Servicing Guide

Published September 9, 2020

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D2-3.4-04: Qualifying Mortgage Assumption Workout Option (11/08/2017)

This topic contains information on qualifying a delinquent mortgage loan for a mortgage assistance workout option.

If someone is interested in purchasing a property that secures a delinquent mortgage loan with an enforceable due-on-sale (or due-on-transfer) provision and assuming the mortgage loan, the servicer must take the actions listed in the following table.

The servicer must...
  Obtain a complete BRP from the existing borrower to determine his or her inability to continue making payments on the mortgage loan (see D2-2-05, Receiving a Borrower Response Package for information on obtaining a complete BRP).
  Ensure that the property purchaser qualifies for the mortgage loan in accordance with Fannie Mae's underwriting guidelines in place at the time of qualification (see F-1-29, Reviewing a Transfer of Ownership for Credit and Financial Capacity.
  Order an appraisal or an interior BPO for the subject property. Also see D1-4.1-05, Enforcing the Due-on-Sale (or Due-on-Transfer) Provision for additional information.
  Obtain the mortgage insurer's written approval, if applicable. The servicer must follow the procedures in Obtaining MI Approval for a Conventional Mortgage Loan in F-1-18, Processing a Transfer of Ownership for information on obtaining mortgage insurer approval.
  Follow the procedures in Requesting Approval for the Assumption of a Delinquent Conventional Mortgage Loan in F-1-25, Requesting Fannie Mae’s Approval via Fannie Mae’s Servicing Solutions System to determine whether Fannie Mae is willing to forego enforcement of the due-on-sale (due-on-transfer) provision.
  Repurchase an MBS mortgage loan from the MBS pool before the assumption is finalized, if applicable.

If approved by Fannie Mae, the servicer must document each approved assumption with an assumption agreement, or by an assumption and release agreement if a release of liability was agreed to, and record the agreement if required by state law. The servicer must follow the procedures in Completing a Transfer of Ownership in F-1-18, Processing a Transfer of Ownership for detailed requirements related to executing the assumption (or assumption and release) agreement.

As a condition of approving the assumption, the servicer may charge the property purchaser an assumption fee (see Allowable Fees for Special Services in A2-3-05, Fees for Special Services ). The servicer is authorized to pass any out-of-pocket expenses related to the assumption on to the purchaser.

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