Chapter D2-4, Reporting Delinquent Mortgage Loans and Workout Options
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Subpart D1, Assisting the Borrower with Property-Related Issues and Legal Actions
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Part E Default-Related Legal Services, Bankruptcy, Foreclosure Proceedings, and Acquired Properties
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Chapter E-1, Referring Default-Related Legal Matters and Non-Routine Litigation to Law Firms
- Section E-1.1, Referring a Mortgage Loan to a Law Firm
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Section E-1.2, Timing of the Referral to a Law Firm
- E-1.2-01, Timing of the Bankruptcy Referral
- E-1.2-02, Timing of the Foreclosure Referral for Mortgage Loans Generally
- E-1.2-03, Timing of the Foreclosure Referral for Second Lien Conventional Mortgage Loans Not Secured by a Principal Residence
- E-1.2-04, Timing of the Foreclosure Referral for Government Mortgage Loans
- Section E-1.3, Handling Non-Routine Litigation
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Chapter E-2, Managing Bankruptcy Proceedings
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Section E-2.1, Bankruptcy Proceedings in General
- E-2.1-01, General Servicing Requirements for Mortgage Loans Under Bankruptcy Protection
- E-2.1-02, Confirming Bankruptcy Information
- E-2.1-03, Suspending Debt Collection Efforts
- E-2.1-04, Expected Servicer/Attorney Interaction During Bankruptcy Proceedings
- E-2.1-05, Filing a Notice of Appearance and Sending Proper Notices
- E-2.1-06, Reviewing Bankruptcy Reorganization Plans
- E-2.1-07, Preparing and Filing a Proof of Claim
- E-2.1-08, Monitoring Borrower Payments and Critical Dates
- E-2.1-09, Identifying Workout Opportunities
- E-2.1-10, Dealing with Delays in the Bankruptcy Process
- E-2.1-11, Remitting P&I for MBS Mortgage Loans That Are Part of a Bankruptcy
- Section E-2.2, Managing Bankruptcies by Chapter
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Section E-2.3, Servicing Special Circumstance Bankruptcies
- E-2.3-01, Identifying Abusive Filers
- E-2.3-02, Addressing Individuals with Fractional Interests in a Security Property
- E-2.3-03, Handling Cramdowns of the Mortgage Debt
- E-2.3-04, Bankruptcies Involving Mortgage Loans Secured by Investment Properties
- E-2.3-05, Bankruptcies Involving Multiple Fannie Mae Mortgage Loans
- E-2.3-06, Responding to Bankruptcies Identified After Foreclosure Sale
- E-2.3-07, Cross-Border Insolvency Proceedings
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Section E-2.1, Bankruptcy Proceedings in General
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Chapter E-3, Managing Foreclosure Proceedings
- Section E-3.1, Foreclosure Proceedings in General
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Section E-3.2, Initiating and Processing Foreclosure Proceedings
- E-3.2-01, Conducting Prereferral Review
- E-3.2-02, Initiating Foreclosure Proceedings on a First Lien Conventional Mortgage Loan
- E-3.2-03, Initiating Foreclosure Proceedings on a Second Lien Conventional Mortgage Loan
- E-3.2-04, Postponing Foreclosure Referral for Mortgage Loans Not Secured by a Principal Residence
- E-3.2-05, Expected Servicer/Attorney Interaction During Foreclosure Proceedings
- E-3.2-06, Conducting Borrower Outreach During Foreclosure
- E-3.2-07, Impact of Engagement with a Mortgage Assistance Fund Program Provider
- E-3.2-08, Processing Reinstatements During Foreclosure
- E-3.2-09, Conducting Foreclosure Proceedings
- E-3.2-10, Paying Certain Expenses During the Foreclosure Process
- E-3.2-11, Collecting Under an Assignment of Rents
- E-3.2-12, Performing Property Preservation During Foreclosure Proceedings
- E-3.2-13, Addressing Title Defects Generally
- E-3.2-14, Addressing Title Defects for Bifurcated Mortgage Loans
- E-3.2-15, Allowable Time Frames for Completing Foreclosure
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Section E-3.3, Preparing for the Foreclosure Sale
- E-3.3-01, Completing Preforeclosure Sale Review
- E-3.3-02, Certifying the Status of Workout Negotiations Prior to Foreclosure Sale
- E-3.3-03, Inspecting Properties Prior to Foreclosure Sale
- E-3.3-04, Marketing the Foreclosure Sale and Using Foreclosure Auction Services
- E-3.3-05, Issuing Bidding Instructions
- E-3.3-06, Handling a Suspension or Reduction of the Redemption Period
- E-3.3-07, Pursuing a Deficiency Judgment
- Section E-3.4, When Foreclosure Proceedings Must Be Suspended or Canceled
- Section E-3.5, Servicer Responsibilities Following the Foreclosure Sale
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Chapter E-4, Managing Acquired Properties
- Section E-4.1, Notifying Fannie Mae of Property Acquisitions
- Section E-4.2, Conveying Title to an Acquired Property
- Section E-4.3, Preserving and Managing Properties
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Section E-4.4, Property and Flood Insurance Coverage Requirements
- E-4.4-01, Continuing or Canceling Property Insurance Coverage
- E-4.4-02, Remitting Property Insurance Settlement Proceeds or Unearned Premium Refunds
- E-4.4-03, Canceling Flood Insurance Coverage for Acquired Properties
- E-4.4-04, Remitting Flood Insurance Settlement Proceeds or Unearned Premium Refunds
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Section E-4.5, Filing MI Claims for Liquidated Properties
- E-4.5-01, Filing MI Claims for Conventional Mortgage Loans or for Other Mortgage Loans for which Fannie Mae Bears the Risk of Loss
- E-4.5-02, Filing MI Claims for FHA Mortgage Loans
- E-4.5-03, Filing MI Claims for FHA Coinsured Mortgage Loans
- E-4.5-04, Filing MI Claims for FHA Title I Loans
- E-4.5-05, Filing MI Claims for HUD Section 184 Mortgage Loans
- E-4.5-06, Filing MI Claims for VA Mortgage Loans
- E-4.5-07, Filing MI Claims for RD Mortgage Loans
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Chapter E-5, Requesting Reimbursement for Expenses Associated with Default-Related Legal Matters
- E-5-01, Requesting Reimbursement for Expenses
- E-5-02, Servicer Responsibilities Prior to Requesting Reimbursement of Attorney Fees and Costs
- E-5-03, Allowable Bankruptcy Fees
- E-5-04, Allowable Foreclosure Fees
- E-5-05, Reimbursing Law Firms/Reimbursement of Uncollected Fees, Costs or Advances
- E-5-06, Technology Fees and Electronic Invoicing
- E-5-07, Other Reimbursable Default-Related Legal Expenses
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Chapter E-1, Referring Default-Related Legal Matters and Non-Routine Litigation to Law Firms
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Part F Servicing Guide Procedures, Exhibits, and Quick Reference Materials
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Chapter F-1, Servicing Guide Procedures
- F-1-01, Servicing ARM Loans
- F-1-02, Escrow, Taxes, Assessments, and Insurance
- F-1-03, Establishing and Implementing Custodial Accounts
- F-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan
- F-1-05, Expense Reimbursement
- F-1-06, Filing an MI Claim for a Liquidated Mortgage Loan or Acquired Property
- F-1-07, Handling Property Forfeitures and Seizures
- F-1-08, Managing Foreclosure Proceedings
- F-1-09, Processing Mortgage Loan Payments and Payoffs
- F-1-10, Obtaining and Executing Legal Documents
- F-1-11, Post-Delivery Servicing Transfers
- F-1-12, Preparing to Implement a Workout Option
- F-1-13, Processing a Fannie Mae Mortgage Release (Deed-In-Lieu of Foreclosure)
- F-1-14, Processing a Fannie Mae Short Sale
- F-1-15, Processing a Government Mortgage Loan Modification
- F-1-16, Processing a Repayment Plan
- F-1-17, Processing a Transfer of Ownership
- F-1-18, Processing a Workout Incentive Fee
- F-1-19, Processing a Military Indulgence
- F-1-20, Remitting and Accounting to Fannie Mae
- F-1-21, Reporting a Delinquent Mortgage Loan via Fannie Mae’s Servicing Solutions System
- F-1-22, Reporting a Workout Option via Fannie Mae’s Servicing Solutions System
- F-1-23, Reporting to Third Parties
- F-1-24, Requesting Fannie Mae’s Approval via Fannie Mae’s Servicing Solutions System
- F-1-25, Reclassifying or Voluntary Repurchasing an MBS Mortgage Loan
- F-1-26, Servicing eMortgages
- F-1-27, Processing a Fannie Mae Flex Modification
- F-1-28, Reviewing a Transfer of Ownership for Credit and Financial Capacity
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Chapter F-2, Exhibits
- F-2-01, Bankruptcy Referral and Completion Timelines
- F-2-02, Incentive Fees for Workout Options
- F-2-03, Compensatory Fee Calculation Examples
- F-2-04, Firm Minimum Requirements
- F-2-05, Historical Yield Differential Adjustment Provisions
- F-2-06, Mortgage Insurer Delegations for Workout Options
- F-2-07, Reporting the Principal Amount for Mortgage Loans with Principal Forbearance
- F-2-08, Servicing Fees for MBS Mortgage Loans
- F-2-09, Servicing Fees for Portfolio Mortgage Loans
- F-2-10, Fannie Mae’s Workout Hierarchy
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Chapter F-3, Acronyms and Glossary of Defined Terms
- F-3-01, Acronyms and Glossary of Defined Terms: A
- F-3-02, Acronyms and Glossary of Defined Terms: B
- F-3-03, Acronyms and Glossary of Defined Terms: C
- F-3-04, Acronyms and Glossary of Defined Terms: D
- F-3-05, Acronyms and Glossary of Defined Terms: E
- F-3-06, Acronyms and Glossary of Defined Terms: F
- F-3-07, Acronyms and Glossary of Defined Terms: G
- F-3-08, Acronyms and Glossary of Defined Terms: H
- F-3-09, Acronyms and Glossary of Defined Terms: I
- F-3-10, Acronyms and Glossary of Defined Terms: J
- F-3-11, Acronyms and Glossary of Defined Terms: K
- F-3-12, Acronyms and Glossary of Defined Terms: L
- F-3-13, Acronyms and Glossary of Defined Terms: M
- F-3-14, Acronyms and Glossary of Defined Terms: N
- F-3-15, Acronyms and Glossary of Defined Terms: O
- F-3-16, Acronyms and Glossary of Defined Terms: P
- F-3-17, Acronyms and Glossary of Defined Terms: Q
- F-3-18, Acronyms and Glossary of Defined Terms: R
- F-3-19, Acronyms and Glossary of Defined Terms: S
- F-3-20, Acronyms and Glossary of Defined Terms: T
- F-3-21, Acronyms and Glossary of Defined Terms: U
- F-3-22, Acronyms and Glossary of Defined Terms: V
- F-3-23, Acronyms and Glossary of Defined Terms: W
- F-3-24, Acronyms and Glossary of Defined Terms: X
- F-3-25, Acronyms and Glossary of Defined Terms: Y
- F-3-26, Acronyms and Glossary of Defined Terms: Z
- Chapter F-4, Servicing Guide Resources
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Chapter F-1, Servicing Guide Procedures
B-8.1-04, Termination of Conventional Mortgage Insurance (05/15/2019)
- Automatic Termination of Conventional Mortgage Insurance
- Borrower-Initiated Termination of Conventional Mortgage Insurance Based on Original Value of the Property
- Borrower-Initiated Termination of Conventional Mortgage Insurance Based on Current Value of the Property
- Verification of Acceptable Payment Record for Borrowers Impacted by a Disaster
- Terminating the Conventional Mortgage Insurance for a Modified Mortgage Loan
- Finalizing and Reporting the Mortgage Insurance Termination
- Performing an Escrow Analysis Upon Termination of Mortgage Insurance
Automatic Termination of Conventional Mortgage Insurance
The servicer must not charge the borrower a fee for processing an automatic termination.
The servicer must take the following steps to terminate the MI, as applicable:
1. Determine when the MI is due to automatically terminate.
The servicer’s review must determine whether
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a mortgage loan is eligible for automatic termination of MI based on the scheduled termination date (or the mid-point of the amortization period, as applicable), and
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the borrower’s payments are current on that date.
The following table describes the timing of the automatic termination.
If the mortgage loan closed... | Then the MI is eligible to be terminated... |
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on or after July 29, 1999 and is secured by a one-unit principal residence or second home |
on the applicable termination date, provided the borrower’s payments are current on the termination date. The applicable termination date is
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before July 29, 1999, regardless of the property type; or on or after July 29, 1999 and is secured by a one- to four- unit investment property or a two- to four-unit principal residence |
on the first day of the month after the date that is the mid-point of the original amortization period, provided the borrower’s payments are current on that date. |
Note: The servicer must determine the original value of the property in accordance with applicable law.
2. Verify the borrower’s payments are considered current.
The borrower’s payments are considered current if the payment due in the month preceding the scheduled termination date, or the mid-point of the amortization period, as applicable, was paid by the end of the month in which the payment was due.
The following table describes the action the servicer must take depending upon the status of the borrower’s payments.
If the borrower’s payments are... | Then the servicer... |
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current and the mortgage loan is eligible for automatic termination based on its scheduled amortization |
must terminate the MI immediately. |
current and the mortgage loan is eligible for automatic termination based on the mid-point of the amortization period |
must terminate the MI no later than the first day of the month following the mid-point date. |
not current |
must not terminate the MI, even if the other eligibility criteria for automatic termination are met. The servicer must
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Borrower-Initiated Termination of Conventional Mortgage Insurance Based on Original Value of the Property
The servicer must take the following steps to evaluate the borrower's written or verbal request for MI termination due to reduction in the UPB through the payment of scheduled monthly payments or an unscheduled principal curtailment:
1. Verify the LTV ratio of the mortgage loan meets Fannie Mae’s eligibility criteria.
The following table describes the LTV ratio eligibility criteria.
If the mortgage loan is secured by... | Then the LTV ratio eligibility criterion is met... |
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on the date the mortgage loan balance is first scheduled to reach 80% (or actually reaches 80%) of the original value of the property. |
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on the date the outstanding principal balance of the mortgage loan reaches 70% of the original value of the property. |
Note: The servicer must determine the original value of the property in accordance with applicable law.
2. Verify the borrower has an acceptable payment record.
An acceptable payment record is achieved when the mortgage loan
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is current when the termination is requested, which means the mortgage loan payment for the month preceding the date of the termination request was paid;
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has no payment 30 or more days past due in the last 12 months; and
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has no payment 60 or more days past due in the last 24 months.
Note: When assessing the payment history for a mortgage loan that has been outstanding for fewer than 24 months (or for a new borrower who assumed a mortgage loan within the last 23 months), the servicer must apply the acceptable payment record criterion to the length of time the mortgage loan has been outstanding (or that has elapsed since the new borrower assumed the mortgage loan).
The 12- and 24-month payment histories must be measured backward from the later of the date
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the balance is first scheduled to reach, or actually reaches, 80% of the original value of the property; or
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the borrower actually requests termination.
3. Verify the current value of the property is not less than its original value.
The servicer must obtain a property valuation from Fannie Mae's servicing solutions system to verify that the current value of the property is at least equal to the original value of the property and take the required actions based on the following table.
If... | Then the servicer must... |
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Fannie Mae's servicing solutions system renders a current property value and the value is at least equal to the original value of the property | terminate the MI and notify the borrower within 30 days of receiving the value. |
Fannie Mae's servicing solutions system renders a current property value and the value is less than the original value of the property |
deny the borrower’s request for termination unless the borrower
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Fannie Mae's servicing solutions system does not render a property value |
deny the borrower's request for termination unless the borrower chooses to verify that the current value of the property is at least equal to the original value of the property by following the procedure in Ordering Property Values for Mortgage Insurance Termination in . |
The BPO or appraised value is at least equal to the original value of the property | terminate the MI and notify the borrower within 30 days of receiving the value. |
The BPO or appraised value is less than the original value of the property | deny the borrower's request for termination unless the borrower pays down the mortgage loan balance to the point that it satisfies Fannie Mae's LTV ratio eligibility criterion. |
Note: The AVM value in Fannie Mae's servicing solutions system will be updated after 120 days.
If the request for termination is denied, the servicer must
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notify the borrower and provide the grounds for denial, including the results of the AVM value, BPO, or appraisal used to make the determination, and
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send this notice within 30 days of the date the servicer received the AVM value, BPO, or appraisal, if applicable and in accordance with applicable law.
The servicer is authorized to identify a mortgage loan that is close to or has reached the LTV requirements for MI termination based on original value and notify the borrower of the actions required to terminate MI. The servicer must terminate MI based on original value of the property only after receiving a direct response from the borrower to do so.
Borrower-Initiated Termination of Conventional Mortgage Insurance Based on Current Value of the Property
The servicer must not solicit a borrower for MI termination based on current value of the property. The servicer must only terminate MI based on current value of the property in response to a borrower-initiated request for termination.
If the borrower’s written or verbal request for termination based on the current value includes the information necessary to reach a decision, the servicer must evaluate the request based on the following:
1. Verify the LTV ratio of the mortgage loan meets Fannie Mae’s eligibility criteria.
Satisfaction that the mortgage loan meets the applicable LTV ratio eligibility criterion must be evidenced by obtaining a property valuation based on an inspection of both the interior and exterior of the property from Fannie Mae's servicing solutions system by following the procedure in
The following table describes the LTV ratio eligibility criteria.
If the mortgage loan is... | Then... |
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secured by a one-unit principal residence or second home |
the LTV ratio must be
If Fannie Mae’s minimum two-year seasoning requirement is waived because the property improvements made by the borrower increased the property value, the LTV ratio must be 80% or less.
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secured by a one- to four-unit investment property or a two- to four-unit principal residence | the LTV ratio must be 70% or less and the seasoning of the mortgage loan must be greater than two years. |
2. Verify the borrower has an acceptable payment record.
An acceptable payment record is achieved when the mortgage loan
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is current when the termination is requested, which means the mortgage loan payment for the month preceding the date of the termination request was paid;
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has no payment 30 or more days past due in the last 12 months; and
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has no payment 60 or more days past due in the last 24 months.
Note: When assessing the payment history for a mortgage loan and the borrower has made property improvements, the servicer must apply the acceptable payment record criterion to the length of time the mortgage loan has been outstanding.
If a mortgage loan has been assumed by a new borrower, the servicer must not agree to the termination unless the new borrower has a 24-month payment history for the mortgage loan.
The servicer must notify the borrower if the request for termination is denied and provide the reasons for denial, including the results of the BPO or appraisal. This notice must be sent within 30 days after the later of
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the date the servicer received the borrower’s request for termination, or
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the date the servicer received the BPO or appraisal.
Verification of Acceptable Payment Record for Borrowers Impacted by a Disaster
When verifying an acceptable payment history for a borrower that was impacted by a disaster event in which the servicer provided either a forbearance plan, a repayment plan, or a Trial Period Plan, or disaster payment deferral and the borrower complied with the terms of such workout option, the servicer must not consider any payment that is 30 or more days past due in the last 12 months, or 60 or more days past due in the last 24 months that is attributable to the disaster event. This applies when reviewing the borrower's request for termination of conventional MI based on either original or current value of the property.
Terminating the Conventional Mortgage Insurance for a Modified Mortgage Loan
The MI termination eligibility criteria for a modified mortgage loan must be based on the terms and conditions of the modified mortgage loan, including the amortization schedule of the modified mortgage loan, and must comply with applicable law.
Finalizing and Reporting the Mortgage Insurance Termination
The servicer must automatically terminate the MI on the applicable termination date and must approve a borrower-initiated request for termination if the previously stated requirements for the applicable type of MI termination are met.
The servicer must not collect MIPs as part of the borrower’s mortgage loan payment more than 30 days after the later of
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the date the servicer received the borrower’s request for termination (or the scheduled termination date or the mid-point of the amortization period, as applicable, for an automatic termination), or
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the date all eligibility criteria for termination were satisfied.
The following table provides the requirements for finalizing and reporting the termination of the MI.
✓ | The servicer must... |
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Reduce the borrower’s mortgage loan payment by the amount that was being collected to pay the MIP within the required time frame, unless the MIP was financed as part of the mortgage loan amount. |
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Notify the borrower within 30 days after termination that the MI has been terminated and, if applicable, indicate no further escrow deposits for MI will be due from the borrower. |
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Forward any unearned MIP refund to the borrower as soon as it is received from the mortgage insurer, but no later than 45 days after the MI termination date. |
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Report the termination of MI to Fannie Mae with the next Fannie Mae investor reporting system reports it submits after the termination date. See Reporting Discontinuance of Mortgage Insurance in the Investor Reporting Manual for additional information. |
Performing an Escrow Analysis Upon Termination of Mortgage Insurance
The following table outlines the actions the servicer must take depending on whether it performs a new escrow analysis at the time the MI is terminated.
If the servicer... | Then... |
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does not perform a new escrow analysis |
the servicer must advise the borrower that escrow deposits accumulated to pay off the next MIP will be considered in the borrower’s next escrow account analysis. |
performs a new escrow analysis |
the resulting change in the mortgage loan payment must not equal the amount previously escrowed for the MIP, should other escrow items need to be adjusted. |
The table below provides references to recently issued Announcements that are related to this topic.
Announcements | Issue Date |
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Announcement SVC-2019-03 | May 15, 2019 |