Servicing Guide

Published September 9, 2020

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Once a Chapter 13 bankruptcy plan has been confirmed, what are the requirements for servicing the mortgage loan?

Once a Chapter 13 bankruptcy plan has been confirmed, the servicer must service the mortgage loan in accordance with the requirements listed in the following table.

The servicer must…
 

Continue to monitor the timely receipt of all payments for the pre-petition arrearages and any post-petition payments that come due.

 

Satisfy Fannie Mae’s standard remittance requirements based on the applicable remittance type for the mortgage loan throughout the term of the reorganization plan.

See E-2.1-11, Remitting P&I for MBS Mortgage Loans That Are Part of a Bankruptcy for requirements related to reclassification or removal of MBS mortgage loans. See also C-3-01, Responsibilities Related to Remitting P&I Funds to Fannie Mae for additional information.

 

Maintain several sets of records during the term of the reorganization plan:

  • one that reflects application of the payments under the terms of the reorganization plan,

  • one that reflects application of the payments under the original terms of the mortgage loan, and

  • one that reflects application of any scheduled interest that must be remitted to Fannie Mae if the mortgage loan has a scheduled/actual remittance type.

 

Confirm the plan payment status with the trustee in jurisdictions in which the post-petition monthly payments are made through the Chapter 13 trustee when the servicer believes that the borrower is 60 days delinquent in his or her payments.

 

Refer the case to a law firm to seek relief from the automatic stay or a dismissal of the case in accordance with local bankruptcy rules and practices within two weeks of the borrower becoming 60 days delinquent on either contractual post-petition payments or pre-petition payments pursuant to the plan.

 

Send any required breach letter immediately to the borrower and refer the mortgage loan to a law firm to initiate or resume foreclosure proceedings (as applicable) when the automatic stay is lifted or the case is dismissed. Additionally, the servicer must always consider the possibility of arranging a workout option.

For more information please see: E-2.2-04: Managing Chapter 13 Bankruptcies

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