F-1-05: Expense Reimbursement (03/08/2023)

General Expense Reimbursement Requirements

The servicer must advance its own funds in accordance with Advancing Funds to Cover Expenses in B-1-01, Administering an Escrow Account and Paying Expenses and Requirements When a Property’s Flood Zone Status Changes in  B-3-01, Flood Insurance Requirements Applicable to All Property Types.

Reimbursement from Fannie Mae

To be eligible for reimbursement of either escrow or corporate advances from Fannie Mae, advances must be

• necessary to protect Fannie Mae’s interest in the property, and

• made for a mortgage loan that is a

  • portfolio mortgage loan,

  • participation pool mortgage loan, or

  • special servicing option MBS mortgage loan.

The servicer must also follow the requirements set forth in Chapter E-5, Requesting Reimbursements for Default-Related Expenses.

The servicer must take the steps shown in the following table to obtain reimbursement of funds advanced to cover expenses.

Step	Servicer Action
1	Advance the funds to pay expenses in a timely manner.
2	Submit a request for expense reimbursement with required supporting documentation.
3	Retain in the mortgage loan servicing file all supporting documentation for all requests for expense reimbursement.
4	Ensure supporting documentation is available to Fannie Mae upon request.

If Fannie Mae reimburses the servicer for an advance, any subsequent repayment by the borrower must be used to repay Fannie Mae.

When the servicer accepts a full reinstatement of the mortgage loan in accordance with  E-3.2-08, Processing Reinstatements During Foreclosure where Fannie Mae has reimbursed the servicer for its advances for foreclosure-related expenses including the costs of any preforeclosure property inspection, the servicer must repay the reimbursement by remitting the funds as a special remittance in accordance with Remitting a Special Remittance in F-1-20, Remitting and Accounting to Fannie Mae.

When a property has been remapped into an SFHA and the servicer is unable to collect the applicable flood insurance premium from the borrower, Fannie Mae will advise the servicer if any of the remedies permitted under the mortgage loan should be pursued against the borrower.

Reimbursement for Escrow Advances

Fannie Mae will reimburse the servicer for real estate taxes and property and flood insurance premiums it advances to protect Fannie Mae’s interests when there are insufficient funds in the escrow account to cover payments (or for a non-escrowed mortgage loan). Such escrow advances are reimbursable even if the expenses were advanced prior to the mortgage loan becoming delinquent. However, to be eligible for reimbursement, the mortgage loan must have subsequently become delinquent. See also Defined Expense Reimbursement Limits further in this topic.

Reimbursement for HOA Assessments and Related Expenses

In accordance with Paying Assessments and Related Expenses Associated with Protecting the Priority of Fannie Mae’s Mortgage Lien in  B-1-01, Administering an Escrow Account and Paying Expenses, Fannie Mae will reimburse the servicer for HOA assessments and similar charges it must pay to the extent necessary to avoid a lien that takes priority over Fannie Mae’s mortgage lien under applicable law, and would extinguish Fannie Mae’s mortgage lien if foreclosed.

Unless Fannie Mae has provided prior written approval for additional amounts, reimbursement is limited to the lowest of the

• actual advances paid,

• maximum limit provided in the project declaration that would take priority over Fannie Mae’s mortgage lien, or

• state statutory maximums that would take priority over Fannie Mae’s mortgage lien.

The servicer must maintain adequate records to document that reasonable and timely efforts were made to ensure it minimized the amount of any late fees, interest, and attorney fees, which may be included under the lien pursuant to applicable law. Such expenses must be excluded from the servicer’s request for reimbursement from Fannie Mae to the extent they directly result from the servicer’s failure to monitor and ensure the timely payment of the related assessments.

The servicer must take the steps shown in the following table to obtain reimbursement of HOA assessments and related expenses.

Step	Servicer Action
1	Advance the funds to pay expenses.
2	Complete the foreclosure sale or acceptance of the Mortgage Release.
3	Submit a request for expense reimbursement.

Reimbursement for Expenses Associated with Workout Options

Reimbursement for Payment Deferral Expenses and Fees

The servicer must pay any necessary and actual out-of-pocket expenses in accordance with the Servicing Guide associated with execution of a payment deferral.

The servicer must pay any out-of-pocket expenses, including, but not limited to, the following:

• required notary fees,

• recording costs,

• title costs, or

• any other allowable and documented expense.

Fannie Mae will reimburse the servicer for allowable out-of-pocket expenses in accordance with this Procedure.

With regard to mortgage loans for which the payment deferral remains in effect, servicing fees, guaranty fees, and excess servicing fees (if applicable) will be reimbursed at the time the mortgage loan matures or is paid-in-full through a credit to the servicer’s custodial account.

Reimbursement for Mortgage Loan Modification Expenses

The servicer must pay any necessary and actual out-of-pocket expenses in accordance with the Servicing Guide associated with the execution of a mortgage loan modification.

The servicer must pay any out-of-pocket expenses, including, but not limited to, the following:

• required notary fees,

• recording costs,

• title costs,

• property valuation fees,

• credit report fees, or

• other allowable and documented expense.

Fannie Mae will reimburse the servicer for allowable out-of-pocket expenses in accordance with this Procedure.

Reimbursement for Short Sale Expenses

The servicer may request reimbursement for Fannie Mae’s share of all expenses related to a short sale for a conventional mortgage loan, including the amount required to reimburse the servicer for the appraisal, by submitting a request for expense reimbursement.

The servicer must retain the original invoices that support the expenses claimed in the mortgage loan servicing file.

For special servicing option MBS mortgage loans, the servicer must not request reimbursement for Fannie Mae’s share of the amount required to remove the mortgage loan (or participation interest in the mortgage loan) from the pool, since Fannie Mae will automatically reimburse the servicer for this amount after it remits the funds and reports the applicable action code required to remove the mortgage loan (or participation interest in the mortgage loan) from the pool. Also see the Investor Reporting Manual for additional information.

Reimbursement for Mortgage Release Expenses

Fannie Mae will reimburse the servicer for costs related to

• preparing documentation for a completed Mortgage Release (see Defined Expense Reimbursement Limits further in this topic), and

• obtaining a title update associated with execution of a Mortgage Release (provided the borrower is unable to pay).

Reimbursing Fannie Mae for a Cancelled Mortgage Loan Modification

For any mortgage loan modification that is cancelled by the servicer but not re-entered into Fannie Mae’s servicing solutions system within 30 days of the date of the cancellation, the servicer must refund Fannie Mae within 60 days of the cancellation date any requested amounts paid by Fannie Mae to the servicer in connection with the cancelled mortgage loan modification.

Reimbursement for Foreclosure Attorney Fee Milestones or Prorated Bankruptcy Attorney Fees

In accordance with  E-5-05, Reimbursing Law Firms/Reimbursement of Uncollected Fees, Costs or Advances, the servicer may request reimbursement of foreclosure or bankruptcy attorney fees paid to the law firm at established foreclosure milestones or when a bankruptcy proceeding is closed prior to completion, even if the full applicable allowable fee is not incurred.

Reimbursement for Property Inspections and Property Preservation Expenses

Fannie Mae will reimburse the servicer for:

• insured loss repair inspections on current and delinquent mortgage loans when required to confirm property repairs in accordance with B-5-01, Insured Loss Events;

• all interior and exterior preforeclosure property inspections on delinquent mortgage loans (see D2-2-10, Requirements for Performing Property Inspections), as well as post-foreclosure sale inspections following a third-party sale (see E-3.5-02, Handling Third-Party Sales), completed in compliance with requirements of the Servicing Guide;

• property preservation work completed in accordance with  E-3.2-12, Performing Property Preservation During Foreclosure Proceedings; and

• inspections on current and delinquent mortgage loans when required to determine the extent and nature of any property damage related to a disaster event in accordance with  D1-3-01, Evaluating the Impact of a Disaster Event and Assisting a Borrower.

For insured loss repair inspections and inspections performed on current mortgage loans related to a disaster event, the servicer may begin submitting requests for reimbursement immediately after the inspection is completed, but must submit its request no later than one year after the costs are incurred. For delinquent mortgage loans, refer to the time frames set forth in  E-5-01, Requesting Reimbursement for Expenses.

The servicer must refer to the Property Preservation Matrix and Reference Guide for additional details on preserving delinquent and vacant properties. Also see Defined Expense Reimbursement Limits further in this topic.

The following table describes the servicer’s responsibilities when requesting reimbursement for property inspection and/or property preservation expenses.

✓	The servicer must...
	Validate fees and costs prior to submitting a request for expense reimbursement to ensure the expenses are reasonable and necessary to protect Fannie Mae’s interest, and compliant with Fannie Mae’s guidelines.
	Retain all individual invoices related to completed property inspections and property preservation work and make the invoices available to Fannie Mae upon request.
	Request reimbursement for the lesser of Fannie Mae’s maximum allowable reimbursement amount or the actual cost incurred by submitting a request for expense reimbursement (refer to Defined Expense Reimbursement Limits further in this topic for applicable reimbursement limits).

Reimbursement for Recording Costs Associated with a Mortgage Loan Satisfaction or Charge-Off

The servicer should record mortgage loan satisfactions and lien releases with the county recorder or Land records office electronically, when possible. Fannie Mae will reimburse the servicer for any government-imposed recording costs it has to pay in connection with mortgage loan satisfactions in accordance with  C-1.2-05, Charging for a Release of Lien if:

• the mortgage loan is a portfolio mortgage loan or a special servicing option MBS mortgage loan, and

• applicable law and/or mortgage loan documents do not allow the servicer to charge the cost to the borrower.

  Note: The servicer must not net costs for recording the satisfaction of a mortgage loan out of the proceeds received for the individual mortgage loan payoff.

Fannie Mae will also reimburse the servicer for costs it incurs to record the required release of lien in the real property records when a mortgage loan charge-off is approved in accordance with  D1-1-02, Evaluating a First Lien Mortgage Loan for Charge-Off and Release of Lien.

Fannie Mae will reimburse the servicer for the costs assessed to electronically file or record documents even if a free paper-filing option is available. Fannie Mae will also reimburse the servicer for fees paid to a third-party vendor to assist in such filing, except when an option to file or record electronically without vendor charges exists.

Reimbursement for Mortgage Insurance Premium Expenses

Fannie Mae will reimburse the servicer its costs for borrower-paid primary MI as required in accordance with B-8.1-02, Paying Conventional Mortgage Insurance Premiums. The servicer is authorized to request reimbursement for servicing advances for MI renewal premiums that are paid after the date of default and through the month that any of the following events occurs:

• a third-party sale,

• a short sale,

• a foreclosure, or

• a Mortgage Release (deed-in-lieu of foreclosure).

If the servicer receives an MI premium refund from the mortgage insurer after receiving reimbursement of the MI premium from Fannie Mae, the servicer must remit the reimbursed funds to Fannie Mae through the CRS using the 336 receipt code within 30 days of Fannie Mae’s request, unless the servicer receives the MI premium refund following the repurchase of a bifurcated loan, in which case the servicer must follow A1-3-03, Repurchase Obligations Related to Bifurcated Mortgage Loans.

Defined Expense Reimbursement Limits

This procedure contains the amount that Fannie Mae will pay for its share of expenses when specific reimbursement expense limits are defined. Also see the Allowable Foreclosure Attorney Fees Exhibit and the Allowable Bankruptcy Attorney Fees Exhibit for additional information regarding fees associated with either of these legal proceedings. In addition, also see the Property Preservation Matrix and Reference Guide for additional information concerning preservation work.

Defined Expense Reimbursement Limits
Property Inspections
Description	Maximum Reimbursement Amount
Interior Property Inspection	$45/inspection
Exterior Property Inspection	$30/inspection
Insured Loss Repair Inspection	$60/inspection
Workout Expenses
Mortgage Release document preparation cost	up to $500 each, upon completion
Escrow Expenses
Taxes	Actual amount(s) that the servicer advanced to cover real estate tax payments when the escrow account has insufficient funds to pay the expense in a timely manner (see Advancing Funds to Cover Expenses in B-1-01, Administering an Escrow Account and Paying Expenses and Reimbursement for Escrow Advances in this topic for further details).
Tax Penalties and Late Charges	Late charges and penalties are not payable on escrowed mortgage loans. The first set of late charges and penalties for each tax type, for non-escrowed mortgage loans.
HOA Dues	From the foreclosure sale date up to the REO sale date (disposition). Reimbursement of dues incurred prior to the foreclosure date will be decided per each state’s statutes.
Property and Flood Insurance	Actual amount(s) that the servicer advanced to cover property and/or flood insurance premiums when the escrow account has insufficient funds to pay the expense in a timely manner, less any applicable unearned premium refund amount the servicer received when a policy is canceled. Fannie Mae will reimburse the servicer for such advances for a period of up to 14 days after the date of the foreclosure sale or acceptance of an executed Mortgage Release, the closing date for a short sale, or for a third-party sale the later of the date the sale is completed (including funds received), or when applicable, the date the court confirms or ratifies the sale. See Reimbursement for Escrow Advances in this topic for further information. See also E-4.4-02, Remitting Property Insurance Settlement Proceeds or Unearned Premium Refunds and E-4.4-04, Remitting Flood Insurance Settlement Proceeds or Unearned Premium Refunds
Technology Fees and Electronic Invoicing
Description	Maximum Reimbursement Amount
Technology Fees	$25/mortgage loan for life of the default
Electronic Invoicing	$10/life of mortgage loan; $5 for submission of electronic invoice relating to a foreclosure and an additional $5 if a bankruptcy is filed on the same mortgage loan
Property Preservation
Description	Maximum Reimbursement Amount
A. Securing
Knob lock or Knob lock with deadbolt	$60 each
Padlock or Hasp and Padlock	$40 each
Slider lock/Window lock	$25 each
Boarding	$0.90/united inches (UI)
Clearboarding	Small (≤ 72 UI) = $185 Large (> 72 UI) = $285
Repair/Replace Windows	Standard (≤ 36” × 36”) = $150 Large (> 36” × 36”) = $200 Life of loan cap = $600
Security Door	$250/door
Repair/Replace Exterior Door	$350 for the life of the mortgage loan
Repair/Replace Exterior Door Jamb	$300 for the life of the mortgage loan
Cover Exterior Dryer Vent	$25 each — 1 per unit for the life of the mortgage loan
Repair Garage Door	$100/door for the life of the mortgage loan
Pool Covers	$1,200 for the life of the mortgage loan
Repair/Replace Fence	$300 for the life of the mortgage loan
Repair/Replace Gate	$300 for the life of the mortgage loan
Repair/Replace Lanai	$300 for the life of the mortgage loan
B. Yard Service
Initial Grass Cut and Desert Landscaping (Less than 12” height)	For the life of the mortgage loan: Less than 10,000 sq ft — $125 each 10,001 — 15,000 sq ft — $175 each 15,001 — 25,000 sq ft — $200 each 25,001 — 35,000 sq ft — $225 each 35,001 — 43,560 sq ft — $250 each
Grass Re-cut and Desert Landscaping	Per instance: Less than 10,000 sq ft — $80 each 10,001 — 15,000 sq ft — $100 each 15,001 — 25,000 sq ft — $125 each 25,001 — 35,000 sq ft — $150 each 35,001 — 43,560 sq ft — $175 each
Trim Trees/Shrubs/Vines	$500/calendar year
C. Winterization
Dry Winterization	$150 for the first unit for the life of the mortgage loan
Wet/Steam Winterization	$220 for the first unit for the life of the mortgage loan
Radiant Winterization	$260 for the first unit for the life of the mortgage loan
Additional unit of any type of winterization	$100 each for the life of the mortgage loan
Re-Winterize	$50 each/calendar year
D. Health and Safety
Cleaning Refrigerator and Stand Alone Freezer	$100 each
Moisture Control	$30 per product, $360/calendar year
Address Discoloration	$400 for the life of the mortgage loan
Cleaning Toilet	$75 each, $375 maximum for the life of the loan
Capping Wires	$1 each
Capping Gas/Water/Sewer Lines	$25 each
Extermination	$100/calendar year
Repair/Replace Deck	$300 for the life of the mortgage loan
Install/Repair/Replace Exterior Handrails	$300 for the life of the mortgage loan
Repair/Replace Steps	$150 for the life of the mortgage loan
E. Raw Garbage, Perishable Debris, and Personal Property *Combined maximum of 10 cubic yards for the life of the mortgage loan
Raw Garbage and Perishable Debris — Interior/Exterior	*$50/cubic yard
Move Personal Property — Interior/Exterior	*$20/cubic yard
Dead Vermin/Animal Removal	$75 for the life of the mortgage loan
Roof Cleaning	$100/calendar year
F. Additional Allowable Items
Aerial Imagery Report	$65 for the life of the mortgage loan
Address Posting	$50 for the life of the mortgage loan
Chimney Cap	$250/cap — 2 per unit for the life of the mortgage loan
Clean/Reattach Gutters	$100/calendar year
Repair/Replace Gutters	$300/calendar year
Snow Removal	$100 each clearing, $500/calendar year
Repair/Replace Sump Pump	$300 for the life of the mortgage loan
Utility Transfers and Shut Off	$100 for one time shut off/transfer fee of each
Utility Service	$2,000 per initial utility service, $200 per service per month for the life of the mortgage loan
Police/Fire Report	$50 for the life of the mortgage loan
Emergency Pump Water	$500 for the life of the mortgage loan
Graffiti Removal	$200 for the life of the mortgage loan
Repair/Replace Fascia	$160 for the life of the mortgage loan
Repair/Replace Soffits	$200 for the life of the mortgage loan
Plumbing Services	$150 for the life of the mortgage loan
Vacancy Notice Posting	$35 for the life of the mortgage loan
G. Damaged Properties
Patch/Repair Roof	$800 for the life of the mortgage loan
Tarp Roof	$600 for the life of the mortgage loan
H. Code Violations
Code Violations/Citations	$1,000 per fine/fee/lien$3,000 for the life of mortgage loan
I. Registration
Property Registration	Actual cost to register per local requirement

Reimbursement for Other Reimbursable Default-Related Legal Expenses

In accordance with E-5-07, Other Reimbursable Default-Related Legal Expenses, Fannie Mae will reimburse the servicer for the following out-of-pocket costs that it pays to third-party vendors or the courts, as long as the costs are actual, reasonable, and necessary (and are included in any applicable FHA, VA, RD, or MI claim that is filed):

• filing costs and other costs required by the courts (including fees paid to a third-party vendor to file electronically except when an option to file or record electronically without vendor charges exists);

• trustee sale guarantees or other title foreclosure litigation reports;

• costs for posting notices of foreclosure sales;

• costs for publication of legal notices (reimbursable for California non-judicial foreclosures only if the notices are placed as specified by Fannie Mae);

• costs for publication placement services for allowable jurisdictions;

• costs of announcing postponements of foreclosure sales;

• costs of servicing summonses and complaints and other legal notices for which the law requires personal service;

• charges for brokers’ price opinions (or for appraisals, if Fannie Mae instructed the servicer to obtain them) that are obtained in connection with relief provisions, workout options, or if legally required to determine the amount of the foreclosure bid;

• the cost of recording any legal documents necessary to conduct the foreclosure (such as notices of default, notices of sale, substitutions of trustees, assignments, satisfaction documents, deeds), including fees paid to a third-party vendor to electronically record except when an option to file or record electronically without vendor charges exists; and

• other costs that Fannie Mae approves in advance, such as excess foreclosure title and publication costs, or that are specifically footnoted on the standard fee schedule that appears in Allowable Attorney Foreclosure Fees Exhibit.

Fannie Mae will reimburse the servicer for postage costs incurred by law firms for first-class mail and certified or registered mail when required, provided the postage costs are incurred by the law firm retained by the servicer to handle Fannie Mae foreclosure and bankruptcy matters on mailings that are required by

• state statute, or

• court rule or court order.

Fannie Mae will not reimburse the servicer for postage costs incurred in connection with mailings by the servicer or law firm that are associated with servicer functions. Examples of mailings that are associated with servicer functions are

• demand and acceleration letters;

• communications with borrowers or third parties related to general servicing matters that are not required by state statute, court rule or order;

• correspondence addressing allegations of servicing or organization error;

• responses to Qualified Written Requests under RESPA; and

• responses to FDCPA letters.

All postage costs must be actual, reasonable, and necessary. Fannie Mae will not reimburse the servicer for the cost of

• mailing preparation services,

• overnight mail,

• stationery

• envelopes, or

• postal meter rental.

Under the provisions of 12 U.S.C. §1723a (c)(2), Fannie Mae is exempt from the imposition of revenue or documentary stamps (or the like) that are imposed pursuant to state law. Therefore, Fannie Mae will not reimburse the servicer for those items if it pays them.