Servicing Guide

Published October 14, 2020

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What are the timing and condition requirements for incentive payments that are applicable to a 2MP 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 2MP modification.

Type of Incentive Compensation Timing and Conditions of Incentive Payment

Servicer Incentive

Servicer incentive fees will be earned and payable upon the effective date of a 2MP modification.

Borrower “Pay for Performance” Incentive

The “pay for performance” principal balance reduction payment will accrue monthly and be applied annually after the anniversary month in which the 2MP modification became effective for each of the first five years. Borrower “pay for performance” principal balance reduction payments will accrue as long as the first and second lien mortgage loans are 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). Borrower incentive payments do not accrue during the Trial Period Plan. The payments will be made to the servicer of the second lien mortgage loan to be applied towards reducing the UPB on the second lien mortgage loan.

Note: If and when the Fannie Mae HAMP and/or 2MP mortgage loan modification cease to be in good standing or are paid in full, 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. Undisbursed incentive payments, even if accrued, will not be made

If a borrower misses three consecutive payments at any time on his or her second lien following the execution of a 2MP modification (that is, three monthly payments are due and unpaid on the last day of the third month), the second lien 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 how the servicer obtains the borrower “Pay for Performance” incentive fee.

Step Required Action
1

The servicer enters a closed case into Fannie Mae’s servicing solutions system.

2

The servicer reports the 2MP modification transaction to the Program Administrator.

3

If eligible, Fannie Mae, in its capacity as 2MP Program Administrator, pays the incentive fee.

Note: The servicer must not include a request for expense reimbursement for the incentive fee.

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

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