Servicing Guide

Published September 9, 2020

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E-3.3-07: Pursuing a Deficiency Judgment (01/18/2017)

The servicer must pursue a deficiency judgment on an FHA, VA, or RD mortgage loan if instructed to do so by FHA, VA, or RD, respectively.

A deficiency judgment cannot be pursued for a Texas Section 50(a)(6) loan.

The servicer is authorized to waive Fannie Mae’s deficiency judgment rights if so doing will help resolve foreclosure delays based upon individual borrower circumstances. This authorization is applicable only to conventional mortgage loans that are in foreclosure and are experiencing foreclosure delays.

The servicer must contact the mortgage insurer (if the mortgage loan is covered by MI) to obtain the mortgage insurer’s consent to waive its deficiency judgment rights.

If the mortgage insurer does not provide its consent to waive its deficiency judgment rights, the servicer must notify the borrower that, notwithstanding Fannie Mae’s waiver of its deficiency judgment rights, the mortgage insurer may have the right to pursue the borrower for any deficiency judgment that occurs from the resolution of the foreclosure matter.

For each deficiency waiver granted, the servicer must ensure that it properly documents the deficiency waiver in the mortgage loan servicing file and must be able to provide this information to Fannie Mae upon request.

The servicer must proceed non-judicially in jurisdictions where the preferred or routine method of foreclosure is non-judicial, even if doing so means waiving Fannie Mae's right to pursue a deficiency judgment, unless the servicer or the law firm is aware of circumstances that suggest the benefits of proceeding judicially outweigh the increase in time frame, fees, and costs. If the servicer has questions regarding the preservation or waiver of deficiency claims, it must contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) for guidance, including direction to proceed judicially on a case-by-case basis.

The following table provides additional Fannie Mae requirements related to the pursuit of a deficiency judgment.

The servicer must...
 

Promptly communicate to either the mortgage insurer or Fannie Mae (depending on whether the mortgage loan is insured or uninsured) any information it may have to assist in deciding whether to pursue a deficiency judgment.

 

Advise Fannie Mae about any information it receives from the mortgage insurer concerning whether the deficiency judgment is to be pursued solely or jointly.

 

Cooperate with and assist Fannie Mae and its vendors in the pursuit of a deficiency.

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