Servicing Guide

Published September 9, 2020

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What procedures should be followed when determining the borrower's new modified mortgage loan terms for a Fannie Mae Flex Modification?

The servicer must follow the procedures in Obtaining a Property Valuation in F-1-28, Processing a Fannie Mae Flex Modification for determining the property value. The servicer must determine the post-modification MTMLTV ratio, which must include capitalized arrearages. The following table describes the servicer's action depending on the post-modification MTMLTV ratio and the delinquency of the mortgage loan.

Step Action
1 Capitalize arrearages.
2 Set the interest rate to a fixed interest rate that is based on the existing mortgage loan amortization type and interest rate.
3 Extend the term to 480 months from the mortgage loan modification effective date.
4 through 6 Provide or increase principal forbearance, if applicable as indicated in F-1-28, Processing a Fannie Mae Flex Modification.

The servicer must follow the procedures in Determining the New Modified Mortgage Loan Terms in F-1-28, Processing a Fannie Mae Flex Modification for determining the borrower's new modified mortgage loan terms. The servicer must request Fannie Mae's prior written approval through Fannie Mae's servicing solutions system to deviate from the prescribed steps for determining the new modified mortgage payment terms, unless a certain step is prohibited by applicable state law.

The following table lists additional Fannie Mae Flex Modification requirements.

The Fannie Mae Flex Modification must result in...
  A fixed rate mortgage loan.

Note: An ARM or interest-only mortgage loan must be converted to a fully amortizing mortgage loan and may not be a bi-weekly or daily simple interest mortgage loan.

  A monthly P&I payment as described in the following table.
If, at the time of evaluation, the mortgage loan is... Then the monthly P&I payment must be...
current or less than 31 days delinquent less than the borrower's pre-modification P&I payment.
31 or more days delinquent less than or equal to the pre-modification P&I payment.

When the servicer submits a request through Fannie Mae's servicing solutions system for Fannie Mae's approval of a Fannie Mae Flex Modification based on the borrower's submission of a BRP, in accordance with applicable law it must:

  • immediately provide the borrower with notice of the right to receive a copy of all appraisals and other valuations developed in connection with the mortgage loan modification, and

  • provide the borrower a copy of all appraisals and other valuations developed in connection with the mortgage loan modification.

Prior to granting a permanent mortgage loan modification, the servicer must place the borrower in a Trial Period Plan using the new modified mortgage loan terms.

For more information please see: D2-3.2-07: Fannie Mae Flex Modification

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