Servicing Guide

Published June 10, 2020

The Servicing Guide is organized into parts that reflect how lenders generally categorize various aspects of their business relationship with Fannie Mae. To begin browsing, select from any of the sections below. You may also download the entire Servicing Guide in PDF format.

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When terminating mortgage insurance, what steps do I take to finalize and report it?

Finalizing and Reporting the Mortgage Insurance Termination in Servicing Guide B-8.1-04, Termination of Conventional Mortgage Insurance states that the servicer must automatically terminate the MI on the applicable termination date and must approve a borrower-initiated request for termination if the requirements for the applicable type of MI termination are met (for detailed policy requirements for terminating conventional mortgage insurance, refer to B-8.1-04, Termination of Conventional Mortgage Insurance). 

The servicer must not collect mortgage insurance premiums (“MIPs”) as part of the borrower’s mortgage loan payment more than 30 days after the later of 

  • ​​​​​the date the servicer received the borrower’s request for termination (or the scheduled termination date or the midpoint of the amortization period, as applicable, for an automatic termination), or 
  • 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...
 

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.

 

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.

 

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.

 

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.

Additionally, Investor Reporting Manual Chapter 3-06, Reporting a Transaction 89 (Discontinuance of Mortgage Insurance) provides specific instructions the servicer must follow when reporting termination of the MI. 

The servicer must notify Fannie Mae about an automatic termination or a borrower-initiated cancellation of mortgage insurance coverage via a Transaction Type 89. The termination or cancellation must be reported by the last reporting day of the reporting period in which the effective date of the termination occurs.

The reason for the MI Discontinuance is distinguished by action codes. The proper action code that must be reported differs based on whether the MI is automatically terminated or is canceled based on the borrower’s request to do so.

Action codes are further described in the following table.  

Action Code

The servicer must use this code…

51

to report a borrower-initiated cancellation based on the original value of the property (or, in the case of a second-lien mortgage loan, the value of the property at the time the second-lien mortgage loan was originated)

52

to report a borrower-initiated cancellation based on the current appraised value of the property

53

to report an automatic termination (regardless of whether the termination is based on the scheduled LTV ratio or the date that is the mid-point of the amortization period).

54

to report termination due to high risk.

Record specifications and descriptions for Transaction Type 89 are included in the following table.  

Data Element

Position(s)

Length

Description

 Lender Number

1-9

(9)

Numeric

Investor

10

(1)

Alphanumeric; Always F = Fannie Mae

Record Identifier

11-12

(2)

Numeric; Always 89

Source Code

13

(1)

Numeric; Always zero (0)

Fannie Mae Loan Number

14-23

(10)

Numeric

Action Code

24-25

(2)

Numeric

Action Date

26-31

(6)

Numeric; MMDDYY format

Filler

32-80

(49)

Alphanumeric; Blanks or zeroes

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