Servicing Guide

Published June 10, 2020

The Servicing Guide is organized into parts that reflect how lenders generally categorize various aspects of their business relationship with Fannie Mae. To begin browsing, select from any of the sections below. You may also download the entire Servicing Guide in PDF format.

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E-4.4-01: Continuing or Canceling Property Insurance Coverage (11/13/2019)

The servicer's action regarding the continuation or cancellation of property insurance coverage following the foreclosure sale or acceptance of an executed Mortgage Release will depend upon  

  • the type of mortgage loan that was liquidated, and

  • whether the property will be conveyed to the insurer or the guarantor.

Any inquiries regarding the cancellation of property insurance should be addressed to Fannie Mae’s SF CPM division (see F-4-03, List of Contacts).

Fannie Mae’s property recovery firms assume all responsibilities for filing any necessary property insurance claims for losses identified post-foreclosure for

  • conventional first lien mortgage loans,

  • conventional second lien mortgage loans for which Fannie Mae either had an ownership interest in the first lien mortgage loan or paid off the first lien mortgage loan in connection with the foreclosure of the second lien mortgage loan,

  • FHA or VA mortgage loans that cannot be conveyed to the insurer or guarantor, and

  • special servicing option RD guaranteed mortgage loans.

The property recovery firm may contact the servicer to obtain information about any applicable property insurance policy and carrier(s) and any recent property inspections completed by the servicer. The servicer must provide all requested information or documentation to the property recovery firm within three business days.

This topic contains the following:

 

For Conventional Mortgage Loans

The following table describes the servicer's responsibilities related to the cancellation of property insurance coverage for all first and second lien conventional mortgage loans when the property is acquired.

Within 14 days after the foreclosure sale or acceptance of an executed Mortgage Release, the servicer must...
 

Ask the property insurance carrier to cancel the policy and, unless prohibited by the policy or applicable law, send it any unearned premium refund.

 

Request cancellation of Fannie Mae's mortgagee interest in the policy and removal of its name from the policy if the insurance carrier is not willing to cancel the policy because Fannie Mae is not the named insured.

For information regarding the servicer’s responsibilities prior to liquidation for maintaining a required property insurance coverage and addressing insurable damage or potential damage due to a disaster event, see B-2, Property Insurance Requirements, B-5-01, Insured Loss Events, and D1-3-01, Evaluating the Impact of a Disaster Event and Assisting a Borrower.

 

For FHA Mortgage Loans

The following table describes servicer requirements for FHA mortgage loans that will be conveyed to HUD.

The servicer must...
 

Obtain an endorsement to the property insurance policy to reflect Fannie Mae's interests immediately following the foreclosure sale.

 

Cancel the insurance coverage on the date the deed to HUD is filed for record and include the amount of the refund, or an estimated refund amount if the refund has not been received, as a deduction on the FHA MI claim.

If the property cannot be conveyed to HUD, the servicer must instead adhere to the policy described for conventional mortgage loans in For Conventional Mortgage Loans earlier in this topic.

When the servicer receives the refund of the unearned property insurance premium from the insurer, it must immediately remit the funds to Fannie Mae as a “special remittance.” However, if Fannie Mae has not reimbursed the servicer for all of its outstanding foreclosure expenses, the servicer may keep the property insurance premium refund and show it as a credit on the request for expense reimbursement that it submits to request reimbursement of its outstanding expenses for the mortgage loan.

 

Note: This does not pertain to property insurance proceeds, but only premium refunds.

 

 

For VA Mortgage Loans

For VA mortgage loans that will be conveyed to VA, the servicer must endorse the applicable property insurance policy over to VA immediately following the foreclosure sale. If the property cannot be conveyed to VA, the servicer must adhere to the policy for conventional mortgage loans in For Conventional Mortgage Loans earlier in this topic.

 

For RD Mortgage Loans

For modified special servicing option or regular servicing option RD mortgage loans, the servicer's decision about canceling the property insurance policy or Fannie Mae's mortgagee interest in it must be made in accordance with RD requirements.

For special servicing option RD mortgage loans, the servicer must adhere to the policy for conventional mortgage loans in For Conventional Mortgage Loans earlier in this topic.

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