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E-3.2-08, Processing Reinstatements During Foreclosure (07/14/2021)

Introduction
This topic contains the following:

Accepting a Full Reinstatement During Foreclosure

The servicer must accept a full reinstatement of a first lien mortgage loan even if foreclosure proceedings have already begun. This is also true for a second lien mortgage loan as long as the first lien mortgage loan is not delinquent or provided the first lien mortgage loan servicer has agreed to arrangements for curing the delinquency.

The following table provides the definition of a full reinstatement.

✓ A full reinstatement must include payment of…
 

All delinquent mortgage loan payments, bearing interest at the rate applicable on the date they became due.
 

Late charges on the delinquent payments.
 

Any funds the servicer advanced for protection of the security or to pay taxes, insurance premiums, etc.
 

The costs of performing the preforeclosure property inspection required by Fannie Mae, FHA, or the VA (as applicable), and if permitted under the terms of the security instrument.
 

All expenses, including attorney fees; that were actually incurred in connection with the foreclosure proceedings that are permitted under the terms of the note, security instrument, and applicable law.

See also E-5-05, Reimbursing Law Firms/Reimbursement of Uncollected Fees, Costs or AdvancesE-5-05, Reimbursing Law Firms/Reimbursement of Uncollected Fees, Costs or Advances for additional information.

For application of funds from a mortgage assistance fund program, see D2-3.1-05, Interacting with Mortgage Assistance Fund Program ProvidersD2-3.1-05, Interacting with Mortgage Assistance Fund Program Providers.

Accepting a Partial Reinstatement During Foreclosure

The servicer is authorized to accept a borrower’s request for a partial reinstatement if the borrower would qualify for a workout option after application of the partial reinstatement funds. See D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options for additional information on available workout options.

See also  C-3-01, Responsibilities Related to Remitting P&I Funds to Fannie MaeC-3-01, Responsibilities Related to Remitting P&I Funds to Fannie Mae for additional information. The servicer must follow the procedures in  F-1-20, Remitting and Accounting to Fannie MaeF-1-20, Remitting and Accounting to Fannie Mae.

If the application of partial reinstatement funds from a mortgage assistance fund program provider would result in a restart or delay of the foreclosure proceeding, the servicer is authorized to decline acceptance of the funds, (see  D2-3.1-05, Interacting with Mortgage Assistance Fund Program ProvidersD2-3.1-05, Interacting with Mortgage Assistance Fund Program Providers  for additional information).

Servicer Requirements After the Mortgage Loan is Partially or Fully Reinstated During Foreclosure

After a mortgage loan is either partially or fully reinstated, the servicer must return the original mortgage note to the document custodian if the servicer took physical possession of the original note for the foreclosure action. The servicer must return the note to the document custodian by submitting a Request for Release/Return of Documents (Form 2009). The servicer also must follow the procedures in F-1-21, Reporting a Delinquent Mortgage Loan via Fannie Mae’s Servicing Solutions SystemF-1-21, Reporting a Delinquent Mortgage Loan via Fannie Mae’s Servicing Solutions System, to report the reinstatement to Fannie Mae.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic. 

Announcements Issue Date
Announcement SVC-2021-04 July 14, 2021
Announcement SVC-2020-01 February 12, 2020
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