Servicing Guide

Published September 9, 2020

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Fannie Mae Single-Family Reverse Mortgage Loan Servicing Manual June 12, 2019 (Chapter 2, Doing Reverse Mortgage Loan Business with Fannie Mae)

See below for Chapter 2, Doing Reverse Mortgage Loan Business with Fannie Mae 

To see other Chapters of the Fannie Mae Single-Family Reverse Mortgage Loan Servicing Manual, please click on any of the chapters below:

Chapter 1, Reverse Mortgage Loan Products

Chapter 3: General Servicing Requirements

Chapter 4: Assisting Borrowers At Risk of Default or In Default

Chapter 5: Processing Claims and Managing Acquired Properties

Chapter 6: Reporting through eBoutique

Chapter 7: Quick Reference Materials

 

Chapter 2, Doing Reverse Mortgage Loan Business with Fannie Mae

This chapter contains the following topics:

 

2-01, Mortgage Loan Files and Records (05/28/2014)

The servicer must retain all evidence of compliance with Fannie Mae policy and make all records, regardless of the format, available to Fannie Mae upon request. See Servicing Guide A2-5, Individual Mortgage Loan Files and Records for additional information.

2-02, Servicing Fees Related to Reverse Mortgage Loans (05/28/2014

The servicer’s total servicing fee for a reverse mortgage loan is a specified dollar amount as indicated in the mortgage loan documents, rather than the difference between the mortgage loan interest rate and the rate at which the servicer passes through interest to Fannie Mae.

2-03, Property Insurance Policy and Coverage Requirements (09/14/2016)

The servicer must follow all applicable HUD requirements for property insurance policy and coverage requirements for HECM loans.

The requirements of a property insurance policy for the insurable improvements of the property securing Home Keeper mortgage loans are as follows:

  • The coverage must protect against loss or damage from fire, windstorm, hurricane, hail, and other hazards covered by the standard extended coverage endorsement.
  • If the property insurance policy includes limitations or exclusions, the borrower must obtain a separate policy or endorsement from another insurer that provides adequate coverage for the limited or excluded peril.
  • The coverage must provide for claims to be settled on a replacement cost basis.
  • The servicer must change the insurance coverage for a mortgage loan when it is inadequate to protect Fannie Mae’s interests. Examples include properties that become vacant and home renovation or construction mortgage loans where the renovation or construction work is completed or the borrower occupies the property. Also, see Servicing Guide B-4-02, Builder’s Risk/Construction Site Insurance for additional information.
  • See Servicing Guide B-2-01, Property Insurance Requirements Applicable to All Property Types for additional information.

This topic contains information on the following:

Property Insurance Carrier Rating Requirements

The property insurance policy for the insurable improvements of the property securing the reverse mortgage loan must be written by a carrier that meets one of the following rating requirements, even if it is rated by more than one of the rating agencies.

Rating Agency

Rating Category

A.M. Best Company, Inc.

Either a “B” or better Financial Strength Rating in Best’s Insurance Reports, or an “A” or better Financial Strength Rating and a Financial Size Category of “VIII “or greater in Best’s Insurance Reports Non-US Edition.

Demotech, Inc.

“A” or better rating in Demotech’s Hazard Insurance Financial Stability Ratings.

Standard & Poor’s

“BBB” or better Insurer Financial Strength Rating in Standard & Poor’s Ratings Direct Insurance Service.

Fannie Mae continues to accept pre-existing property insurance policies for a reverse mortgage loan if the insurance carrier does not meet Fannie Mae rating requirements. However, if the reverse mortgage loan borrower obtains a new property insurance policy, the carrier of that policy must satisfy Fannie Mae’s rating requirements.

Determining Coverage Amounts and Deductible Requirements for Reverse Mortgage Loans Secured by a One- to Four-Unit Property

Coverage must be equal to 100% of the insurable value of the improvements.

The maximum allowable deductible for a home mortgage loan is 5% of the face amount of the policy. See Servicing Guide B-6-01, Lender-Placed Insurance Requirements for the deductible requirements for lender-placed insurance policies.

Determining Coverage Amounts and Deductible Requirements for Reverse Mortgage Loans Secured by a Unit in PUD, Condo, or Co-op

Coverage must be equal to 100% of the insurable value of the improvements.

The maximum allowable deductible is as follows:

  • For policies covering the common elements in a PUD project, a PUD unit mortgage loan, condo projects, or co-op projects, 5% of the face amount of the policy. See Servicing Guide B-6-01, Lender-Placed Insurance Requirements for the deductible requirements for lender-placed insurance policies.
  • For blanket insurance policies covering the individual units and the common elements, 5% of the replacement cost of the unit.

2-04, Lender-Placed Insurance Requirements (10/14/2015)

The servicer must follow all lender-placed insurance requirements found in the  Servicing Guide B-6-01, Lender-Placed Insurance Requirements.  

2-05, Establishing Custodial Bank Accounts (06/13/2018)

The servicer must hold in a custodial bank account prior to its remittance to Fannie Mae any funds it receives for a portfolio mortgage loan or an MBS mortgage loan.

The servicer must provide Fannie Mae with a status of the funds in the custodial account at the end of each month.

The servicer is responsible for the safekeeping of custodial funds at all times. Even if the servicer has complied with all of the requirements of the Manual and the Servicing Guide, Fannie Mae will hold the servicer responsible for any loss of funds deposited in a custodial account and any damages Fannie Mae suffers because of delays in obtaining the funds from the custodial account.

The servicer must reconcile its cash book to the custodial accounts on a monthly basis. The servicer must refer to Servicing Guide A4-1-02, Establishing Custodial Bank Accounts for additional information on the requirements for establishing and maintaining custodial accounts and funds on behalf of Fannie Mae.

This section contains information on the following:

Requirements for Custodial Bank Accounts

If the servicer uses a custodial account for reverse mortgage loans, the custodial account must be separate from those used for regularly amortizing mortgage loans. The servicer must use the separate custodial account only for

  • disbursing funds to the borrower (and, if applicable, an insurance carrier, taxing authority, repair contractor, or mortgage insurer),
  • depositing funds received from Fannie Mae,
  • remitting funds to Fannie Mae, and
  • transferring servicing fees into the servicer’s internal operating account.

The servicer must take the following steps for each custodial account that is established (or changed).

Step

Servicer Action

1

Obtain a fully executed Form 1013 signed by both the servicer and the depository institution.

2

Forward the executed original form to the address listed on the form for processing.

3

Retain a copy of each form in its files.

The P&I custodial account must be titled as follows:

(Name of servicer), as agent, trustee, and/or bailee for the benefit of Fannie Mae and/or payments of various mortgagors and/or various owners of interests in mortgage-backed securities (Custodial Account).

Use of Clearing Accounts

When clearing accounts are used for reverse mortgage loans, the servicer is not required to establish separate accounts for collections and disbursements. However, if the servicer chooses to establish a separate custodial account, deposits to the clearing account must be subsequently recorded in a separate custodial account meeting Fannie Mae's custodial requirements within one business day (including any period during which funds were in a clearing account or general ledger account) of receipt.

The servicer may use general ledger or internal operating accounts as clearing accounts provided that:

  • the institution is an eligible depository and meets the requirements outlined in Servicing Guide A4-1-02, Establishing Custodial Bank Accounts, 
  • the account is titled to indicate it is custodial in nature and includes “for the benefit of Fannie Mae” in the account title, and
  • adequate records and audit trails must be maintained to support all credits to, and charges from, the borrower's payment records and the clearing accounts.

NOTE: Servicing fees and, if applicable, purchase proceeds can be transferred directly from this clearing account into the servicer’s internal operating account without going through the separate custodial account.

Establishing Drafting Arrangements

The servicer must refer to the following table to designate a drafting arrangement for a custodial account or to change an existing arrangement for reverse mortgage loans.

Step

Servicer Action

1

Confirm Fannie Mae’s Cash Management Unit (see 7-03, List of Contacts) has a completed and executed Certificate of Authority, Incumbency, and Specimen Signatures (Form 360) on file.

Note: Form 360 must be accompanied by the Resolution(s)/Evidence of Authorization to be considered complete.

2

Complete an Authorization for Automatic Transfer of Funds (Form 1072) for each drafting arrangement with its custodial bank(s).

3

Send the completed and executed Form 360, as applicable, and Form 1072 to Fannie Mae for processing.

Fannie Mae will use the information the servicer provides to set up automatic drafting or depositing through the ACH process. Fannie Mae will deposit funds that represent

  • the purchase proceeds for the reverse mortgage loan or that are to be used for borrower payments,
  • vendor payments, or
  • the servicer’s servicing fees into the designated account.
  • Fannie Mae will draft the applicable account when the servicer reports remittances related to

  • partial repayments of mortgage loan advances,
  • payoffs,
  • repurchases, or
  • foreclosures.
  • The servicer must designate the accounts from which Fannie Mae is to draft the funds that are due to Fannie Mae. All remittances will be drafted from the servicer’s designated P&I custodial account. However, if a master servicer has designated a subservicer to remit on its behalf, the subservicer’s designated P&I custodial account will be drafted.

    The servicer must report any collections for reverse mortgage loans through eBoutique™ and make the funds available in the custodial account prior to the date Fannie Mae drafts the account.

2-06, Submitting Expense Reimbursement Claims (04/11/2018)

Prior to foreclosure, the servicer must submit expense reimbursement claims via eBoutique. (See 5-01, Submitting the REOgram.)

After foreclosure, the servicer must submit expense reimbursement claims via LoanSphere. The servicer must not submit expense reimbursement claims via LoanSphere prior to the mortgage loan’s liquidation date. Failure to submit a reimbursement claim through the appropriate system may result in denial of the claim.

The servicer must submit its final expense reimbursement claim no later than 60 days after the date Fannie Mae disposes of an acquired property.

For HECM loans, the servicer is authorized to submit its final expense reimbursement claim beyond 60 days after the date Fannie Mae disposes of an acquired property, as long as it is submitted within 30 days of receipt of an initial or supplemental AOP from HUD.

N O T E : Any expense reimbursement claim submitted more than 60 days post-disposition must include an AOP in the supporting documents.

If the servicer submits an expense reimbursement claim after the final deadline, Fannie Mae will deny the request.
 

2-07, Post-Delivery Transfers of Servicing (05/28/2014)

The servicer of reverse mortgage loans must refer to Servicing Guide A2-7-03, Post-Delivery Servicing Transfers for detailed requirements related to post-delivery transfers of servicing.

The servicer must submit a separate Request for Approval of Servicing or Subservicing Transfer (Form 629) for all reverse mortgage loans that are part of the portfolio of mortgage loans being transferred.

With regard to the submission of final accounting reports and remittances, the transferee servicer must submit the monthly Loan Activity Reports in eBoutique.

 

To see other Chapters of the Fannie Mae Single-Family Reverse Mortgage Loan Servicing Manual, please click on any of the chapters below:

Chapter 1, Reverse Mortgage Loan Products

Chapter 3: General Servicing Requirements

Chapter 4: Assisting Borrowers At Risk of Default or In Default

Chapter 5: Processing Claims and Managing Acquired Properties

Chapter 6: Reporting through eBoutique

Chapter 7: Quick Reference Materials

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