Servicing Guide

Published September 9, 2020

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When an ARM Adjustment Error is found, what actions must the servicer take after correcting the error?

The following table describes various scenarios and resulting actions the servicer must take after correcting an ARM adjustment error, in accordance with C-2.2-01, Identifying and Disclosing Adjustment Errors

If the servicer… Then the servicer must…

does not reflect the adjustment error consistently in its own internal records, Fannie Mae’s records, and notices sent to the borrower

adjust its records by re-amortizing the mortgage loan to properly allocate the P&I distribution for any incorrectly applied payments and to correct the UPB.

Note: Generally, the borrower does not need to be notified of the correction since it results in amortization of the mortgage loan under the terms that were disclosed to the borrower in his or her mortgage loan documents.

is required to file a corrected Mortgage Interest Statement (IRS Form 1098) with the IRS

send the borrower the appropriate notification of the correction.

notifies the borrower of an incorrect interest rate and/or monthly payment, but updates its records and Fannie Mae’s records correctly

notify the borrower of the correction and update Fannie Mae’s records if the borrower’s UPB after the correction differs from the UPB that Fannie Mae has in its records.

For more information please see F-1-01, Servicing ARM Loans

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