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D2-3.2-04: Payment Deferral (10/11/2023)

Introduction

This topic contains the following information:


Determining Eligibility for a Payment Deferral

The servicer is authorized to evaluate the borrower for a payment deferral without receiving a complete Borrower Response Package (BRP). When the servicer offers a payment deferral without receiving a complete BRP, the servicer is not required to send an Evaluation Notice, or equivalent.

If the borrower submitted a complete BRP, then the servicer must evaluate the borrower in accordance with D2-2-05, Receiving a Borrower Response Package. The servicer is authorized to use an Evaluation Notice, but must make the appropriate changes as necessary, including to the applicable Frequently Asked Questions, to reflect the terms of the payment deferral.

In order to be eligible for a payment deferral, the following criteria must be met.

Eligibility Criteria for a Payment Deferral
  The servicer must achieve QRPC with the borrower (see D2-2-01, Achieving Quality Right Party Contact with a Borrower for additional information).

Additionally, the servicer must confirm that the borrower:

  • has resolved the hardship;

  • is able to continue making the full monthly contractual payment, including the amount required to repay any escrow shortage amount over a term of 60 months; and

  • is unable to reinstate the mortgage loan or afford a repayment plan to cure the delinquency.

 

The mortgage loan must be a conventional first lien mortgage loan, and may be a fixed-rate, a step-rate, or an ARM.

Note: The property securing the mortgage loan may be vacant or condemned.

  The mortgage loan must have been originated at least 12 months prior to the evaluation date for a payment deferral.
  The mortgage loan must be equal to or greater than 2 months delinquent but less than or equal to 6 months delinquent as of the date of evaluation.
 

The mortgage loan may receive more than one payment deferral; however, no more than 12 months of cumulative past-due P&I payments as the result of a payment deferral may be deferred over the life of the mortgage loan.

Note: This cumulative cap does not include past-due P&I payments deferred as the result of a disaster payment deferral.

  The mortgage loan must not have received a prior payment deferral with an effective date within 12 months of the evaluation date.

Note: This does not apply to a prior disaster payment deferral.

 

As of the evaluation date, the mortgage loan must not be within 36 months of its maturity or projected payoff date.

Note: If the borrower is otherwise eligible for a payment deferral and the servicer determines that a payment deferral is the appropriate solution based on the borrower's circumstances, then the servicer is authorized to submit a request for a payment deferral through Fannie Mae's servicing solutions system for review and to obtain prior approval from Fannie Mae.

  The mortgage loan must not be subject to
  • a recourse or indemnification arrangement under which Fannie Mae purchased or securitized the mortgage loan or that was imposed by Fannie Mae after the mortgage loan was purchased or securitized,

  • an approved liquidation workout option,

  • an active and performing repayment plan,

  • a current offer for another retention workout option, or

  • an active and performing mortgage loan modification Trial Period Plan.

  The borrower must not have failed a non-disaster related mortgage loan modification Trial Period Plan within 12 months of being evaluated for eligibility for a payment deferral.

Note: Converting from a Trial Period Plan to a forbearance plan is not considered a failed Trial Period Plan.

  The mortgage loan must not have been modified with a non-disaster related mortgage loan modification within the previous 12 months of being evaluated for eligibility for a payment deferral.


Determining Eligibility for a Payment Deferral for a Texas Section 50(a)(6) Loan

A Texas Section 50(a)(6) loan is eligible for a payment deferral if

  • the requirements described in Determining Eligibility for a Payment Deferral are satisfied, and

  • the application of a payment deferral to the mortgage loan complies with applicable law.

If the servicer receives notice from the borrower that a payment deferral fails to comply with Texas Section 50(a)(6) requirements, the servicer must immediately, but no later than seven business days after receipt, take the actions listed in the following table.

The servicer must
  Inform Fannie Mae's Legal department by submitting a Non-Routine Litigation Form (Form 20) and include the borrower notice in its submission.
  Collaborate with Fannie Mae on the appropriate response, including any cure that may be necessary, within the 60-day time frame provided by the requirements of Texas Section 50(a)(6).


Performing an Escrow Analysis

The servicer must perform an escrow analysis prior to offering a payment deferral. See Administrating an Escrow Account in Connection With a Payment Deferral in B-1-01, Administering an Escrow Account and Paying Expenses for additional information.

Any escrow account shortage that is identified at the time of the payment deferral must not be included in the non-interest-bearing balance and the servicer is not required to fund any existing escrow account shortage.

If applicable law prohibits the establishment of the escrow account, the servicer must ensure that the T&I payments are paid to date.


Determining the Payment Deferral Terms

The servicer must defer the following amounts as a non-interest-bearing balance, due and payable at maturity of the mortgage loan, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing UPB:

  • at least 2 months and up to 6 months of past-due P&I payments, provided that it does not result in more than 12 months of past-due P&I payments cumulatively deferred over the life of the mortgage loan as a result of the payment deferral;
  • out-of-pocket escrow advances resulting from a delinquency and paid to third parties, provided they are paid prior to the effective date of the payment deferral; and
  • servicing advances resulting from a delinquency, paid to third parties in the ordinary course of business, and not retained by the servicer, provided they are paid prior to the effective date of the payment deferral, if allowed by state law.

All other terms of the mortgage loan must remain unchanged.

Any existing non-interest-bearing balance on the mortgage loan remains due and payable at maturity of the mortgage loan, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing UPB.

Also see A4-2.1-07, Servicer's Duties and Responsibilities Related to Mortgage Loans with an Outstanding Non-Interest-Bearing Balance for additional information.


Completing a Payment Deferral

Fannie Mae considers a payment deferral to be completed when the case is submitted into Fannie Mae's servicing solutions system, including entry of loan-level information such as the applicable campaign ID to identify a payment deferral. The case must be entered by the last day of the month in which the evaluation took place.

If the servicer is unable to complete the payment deferral prior to the 15th day of the evaluation month, then the servicer is authorized to allow for sufficient processing time (via a "processing month") to complete a payment deferral. The servicer must treat all borrowers equally in applying the processing month, as evidenced by a written policy.

The servicer must send the payment deferral agreement, or equivalent, to the borrower no later than five days after the completion of the payment deferral.

While use of the payment deferral agreement is optional, it reflects the minimum level of information that the servicer must communicate and illustrates a level of specificity that complies with the requirements of the Servicing Guide. Also, the servicer must ensure the payment deferral agreement complies with applicable law.

Note If the servicer determines the borrower’s signature is required on the payment deferral agreement, it must receive the executed agreement prior to completing the payment deferral.

The servicer represents and warrants that application of the payment deferral to the mortgage loan must not impair Fannie Mae's first lien position or enforceability against the borrower(s) in accordance with its terms.

The servicer must also provide documents to the document custodian in accordance with the following table.

If the payment deferral agreement is... Then the servicer must send...
not required to be signed by the borrower a copy of the payment deferral agreement signed by the servicer to the document custodian within 25 days of the effective date of the payment deferral.
required to be signed by the borrower but not recorded the fully executed original payment deferral agreement to the document custodian within 25 days of the effective date of the payment deferral.
required to be recorded
  • a certified copy of the fully executed payment deferral agreement to the document custodian within 25 days of the effective date of the payment deferral, and

  • the original payment deferral agreement that is returned from the recorder’s office to the document custodian within 5 business days of receipt.


Soliciting the Borrower for a Payment Deferral

If the servicer is unable to achieve QRPC as described in Contacting a Borrower During a Forbearance Plan Term in D2-3.2-01, Forbearance Plan with a borrower on a forbearance plan and the borrower is otherwise eligible for a payment deferral, the servicer must solicit the borrower for a payment deferral within 15 days after expiration of the forbearance plan.

If the borrower does not make their total monthly repayment plan payment by the end of the month in which it is due, then the servicer must solicit the borrower for a payment deferral by the 15th day of the following month provided that QRPC has not been achieved and the borrower is otherwise eligible for a payment deferral.

See Using Solicitation Letters later in this topic for additional information.

The servicer must also refer to Solicitating the Borrower for a Fannie Mae Flex Modification in D2-3.2-06, Fannie Mae Flex Modification  for when to solicit the borrower for a Fannie Mae Flex Modification.


Requirement to Make a Payment During the Month of Solicitation and/or a Processing Month for a Payment Deferral

The borrower must make their full monthly contractual payment during the month of solicitation and/or during the processing month if, as of the date of evaluation, 

  • the mortgage loan is 6 months delinquent, or
  • the payment deferral would cause the mortgage loan to exceed 12 months of cumulative deferred past-due P&I payments over the life of the mortgage loan.

In this circumstance, the servicer must complete the payment deferral within the solicitation month and/or the processing month as applicable after receipt of the borrower's full monthly contractual payment due during that month.


Using the Solicitation Letters

When soliciting the borrower for a payment deferral, the servicer must use the Payment Deferral Post-Forbearance Plan Solicitation Cover Letter or the Payment Deferral Post-Repayment Solicitation Cover Letter, as applicable, with the payment deferral agreement or the equivalent, making any appropriate changes to comply with applicable law.

While use of these documents is optional, they reflect the minimum level of information that the servicer must communicate and illustrate a level of specificity that complies with the requirements of the Servicing Guide. The servicer must ensure that all documents comply with applicable law.

The servicer must include instruction on how to accept the solicitation in the payment deferral agreement. The servicer is authorized to consider the following as acceptance by the borrower, subject to applicable law:

  • the borrower contacting the servicer directly in accordance with any acceptable outreach and communication method,
  • the borrower returning an executed payment deferral agreement, or 
  • any other method evidencing the borrowers acceptance as determined by the servicer.


Processing a Payment Deferral for an MBS Mortgage Loan

MBS mortgage loans subject to a payment deferral will not be subject to automatic reclassification as described in A1-3-06, Automatic Reclassification of MBS Mortgage Loans. In addition, the servicer must not make a manual reclassification request for mortgage loans subject to a payment deferral.


Processing a Payment Deferral for a Mortgage Loan with Mortgage Insurance

The servicer must see F-2-06, Mortgage Insurer Delegations for Workout Options for the list of conventional mortgage insurers from which Fannie Mae has obtained delegation of authority on behalf of all servicers, which allows the servicer to process a payment deferral without obtaining separate mortgage insurer approval at the company or loan level.


Handling Fees and Late Charges in Connection with a Payment Deferral

The servicer must not charge the borrower administrative fees.

The servicer must waive all late charges, penalties, stop payment fees, or similar charges upon completing a payment deferral.

The servicer must follow the procedures in Reimbursement for Expenses Associated with Workout Options in F-1-05, Expense Reimbursement for advancing funds and requesting reimbursement.

 

 


Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SVC-2023-05 October 11, 2023
Announcement SVC-2023-03 May 10, 2023
Announcement SVC-2020-07 December 9, 2020

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