Servicing Guide

Published September 9, 2020

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D2-3.2-06: Disaster Payment Deferral (09/09/2020)

This topic contains the following:

See Chapter D1-3, Providing Assistance to a Borrower Impacted by a Disaster Event for the requirements for assisting a borrower 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 his or her 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, and

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

Note: If the mortgage loan was previously modified pursuant to a Fannie Mae HAMP modification under which the borrower remains in “good standing,” then the mortgage loan will not lose good standing and the borrower will not lose any “pay for performance” incentives under the following circumstances:

  • The borrower was on a disaster-related forbearance plan immediately preceding the disaster payment deferral, or

  • The borrower has a disaster-related hardship and the mortgage loan is less than three months delinquent.

  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 he or she was two or more months delinquent as of the date the disaster occurred, and the servicer determines the borrower can maintain his or her 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

  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,

  • a current offer for another retention workout option,

  • an approved liquidation workout option,

  • an active and performing repayment plan or other non-disaster-related forbearance plan, or

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

 

Note: The servicer must refer to Evaluating or Soliciting a Borrower with a Disaster-Related Hardship for a Fannie Mae Flex Modification in D2-3.2-07, Fannie Mae Flex Modification, if

  • the servicer is unable to establish QRPC with a borrower on a disaster-related forbearance plan and the borrower is ineligible for a disaster payment deferral, or

  • the borrower is eligible for a disaster payment deferral but does not respond to the disaster payment deferral offer as described in Soliciting a Borrower for a Post-Forbearance Disaster Payment Deferral.

 

 

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

If the servicer chooses to perform an escrow analysis, 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. In addition, the servicer is not required to revoke any escrow deposit account waiver.

In the event the servicer identifies an escrow shortage as the result of an escrow analysis in connection with a disaster payment deferral or as part of the next annual analysis, then the servicer must spread repayment of the escrow shortage amount in equal monthly payments over a term of up to 60 months, unless the borrower decides to pay the shortage upfront.

 

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 advantages 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.

 

Completing a Disaster Payment Deferral

The servicer must complete (i.e., submit the case via Fannie Mae’s servicing solutions system) a disaster payment deferral in the same month in which it determines the borrower is eligible.

The servicer is authorized to use an additional month to allow for sufficient processing time (a “processing month”) to complete a disaster payment deferral. The servicer must treat all borrowers equally in applying the processing month, as evidenced by a written policy.

Note: If the mortgage loan is 12 months delinquent as of the date of evaluation, the borrower must make his or her full monthly contractual payment during the processing month. In this circumstance, the servicer must complete the disaster payment deferral within the processing month after receipt of the borrower’s full monthly contractual payment due during that month.

 

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 agree 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’s application of a disaster 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 record the disaster payment deferral agreement if the servicer determines that recordation is required to comply with law and ensure that the mortgage loan retains its first lien position. The servicer must obtain a title endorsement or similar title insurance product issued by a title insurance company if the disaster payment deferral agreement will be recorded.

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 Post-Forbearance Disaster Payment Deferral

If the servicer is unable to establish QRPC as described in Determining Eligibility for a Disaster Payment Deferral with a borrower on a disaster-related forbearance plan and the borrower is otherwise eligible for a disaster payment deferral, the servicer must send an offer for a disaster payment deferral within 15 days after expiration of the forbearance plan.

The servicer must solicit the borrower using the Payment Deferral Post-Disaster Forbearance Solicitation Cover Letter with the disaster payment deferral agreement or the equivalent, making any appropriate changes to comply with applicable law.

While use of the Payment Deferral Post-Disaster Forbearance Solicitation Cover Letter and disaster payment deferral agreement 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 this Guide.

The Payment Deferral Post-Disaster Forbearance Solicitation Cover Letter must include language that additional forbearance may be available if the borrower’s hardship is not resolved, and that a mortgage loan modification may be available if the borrower needs payment relief.

The servicer must include instruction on how to accept the offer in the disaster 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 disaster 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

The servicer must not make a manual reclassification request for mortgage loans subject to a disaster payment deferral. Also, see A1-3-06, Automatic Reclassification of MBS Mortgage Loans for additional information on automatic reclassification.

 

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.

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