Servicing Guide

Published November 10, 2020

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What are the servicer responsibilities upon receipt of notice of a legal action impacting Fannie Mae’s interest?

From time to time, servicers may be served with a summons and complaint relating to a Fannie Mae mortgage loan (e.g., a condemnation action, a probate proceeding, a partition action, a quiet title action, a code violation notice, a tax sale, or a subordinate loan foreclosure). The servicer is responsible for handling these types of legal actions, including retaining any legal counsel necessary to represent Fannie Mae’s interests. 

The following table outlines the servicer’s responsibilities upon receipt of notice of a legal action impacting Fannie Mae’s interest.

The servicer must...
 

Notify Fannie Mae’s Single Family Legal department immediately of any non-routine litigation and certain matters requiring escalation as required in accordance with this Guide by submitting a Non-Routine Litigation Form (Form 20). See E-1.3-02, Reporting Non-Routine Litigation to Fannie Maefor additional information.

 

Use counsel selected and engaged pursuant to Fannie Mae’s requirements. See A4-2.2-01, Selecting and Retaining Law Firms for additional information.

Note: If a legal proceeding involves allegations that would trigger Fannie Mae’s right to indemnification from the servicer (e.g., allegations of origination issues or servicing errors), the servicer is authorized to retain any counsel of its choice.

 

Obtain excess fee approval from its Fannie Mae Servicing Representative (see F-4-03, List of Contacts) if the legal proceeding does not involve allegations that would trigger Fannie Mae’s right to indemnification from the servicer.

 

Instruct counsel to

  • notify the borrower about his or her responsibility for expenses when the deed of trust or mortgage loan provides for the borrower to reimburse any legal fees or costs incurred by the servicer, and

  • handle such matters by stipulation or any other expeditious matter that will reduce fees and costs.

 

Notify Fannie Mae’s Project Standards Team (see F-4-03, List of Contacts) if, for a condo association, co-op corporation or PUD project, the servicer is advised of any proposed action that requires the consent of a specified percentage of the mortgage loan holders in the project, the servicer must contact Fannie Mae immediately with its recommendation regarding the proposed action.

See below for related Q&A's:

Does Fannie Mae direct and control all litigation involving a Fannie Mae mortgage loan when handling notices of liens, legal action or other actions impacting Fannie Mae's interest?

Can the servicer initiate legal proceedings or intervene in legal proceedings on Fannie Mae's behalf when handling notices of liens, legal action or other actions impacting Fannie Mae's interest?

What actions should be taken to prevent new liens becoming superior to Fannie Mae's mortgage lien?

What action should be taken if the servicer receives an electronic notice from MERS related to a mortgage loan that it is servicing for Fannie Mae?

Who should the servicer contact upon receipt notification of notices of liens, legal action, other actions impacting Fannie Mae's interest, when a condo association, co-op corp. or PUD project are involved?

For more information please see: D1-6-02: Handling Notices of Liens, Legal Action, Other Actions Impacting Fannie Mae's Interest.

 

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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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