Servicing Guide

Published November 10, 2020

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What are some of the servicer responsibilities in connection with processing a Fannie Mae Mortgage Release for a first lien mortgage loan?

The following table provides some of the servicer’s responsibilities in connection with processing a Fannie Mae Mortgage Release for a first lien mortgage loan.

The servicer must...
 

Ensure that the borrower is not involved in or party to litigation other than foreclosure or bankruptcy involving the subject property or mortgage loan.

 

Evaluate the borrower’s eligibility and cash contribution requirements, if any, based on the status of the mortgage loan at the time of the respective evaluation.

 

Inform the borrower of the three exit options:

1. Immediate move.

2. A three-month transition lease with no rent payment required.

3. A twelve-month lease at market rent payment.

See Evaluating a Borrower for Fannie Mae Mortgage Release Transition Options for information on options #2 and #3.

 

Advise the borrower that there may be possible tax consequences if any portion of the outstanding debt is forgiven, and refer the borrower to IRS Publication 544, Sales and Other Dispositions of Assets, particularly the section captioned “Foreclosure, Repossession, or Abandonment.”

 

Work with the borrower to complete all requirements associated with completing and executing the Mortgage Release and ensure that there is sufficient time to complete the processing of the Mortgage Release, including sending the Mortgage Release offer to the borrower, so that an executed deed can be received no later than 30 days prior to the foreclosure sale date, or in applicable foreclosure actions where there is no foreclosure sale and title is transferred by court order, the estimated court order docket date (if known).

 

Work with the title company to resolve any issues that may delay the closing, including assisting the borrower in subordinate lien releases, and ensure that the borrower can convey clear and marketable title. The servicer must follow the procedures in Verifying Clear and Marketable Title in F-1-14, Processing a Fannie Mae Mortgage Release (Deed-In-Lieu of Foreclosure) for ensuring that clear and marketable title can be conveyed.

Note: While the servicer is not required to order a title insurance policy, the servicer is authorized to do so if it deems it necessary to complete the Mortgage Release. Fannie Mae will reimburse the servicer for title insurance costs in accordance with E-5-07, Other Reimbursable Default-Related Legal Expenses.

 

Submit the deed for recordation within five business days of the servicer’s acceptance of the executed deed from the borrower.

 

Ensure the property is vacant and broom swept, unless the borrower is eligible in accordance with Evaluating a Borrower for Fannie Mae Mortgage Release Transition Options.

 

Release the first lien mortgage loan within the time required by applicable state or local law or, if state or local law does not require release of the first lien mortgage loan within a specific time frame, within 30 business days after the occurrence of the following:

  • the acceptance of the Mortgage Release by the servicer, and

  • confirmation by the interior property inspection that the subject property is vacant and secured (unless the borrower is eligible in accordance with Evaluating a Borrower for Fannie Mae Mortgage Release Transition Options).

 

Appropriately manage liquidation workout options that involve the borrower’s relinquishing ownership of the property to ensure that the borrower’s rights are appropriately protected.

 

Provide evidence of the borrower’s indication of intent to pursue a Mortgage Release to Fannie Mae upon request.

The servicer must refer to the Property Preservation Matrix and Reference Guide for further clarification on handling delinquent and vacant or abandoned properties during the Mortgage Release process.

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

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Visit Selling and Servicing Guide Communications and Forms

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