Servicing Guide

Published September 9, 2020

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Is any type of commitment required from a subordinate lien holder prior to releasing funds to facilitate a lien release for mortgage release?

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 a subordinate a lienholder chooses to release its lien to allow the Mortgage Release 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).

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

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