Servicing Guide

Published September 9, 2020

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What should a payment change notification include for mortgage loan modifications with a step interest rate adjustment?

For all mortgage loan modifications with a step interest rate adjustment, the servicer must send the borrower a notification of the mortgage loan interest rate adjustment. All payment change notifications for mortgage loan modifications with a step interest rate adjustment must include the information shown in the following table.

Notice Requirements
 

The amount and effective date of the interest rate increase.

 

The amount and due date of the borrower’s new monthly payment.

 

An explanation pursuant to the terms of the modification agreement, that at the end of the initial fixed-rate term, the interest rate will increase according to the schedule in the modification agreement until it reaches the interest rate cap. Furthermore, the explanation should, as applicable, include statements regarding the following:

  • how the interest rate cap was set; and

  • notification that once the interest rate reaches the interest rate cap, it will be fixed for the remaining life of the mortgage loan.

 

A payment schedule table, similar to the one included in the modification agreement, that outlines the future interest rates and monthly payment amounts (identifying P&I, and estimated escrows) and the effective dates for such amounts, or the servicer may explain these terms, dates, and amounts.

 

An explanation that the monthly payment includes an escrow for property taxes, applicable property insurance, and the other escrowed expenses, which, if changed, will change the monthly payment.

 

An explanation of how the new monthly payment was determined.

 

Servicer contact information and instructions to the borrower to contact the servicer if the borrower has questions or concerns about the new monthly payment.

 

The Homeowner’s HOPE™ Hotline Number (1–888–995–HOPE).

 

An explanation that the borrower can seek assistance with household budgeting at no charge from HUD-approved housing counseling agencies that can be found on HUD.gov.

 

Information regarding the availability of additional educational resources at Fannie Mae’s Know Your Options™ website.

For more information please see: C-1.1-01, Processing Scheduled Mortgage Loan Payments

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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.

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