Servicing Guide

Published September 9, 2020

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What are the timing and condition requirements for incentive payments that are applicable to a Hamp modification?

The servicer must evaluate a mortgage loan for workout options in accordance with D2-3.1-01, Determining the Appropriate Workout Option.

The following table indicates the timing and conditions of incentives applicable to a Fannie Mae HAMP modification.

Type of Incentive Compensation Timing and Conditions of Incentive Payment

Servicer Incentive

Servicer incentive fees will be earned and payable upon the borrower’s successful completion of a Trial Period Plan.

Borrower “Pay for Performance” Incentive

The borrower “pay for performance” principal balance reduction payment will

  • accrue monthly, and

  • be applied annually prior to the first payment due date after the anniversary month in which the Trial Period Plan is effective for each of the first five years following execution of the Agreement.

Borrower incentive payments do not accrue during the Trial Period Plan; however, in the first month of the permanent mortgage loan modification, the borrower will accrue incentive payments equal to the number of months in the Trial Period Plan in addition to any accrual earned during the first month of the permanent mortgage loan modification. Borrower “pay for performance” principal balance reduction payments will accrue as long as the mortgage loan is current and the monthly payments are paid on time (the payment is made by the last day of the month in which the payment is due). For example, if the mortgage loan is current and the borrower makes 10 out of 12 payments on time, he or she will be credited for 10/12 of the annual incentive payment as long as the mortgage loan is in good standing at the time the annual “pay for performance” incentive is paid. A borrower whose mortgage loan is delinquent on a rolling 30- or 60-day basis will not accrue annual incentive payments.

If and when the mortgage loan ceases to be in good standing, the borrower will cease to be eligible for any further incentive payment after that time, even if he or she subsequently cures his or her delinquency. The borrower will lose his or her right to any accrued incentive compensation when the mortgage loan ceases to be in good standing.

Expanded Borrower “Pay for Performance” Incentive

The expanded borrower “pay for performance” principal balance reduction payment will be payable prior to the first payment due date after the sixth anniversary of the Fannie Mae HAMP Trial Period Plan effective date. See F-2-02, Incentive Fees for Workout Options for additional information on the incentive.

 

Neither the borrower nor the servicer will be entitled to accrue incentive compensation for the interim month if the borrower does not make a Trial Period Plan payment during the interim month.

If a borrower misses three consecutive payments at any time following the execution of a Fannie Mae HAMP modification (that is, three monthly payments are due and unpaid on the last day of the third month), the mortgage loan is no longer considered to be in “good standing.” Once lost, good standing cannot be restored and eligibility for incentives and interest reimbursements cannot be reclaimed, even if the borrower fully cures the delinquency.

The following table outlines the process for obtaining Fannie Mae HAMP-related incentives

Step Required Action
1

The servicer reports mortgage loan information through the HAMP servicer web portal.

2

Borrower and servicer incentive payments will be reviewed for eligibility based on

  • mortgage loan modification terms that reflect the target monthly mortgage payment ratio of 31%, or

  • the requirements for receipt of the expanded borrower “pay for performance” incentive.

3

If eligible, the incentive payments are made via ACH to the bank account(s) designated by the servicer on the HAMP Registration Form during the HAMP registration process. The incentive payments will be paid on the 27th calendar day of each month (or, if the 27th falls on a non-business day, the preceding business day).

Note: On the business day prior to the date payment is made, servicers will be able to obtain a detailed report of the incentive payments to be remitted by viewing the Cash Payment Report by Servicer (OBE.10) available on the reporting web portal at HMPadmin.com. This report provides the total cash to be disbursed for each HAMP Registration Number, the aggregate for each HAMP Servicer Number associated with the HAMP Registration Number, and the loan level detail for each incentive type.

The following table outlines how the servicer must apply the “pay for performance” incentives.

If the “pay for performance” incentive being applied... Then the servicer must apply such “pay for performance” incentive...

is less than the interest-bearing UPB

to the interest-bearing UPB.

is greater than or equal to the interest-bearing UPB

in the following order to the

1. deferred UPB, if any; and

2. interest-bearing UPB.

 

If a “pay for performance” incentive is due to be paid when the mortgage loan is delinquent, but the borrower is still in good standing, such incentive must continue to be applied as above to the interest-bearing UPB or, if applicable, the deferred UPB.

 

The servicer must waive any applicable prepayment penalties on partial principal prepayments made by Fannie Mae. After applying the borrower “pay for performance” incentive, the servicer must send any remaining incentive funds directly to the borrower.

 

Also see Reimbursing Fannie Mae for a Cancelled Mortgage Loan Modification in F-1-05, Expense Reimbursement for the requirements for reimbursing Fannie Mae when a mortgage loan modification is cancelled.

 

For more information please see F-1-19, Processing a Workout Incentive Fee

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