The servicer must accept funds on behalf of a borrower from an HFA-HHF mortgage loan modification assistance program, regardless of whether the mortgage loan is current or delinquent.
Mortgage Loan Modification When the Terms of the Mortgage Loan Change: When a mortgage loan is modified using modification assistance program funds while also changing the terms of the mortgage loan, the funds must be applied once the borrower has successfully completed a Trial Period Plan and after any MBS mortgage loan reclassification, but before the modification effective date. The servicer must apply these funds in accordance with C-1.2-01, Processing Additional Principal Payments.
If the servicer does not receive the funds from the HFA prior to the first payment due date of the permanently modified mortgage loan, the servicer must re-evaluate the borrower to determine eligibility for a mortgage loan modification in accordance with this Guide. If the servicer determines that the borrower qualifies for a mortgage loan modification, it must not require the borrower to complete a new Trial Period Plan, even if the modified monthly payment will be higher than the current Trial Period Plan payment. If the borrower no longer qualifies for a mortgage loan modification, the servicer must submit the case to Fannie Mae for decision.
If a borrower who has received modification assistance program funds subsequently requests reapplication of principal prepayments as described in Reapplying Principal Prepayments to Cure a Delinquency in C-1.2-01, Processing Additional Principal Payments, the servicer must not approve the borrower’s request
For more information please see: D2-3.1-05: Interacting with Housing Finance Agencies and Hardest Hit Fund Programs.