Servicing Guide

Published November 10, 2020

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Are there different requirements for issuing bidding instructions on conventional mortgage loans depending on whether or not the mortgage loan is insured?

Yes, the following tables provide Fannie Mae's requirements for the preparation of bidding instructions for a first lien mortgage loan, depending on whether or not the mortgage loan is insured.

For an Uninsured Conventional First Lien Mortgage Loan:

If the security property is in a state or jurisdiction… Then the servicer must…

that has a redemption period

instruct the law firm to bid

  • an amount equal to the lesser of

    • 100% of the reserve price obtained from Fannie Mae, or

    • 100% of the total mortgage indebtedness minus any outstanding property or flood insurance claims, or

  • such other amount as may be required by applicable law (e.g., judgment amount).

that does not have a redemption period and does not levy transfer taxes or other related fees and costs on the winning foreclosure bid, or does levy transfer taxes to which Fannie Mae's real estate transfer tax exemption applies

that does not have a redemption period, but which levies transfer taxes or other related fees and costs on the winning foreclosure bid and does not recognize Fannie Mae's exemption from paying real estate transfer taxes

instruct the law firm to enter an initial bid of $100 (or any other minimum amount the state requires in order for the bid to be considered valid), and continue bidding until it either

  • wins the bidding, or

  • bids an amount equal to the lesser of:

    • 100% of the reserve price obtained from Fannie Mae, or

    • 100% of the total mortgage indebtedness minus any outstanding property or flood insurance claims, or

  • such other amount as may be required by applicable law (e.g., judgment amount).

If the bid amount cannot be increased because the person conducting the foreclosure is prohibited from accepting a range of bids from the servicer, the servicer must instruct the law firm to bid as if the property were in a jurisdiction with a redemption period as indicated above.

For an Insured Conventional First Lien Mortgage Loan:

For a first lien mortgage loan covered by MI, the servicer must bid an amount approved by the mortgage insurer. If the mortgage insurer elects not to issue bidding instructions per its guidelines, or defers to Fannie Mae for foreclosure sale bidding instructions, the servicer must follow the policies and requirements for an uninsured conventional first lien mortgage loan.

If the mortgage insurer’s bidding instructions or requirements include preserving deficiency rights, and where permitted by applicable law, the servicer must preserve the mortgage insurer’s right to pursue a deficiency action in accordance with the mortgage insurer’s instructions.

For more information please see: E-3.3-05: Issuing Bidding Instructions

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