Servicing Guide

Published November 10, 2020

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How should the servicer evaluate the borrower’s ability to make a cash contribution when being considered for a Fannie Mae Short Sale?

The servicer must not evaluate the borrower for a cash contribution if

  • prohibited by applicable law;

  • the servicer evaluated the borrower for a short sale without receiving a complete BRP in accordance with Evaluating a Borrower to Determine Eligibility for a Fannie Mae Short Sale; or

  • he or she is a servicemember with PCS orders relocating him or her greater than 50 miles one way from the property securing the mortgage loan and the property securing the mortgage loan was or currently is the servicemember’s principal residence.

In all other instances, the servicer must evaluate the borrower for a cash contribution and request a cash contribution, if

  • the borrower’s non-retirement cash reserves, as stated on the Mortgage Assistance Application (Form 710), are in excess of $10,000; or

    Note: The servicer must verbally verify the assets stated on Form 710 and obtain documentation to reconcile any inconsistencies.

  • the borrower’s housing expense-to-income ratio is less than or equal to 40% as calculated in accordance with Calculating the Borrower’s Housing Expense-to-Income Ratio in F-1-15, Processing a Fannie Mae Short Sale .

The servicer must initially request a cash contribution of the greater of the following, rounded to the nearest $100 and not to exceed the amount of the deficiency:

  • 20% of the borrower’s non-retirement cash reserves, or

  • four times the contractual monthly mortgage loan payment including PITI. If the servicer does not escrow for T&I, it must estimate the borrower’s monthly tax and insurance premium amounts.

If the servicer determines it is warranted based on its assessment of the borrower’s individual situation and circumstances and ability to contribute, it is authorized to

  • request a lower initial cash contribution amount,

  • negotiate a lower cash contribution amount, or

  • agree to no cash contribution amount.

Note: If the mortgage loan is current or less than 60 days delinquent, the borrower must contribute a minimum of 20% of his or her non-retirement cash reserves.

The servicer must follow the procedures in Requesting Approval for a Non-Delegated Short Sale Case in F-1-25, Requesting Fannie Mae’s Approval via Fannie Mae’s Servicing Solutions System for requesting Fannie Mae’s approval if

  • the borrower refuses to make a cash contribution in an amount the servicer determines is reasonable, or

  • the mortgage loan is current or less than 60 days delinquent and the borrower refuses to contribute a minimum of 20% of his or her non-retirement cash reserves.

The requirement for a cash contribution is waived if the contribution amount is less than $500.

Note: The servicer must not request updated documentation from the borrower when evaluating the borrower’s ability to make a cash contribution and the complete BRP is greater than 90 days old. However, if the borrower’s credit report is greater than 90 days old when the servicer evaluates the borrower’s ability to make a cash contribution, the servicer must obtain a new credit report.

For more information please see: D2-3.3-01, Fannie Mae Short Sale.

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