Servicing Guide

Published September 9, 2020

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What requirements apply as it relates to allowable payments to subordinate lienholders for a Mortgage Release?

The following table provides the requirements that apply to allowable payments to subordinate lienholders for a Mortgage Release.

Requirements for payment 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 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.

 

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.

Examples of other types of liens which funds must not be used for include, but are not limited to, the following:

  • HOA liens,

  • judgments,

  • mechanic’s liens, and

  • materialmen’s liens.

Note: If other liens impede the closing of a Mortgage Release, the servicer must submit the case to Fannie Mae for prior written approval.

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

 

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