Prior to approving a release of liability, the servicer must determine that the transferee's credit and financial capacity is acceptable as required in Chapter D1-4, Transfers of Ownership and D1-1-01, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan.
The servicer must refer to the following Selling Guide topics to determine whether the transferee's credit and financial capacity is acceptable in accordance with Fannie Mae's underwriting guidelines:
- Selling Guide B1-1, Application Package Documentation;
- Selling Guide B2-2, Borrower Eligibility;
- Selling Guide B3-3, Income Assessment;
- Selling Guide B3-4, Asset Assessment;
- Selling Guide B3-5, Credit Assessment; and
- Selling Guide B3-6, Liability Assessment.
For a mortgage loan that has not been modified, the servicer is authorized to use Fannie Mae's automated underwriting system, Desktop Underwriter (DU) (see the Selling Guide B3-2, Desktop Underwriter (DU)) to determine the transferee's credit and financial capacity. If a servicer is not authorized to access DU, the servicer can obtain access by contacting Fannie Mae (see F-4-03, List of Contacts).
If utilizing DU, the servicer must
- submit the transaction as a limited cash-out refinance in DU, and
- use the original value of the property as defined in the Selling Guide.
Note: For a mortgage loan that has been modified, the servicer must contact Fannie Mae to determine the transferee's credit and financial capacity (see F-4-03, List of Contacts).
The servicer must follow the procedures in Obtaining MI Approval for a Conventional Mortgage Loan in F-1-18, Processing a Transfer of Ownership for information on obtaining mortgage insurer approval, if applicable.
The following table provides the requirements for evaluating a request for a release of liability.
|If the servicer has determined that the transferee...||Then the servicer...|
|is capable of assuming the mortgage loan obligation and the mortgage loan
||is authorized to approve the release of liability.|
|is capable of assuming the mortgage loan obligation but the mortgage loan has MI and the mortgage insurer does not agree to the release||must deny the request for the release of liability, although the transfer may still be processed without a release of liability.
Note: The denial must state the mortgage insurer’s decision as its reason for not approving the request.
|is not capable of assuming the mortgage loan obligation||must deny the request for release of liability, although the transfer may still be processed without a release of liability.|
For more information please see F-1-29, Reviewing a Transfer of Ownership for Credit and Financial Capacity.