Servicing Guide

Published September 9, 2020

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What happens if a borrower who is eligible for a Mortgage Release expresses interest in a Mortgage Release transition option?

Evaluating a Borrower for Fannie Mae Mortgage Release Transition Options

Once the servicer determines that the borrower is eligible for a Mortgage Release and the borrower expresses interest in a Mortgage Release transition option, the servicer must screen the borrower for eligibility for a Mortgage Release transition option (exit options #2 and #3 as described in General Requirements When Processing a Fannie Mae Mortgage Release). The servicer must refer the Mortgage Release to Fannie Mae when both the mortgage loan and borrower meet the eligibility criteria described in the following table.

Mortgage loan and borrower eligibility criteria for Mortgage Release transition options
 

The mortgage loan must be a first lien mortgage loan secured by a single-family property.

 

The mortgage loan must not be guaranteed, insured, or held by FHA, HUD, VA, or the RD.

 

The subject property must be

  • the borrower’s principal residence, or

  • an investment property which has been leased to a tenant(s) who uses the property as a principal residence.

Note: For the Mortgage Release transition option that allows the borrower to execute a three-month use and occupancy agreement with no rent payment required, the subject property must be the borrower’s principal residence.

 

At least three monthly payments must have been made since origination or since the last mortgage loan modification, if applicable.

Note: This is only applicable for the Mortgage Release transition option that allows the borrower to execute a twelve-month lease agreement with a market rent payment.

 

The mortgage loan must not have 12 or more payments past due when referred to Fannie Mae for consideration for a Mortgage Release transition option.

Note: This is only applicable for the Mortgage Release transition option that allows the borrower to execute a twelve-month lease agreement with a market rent payment.

 

The borrower must not be involved in an active bankruptcy proceeding or party to litigation involving the subject property or mortgage loan.

Note: For the Mortgage Release transition option that allows the borrower to execute a three-month use and occupancy agreement with no rent payment required, the borrower may be involved in an active bankruptcy proceeding.

 

Clear and marketable title must be able to be conveyed.

 

Subordinate lien releases must be able to be obtained, if applicable.

 

The occupant must have verifiable income.

Note: Unemployed occupants with no source of income are not eligible. For the Mortgage Release transition option that allows the borrower to execute a three-month use and occupancy agreement with no rent payment required, the occupant is not required to have verifiable income.

The servicer must follow the procedures in Processing a Mortgage Release Transition Option in F-1-14, Processing a Fannie Mae Mortgage Release (Deed-In-Lieu of Foreclosure) for processing a Mortgage Release transition option.

For more information please see: D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure)

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