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D2-3.2-05: Disaster Payment Deferral (10/11/2023)

Introduction

This topic contains the following:See also Chapter D1-3, Providing Assistance to a Borrower Impacted by a Disaster Event for the requirements for assisting a borrower impacted by a disaster.


Determining Eligibility for a Disaster Payment Deferral

The servicer must not require a complete BRP to evaluate the borrower for a disaster payment deferral if the eligibility criteria are satisfied.

Note: A disaster-related forbearance plan is not required for purposes of determining borrower eligibility for a disaster payment deferral.

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

Eligibility Criteria for a Disaster Payment Deferral
  The disaster event must result in
  • a financial hardship (e.g., a loss/reduction of income or increase in expenses) that impacts the borrower’s ability to pay their current contractual monthly payment, and

  • either

    • the property securing the mortgage loan experienced an insured loss,
    • the property securing the mortgage loan is located in a FEMA-Declared Disaster Area eligible for Individual Assistance, or
    • the borrower’s place of employment is located in a FEMA-Declared Disaster Area eligible for Individual Assistance.

    Note: See Evaluating the Extent and Nature of the Property Damage in D1-3-01, Evaluating the Impact of a Disaster Event and Assisting a Borrower for additional information on what constitutes a disaster.

  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 current or less than two months delinquent at the time the disaster occurred (e.g., disaster occurs on Mar. 20, the borrower has an LPI of Jan. 1 when the disaster occurred), and

  • be equal to or greater than one month delinquent but less than or equal to 12 months delinquent as of the date of evaluation.

    Note: If a borrower’s hardship is related to disaster but they were two or more months delinquent as of the date the disaster occurred, and the servicer determines the borrower can maintain their full monthly contractual payment, then the servicer must submit a request for a disaster payment deferral through Fannie Mae’s servicing solutions system for review and obtain prior approval from Fannie Mae.

  The mortgage loan must not have previously received a disaster payment deferral as a result of the same disaster event.

Note: The mortgage loan may have previously received a non-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 disaster payment deferral and the servicer determines that a disaster payment deferral is the appropriate solution based on the borrower's circumstances, then the servicer is authorized to submit a request for a disaster 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.


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

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

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

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

If the servicer receives a notice from the borrower that a disaster 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 requirements of Texas Section 50(a)(6).


Performing an Escrow Analysis

The servicer must perform an escrow analysis prior to offering a disaster payment deferral. See Administering 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 disaster 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 Disaster 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:

  • up to 12 months of past-due P&I payments;

  • out-of-pocket escrow advances paid to third parties, provided they are paid prior to the effective date of the disaster payment deferral; and

  • servicing advances 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 disaster payment deferral, if allowed by state law.

All other terms of the mortgage loan must remain unchanged.

Any existing non-interest bearing balance amount 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 Disaster Payment Deferral

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

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

While use of the disaster 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 this Guide. Also, the servicer must ensure the disaster payment deferral agreement complies with applicable law.

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

The servicer represents and warrants that application of the disaster payment deferral to the mortgage loan does 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 disaster payment deferral agreement is... Then the servicer must send...
not required to be signed by the borrower a copy of the disaster payment deferral agreement signed by the servicer to the document custodian within 25 days of the effective date of the disaster payment deferral.
required to be signed by the borrower but not recorded the fully executed original disaster payment deferral agreement to the document custodian within 25 days of the effective date of the disaster payment deferral.
required to be recorded
  • a certified copy of the fully executed disaster payment deferral agreement to the document custodian within 25 days of the effective date of the disaster payment deferral, and

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


Soliciting a Borrower for a Disaster 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 disaster-related forbearance plan and the borrower is otherwise eligible for a disaster payment deferral, the servicer must solicit the borrower for a disaster payment deferral within 15 days after expiration of the forbearance plan.

If a borrower with a disaster-related hardship 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 disaster 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 disaster payment deferral.

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

The servicer must refer to Evaluating or Soliciting a Borrower with a Disaster-Related Hardship 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 Disaster Payment Deferral

The borrower must make their full monthly contractual payment during the month of the solicitation and/or a processing month if, as of the date of evaluation, the mortgage loan is 12 months delinquent.

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


Using the Solicitation Letters

When soliciting the borrower for a disaster payment deferral, the servicer must use the Payment Deferral Post-Disaster Forbearance Plan Solicitation Cover Letter or the Disaster Payment Deferral Post-Repayment Plan 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 included 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 borrower's acceptance as determined by the servicer.


Processing a Disaster Payment Deferral for an MBS Mortgage Loan

MBS mortgage loans subject to a disaster 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 disaster payment deferral. 


Processing a Disaster 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 disaster payment deferral without obtaining separate mortgage insurer approval at the company or loan level.


Handling Fees and Late Charges in Connection with a Disaster 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 disaster 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-2022-04 June 8, 2022
Announcement SVC-2022-01 February 9, 2022
Announcement SVC-2020-06 November 10, 2020
Announcement SVC-2020-04 September 9, 2020
Announcement SVC-2021-03 June 9, 2021

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