Servicing Guide

Published September 9, 2020

For best results, pose your search like a question.

Guide Resources

For a comprehensive list of resources such as forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

Customers Recommend Ask Poli

AskPoli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Launch Ask Poli  

Download PDF Guide

You can also download the printable ~800 page PDF, which include links.

Download Now

What requirements apply as it relates to allowable payments to subordinate lienholders for a Fannie Mae short sale?

Requirements for payments to subordinate lienholders
 

Payments to subordinate lienholders must be in exchange for

  • a lien release,

  • a full release of liability for the borrower, and

  • extinguishment of the indebtedness secured by the subject property.

 

Payments from the sales proceeds to all subordinate lienholders to facilitate lien releases must not exceed $6,000 in aggregate. If an individual subordinate lien or total subordinate liens are less than $6,000, the payoff must not exceed the subordinate lien amount owed. If there are multiple subordinate lienholders, the servicer has discretion to divide the subordinate lien payments among the subordinate lienholders.

 

Payments to subordinate lienholders must be paid from the sales proceeds at the closing of the short sale transaction.

 

Funds must only be used for subordinate mortgage liens or deeds of trust recorded in the land records that constitute a valid lien against the subject property.

Funds must not be used for payment of other types of liens which may include, but are not limited to, the following:

  • HOA liens,

  • judgments,

  • mechanic’s liens, and

  • materialmen’s liens.

Note: If these or similar types of other liens impede the closing of a short sale, the servicer must include a written explanation in its case submission to Fannie Mae for prior written approval

 

Prior to releasing any funds to a subordinate lienholder, the servicer must obtain written commitment from the subordinate lienholder that it will

  • release the borrower from all claims and liability relating to the subordinate lien in exchange for receiving the agreed-upon payoff amount,

  • waive all rights to seek a deficiency judgment against the borrower, and

  • not require a cash contribution in addition to any funds provided by Fannie Mae as a condition for releasing its lien and releasing the borrower from personal liability.

If the subordinate lienholder chooses to release its lien to allow the short sale to close, but does not agree to release the borrower from liability on the note, it cannot receive a payment from Fannie Mae. Regardless of whether payment is made to a subordinate lienholder, the servicer must obtain written commitment from the subordinate lienholder(s) to release the lien(s).

The servicer must require the closing law firm or settlement agent to either

  • confirm that they are in receipt of the written commitment from subordinate lienholder(s) to release the lien(s), or

  • request that a copy of the written commitment provided by the subordinate lienholder be sent to the servicer with the settlement statement which is provided in advance of the closing.

For more information see Servicing Guide D2-3.3-01, Fannie Mae Short Sale.

Have You Tried Ask Poli?

Poli knows. Just ask.

Ask Poli features exclusive Q&As and
more—plus official Selling & Servicing
Guide
content.

Try Ask Poli

Related Articles


AskPoli

Customers Recommend Ask Poli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Guide Resources

For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

X
Having Issues with Seeing this Page Correctly?

Use Firefox or Chrome   How to do a hard refresh in Internet Explorer
We recommend that you use the latest version of FireFox or Chrome.

Download Firefox
Download Chrome
  A hard refresh will clear the browsers cache for a specific page and force the most recent version of a page.
    Hold the Ctrl key and press the F5 key.
     

Email Us
If you still have Technical Support questions, feel free to emailAsk_Poli@fanniemae.com.