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D2-2-10: Requirements for Performing Property Inspections (11/17/2021)

Introduction

This topic contains the following:

 

Inspecting a Property Securing a Delinquent Mortgage Loan

The servicer must order a property inspection on or after the 90th day of delinquency and complete the property inspection no later than the 120th day of delinquency for all delinquent mortgage loans and continue inspecting every calendar month as long as the mortgage loan remains 90 or more days delinquent until the foreclosure sale, the execution of a Mortgage Release, or the mortgage loan becomes current unless otherwise noted in this Servicing Guide

However, the servicer must not complete a property inspection every calendar month when the mortgage loan is 90 or more days delinquent if

  • the property is borrower/tenant occupied, and
  • one of the following has occurred:
    • QRPC has been established within the last 30 days,
    • a full payment has been received within the last 30 days,
    • a workout option has been approved and the borrower is performing under the plan, or
    • the borrower is performing under the applicable bankruptcy plan.

The servicer must use a Property Inspection Report (Form 30) or its own form that provides equivalent information to document the property inspection. When a property inspection is required every calendar month, the property inspections must occur between 20 and 35 days apart. However, the servicer must complete more frequent property inspections when necessary (for example, when required by local ordinance or based on property condition). If extenuating circumstances cause inspection delays, the servicer must document efforts to conduct timely inspection and the reason for any exception in the mortgage loan file.

The servicer must complete a final property inspection within 35 days prior to the foreclosure sale, or in applicable foreclosure actions where there is no foreclosure sale and title is transferred by court order, the estimated court order docket date (if known). See E-3.3-03, Inspecting Properties Prior to Foreclosure Sale for additional information.

The following table outlines the type of inspection the servicer must perform depending on the occupancy status.

If... Then the servicer must complete...
the property is vacant or abandoned an interior inspection as allowed by applicable law
the occupancy status of the property is
  • unknown, or

  • occupied (whether by borrower(s), tenant(s), or unknown occupant(s))

an exterior inspection

The servicer is authorized to consider a curbside (drive-by) inspection as an exterior inspection only in the following circumstances:

  • if there are legal constraints due to compliance with applicable law including active bankruptcy, or 
  • if there is potential danger to the inspector.

The servicer must maintain and make any checklists or other documentation relied upon to determine the occupancy status of a property available to Fannie Mae upon request. Fannie Mae reserves the right to require

  • revisions to the checklists,

  • the use of a prescribed form of checklist, or

  • affidavits of vacancy where necessary or appropriate to evidence the vacancy status.

See  A4-2.1-02, Property Inspection Vendor Management and Oversight for information on property inspection vendor management.

The servicer must follow the procedures in Reimbursement for Property Inspections and Property Preservation Expenses in  F-1-05, Expense Reimbursement for requesting reimbursement of property inspection fees.

The servicer of a second lien mortgage loan must complete a property inspection of the property securing the mortgage loan by the earlier of 

  • the date that it initiates foreclosure proceedings, or
  • the 120th day of delinquency.

 

Inspecting and Repairing a Property in Disrepair

When the servicer learns of any condition detrimental to the value of the property or the need for urgent repairs, the servicer must remind the borrower of their obligation to maintain the property and take the action described in the following table depending on the borrower’s action. (For disaster-impacted properties, see D1-3-01, Evaluating the Impact of a Disaster Event and Assisting a Borrower).

If the borrower... Then the servicer...
agrees to arrange for the necessary repairs and has the financial resources to do so must follow up until the repairs have been completed.
is willing to make the repairs, but is unable to do so is authorized to ask Fannie Mae to advance the necessary funds by requesting expense reimbursement if the mortgage loan is either
  • a whole mortgage loan,

  • a participation pool mortgage loan, or

  • an MBS mortgage loan serviced under the special servicing option.

    Note: Appropriate arrangements should be made for the borrower to repay the advance.

refuses to make repairs of an emergency nature or to allow the servicer to have such repairs made must adhere to the following requirements.
If the mortgage loan... Then the servicer must...
is current and/or the property is occupied determine if inspections are necessary and whether it should pursue other actions, such as legal action, to have emergency repairs made. For non-routine litigation matters, the servicer must notify Fannie Mae’s Legal Department by submitting a Non-Routine Litigation Form (Form 20).
is or becomes delinquent and the servicer determines the property is vacant follow the requirements for inspecting, securing, and repairing vacant properties and securing delinquent mortgage loans set forth in Inspecting and Protecting a Vacant or Abandoned Property and the Property Preservation Matrix and Reference Guide.

Before the servicer of a second lien mortgage loan conducts a property inspection, it must contact the first lien mortgage loan servicer to determine when the property was last inspected to avoid a potential duplication of effort. If the servicer conducts a property inspection, it must notify the first lien mortgage loan servicer of the results of the property inspection and the borrower’s plans regarding any needed repairs. The following table describes the action that the servicer of a second lien mortgage loan must take depending on the borrower’s action.

If the borrower... Then the servicer...

agrees to arrange for the necessary repairs

must follow up until the repairs have been completed.

refuses to make the necessary repairs

must determine what action the first lien mortgage loan servicer intends to take. If the first lien mortgage loan servicer does not intend to take any action to repair the property, the servicer must contact its Fannie Mae Servicing Representative (see F-4-02, List of Contacts).

The servicer must follow the procedures in General Expense Reimbursement Requirements in  F-1-05, Expense Reimbursement for advancing funds to make repairs and requesting reimbursement.

 

Inspecting and Protecting a Vacant or Abandoned Property

The servicer must inspect a property as soon as possible after it becomes aware of the possibility that the property may be vacant or abandoned.

When the servicer determines the property is vacant, the servicer must take the actions listed in the following table.

The servicer must...
 

Make immediate arrangements to protect the property from vandalism and the elements to the extent that local laws allow such action. See Overview of General Servicer Duties and Responsibilities in A2-1-01, General Servicer Duties and Responsibilities and the Property Preservation Matrix and Reference Guide for additional information.

 

Attempt to locate the borrower to determine the reason for the vacancy.

 

Contact any other lienholders to determine if any action has been taken and their intentions.

 

Notify the property insurance carrier about the vacancy to ensure that appropriate insurance coverage is being maintained.

The following table describes the servicer’s next steps depending on the mortgage loan status if the property inspection confirms that the property is vacant.

If the property inspection confirms that the property is vacant and the mortgage loan is... Then the servicer must...

delinquent

complete a property inspection every calendar month as long as the mortgage loan remains 90 or more days delinquent without regard to whether QRPC, as described in D2-2-01, Achieving Quality Right Party Contact with a Borrower, has been established.

not delinquent

summarize its attempts to locate the borrower and its discussions with any other lienholders and submit a recommendation for further action to its Fannie Mae Servicing Representative (see  F-4-02, List of Contacts).

The servicer must obtain a signed copy of the inspection report that first reported the vacancy, in which the person who completed the inspection certifies that they personally went to the property location and that the property is vacant.

An electronic signature is acceptable when obtaining a signed copy of the inspection report. See Selling Guide A2-4.1-03, Electronic Records, Signatures, and Transactions for additional information.

If a property is subsequently inspected and remains vacant, the continued vacancy status must be documented on the checklist or other document evidencing notes of the inspection, but no additional signature is required. If a property previously reported to be vacant becomes occupied, a new signed inspection report is required if the property becomes vacant.

Once the servicer has confirmed the property is abandoned, the servicer must complete an interior inspection every calendar month until the foreclosure sale date, or in applicable foreclosure actions where there is no foreclosure sale and title is transferred by court order, the date the court’s order is entered on the docket. Interior inspections may be conducted simultaneously with other required property inspections.

 

Related Announcements

The following table provides references to Announcements that are related to this topic.

Announcements Issue Date
Announcement SVC-2021-08 November 17, 2021
Announcement SVC-2019-02 April 10, 2019
Announcement SVC-2018-08 November 14, 2018
Announcement SVC-2018-05 August 15, 2018
Announcement SVC-2018-01 February 14, 2018
Announcement SVC–2017-06 July 12, 2017
Announcement SVC–2015–13 October 14, 2015
Announcement SVC–2015–11 August 12, 2015
Announcement SVC-2015–07 May 20, 2015

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