Servicing Guide

Published November 10, 2020

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Fannie Mae Single-Family Reverse Mortgage Loan Servicing Manual June 12, 2019 (Chapter 3, General Servicing Requirements)

See below for Chapter 3: General Servicing Requirements

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 2, Doing Reverse Mortgage Loan Business with Fannie Mae

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 3: General Servicing Requirements 

This chapter contains the following topics:

3-01, Disbursing Payments to Borrowers (05/28/2014)

This topic contains information on the following:

Disbursing Payments Requirements Applicable to All Reverse Mortgage Loans

The servicer must advance funds to make allowable payments to the borrower. At the end of each month the servicer must include in the outstanding mortgage loan balance the following:

  • all payments made to (or on behalf of) the borrower as payments are disbursed, and
  • the servicing fee.

The servicer must advise Fannie Mae when a borrower requests the suspension of payments and again when the borrower requests resumption of the payments to ensure that Fannie Mae’s regular scheduled monthly disbursements accurately reflect the payments due the borrower for that month. (Also see 6-01-01, Reporting Specific Transactions.)

The servicer must disburse payments to a borrower either by sending them through the mail or by electronically transferring them into the borrower’s bank account. The servicer must not disburse funds for draws against a line of credit until after it receives a written request from the borrower.

The servicer must not submit an expense reimbursement claim via LoanSphere prior to the mortgage loan’s liquidation date. 

Disbursing Payments Requirements Specific to Home Keeper Mortgage Loans

Fannie Mae reimburses the servicer for all authorized advances. The servicer must request reimbursement for all unscheduled payments. Fannie Mae reimburses the servicer as described in the following table.

Type of Reimbursement

Frequency

Scheduled payments for tenure and modified tenure payment plans

On the first business day of the month

Payments for:

  • servicing fees due for the previous month, and
  • any adjustments necessary for scheduled payments made in the previous month

On the third business day of the month

Unscheduled payments for:

  • a line of credit draw,
  • disbursement from the set-asides for repairs or the first year’s property charges, or
  • disbursement for the payment of tax assessments or insurance premiums (on behalf of the borrower)

Also see Unscheduled Payment Transactions in 6-01-03, General Servicing Transactions.

Within two business days after receipt of request for reimbursement

 

The servicer is authorized, however, to provide a borrower who has a line of credit “checks” that can be used both as the official request for funds and the means by which the funds are withdrawn from an account the servicer has established for the borrower.

NOTE: Fannie Mae will not reimburse the servicer for draws against the line of credit that are in excess of the remaining balance of the borrower’s credit line; therefore, a servicer that issues checks to a borrower must establish appropriate controls to monitor the borrower’s use of the checks.

The servicer must pay the borrower a late charge for any payment that it does not make to the borrower in a timely manner. A scheduled tenure payment is considered late if the servicer does not mail or electronically transfer it to the borrower on the first business day of the month. An unscheduled line of credit payment is considered late if the servicer does not mail or electronically transfer it to the borrower within five business days after the date it receives the borrower’s written request for the draw. The initial late charge will be 10% of the entire amount that should have been paid to the borrower. For each additional day that the servicer fails to make payment to the borrower, it also must pay interest on the late payment (which should be calculated by using the then-current interest rate for the mortgage loan).

Fannie Mae will not reimburse the servicer for any late charges that the servicer pays.

Disbursing Payments Requirements Specific to Home Equity Conversion Mortgage Loans

The servicer must follow all applicable HUD requirements for disbursing payments to borrowers for HECM loans.

Fannie Mae reimburses the servicer for all authorized advances. The servicer must request reimbursement for all unscheduled payments. Fannie Mae reimburses the servicer as described in the following table.

Type of Reimbursement

Frequency

Scheduled payments

On the first business day of the month

Scheduled payments for:

  • servicing fees due for the previous month,
  • the mortgage insurance premium accrual for the previous month, and
  • any adjustments necessary for payments made the previous month

On the third calendar day of the month

Unscheduled payments for:

  • a line of credit draw,
  • disbursement from the set-asides for repairs or the first year’s property charges, or
  • disbursement for the payment of tax assessments or insurance premiums (on behalf of the borrower)

Also see Unscheduled Payment Transactions in 6-01-03, General Servicing Transactions.

Within two business days after receipt of request for reimbursement

NOTE: Fannie Mae will not reimburse the servicer for any late charges that the servicer pays, including any late charges paid to HUD for any mortgage insurance premium payment.

3-02, Adjusting the Interest Rate (05/28/2014)

Fannie Mae will independently calculate each scheduled interest rate change and notify the servicer of its calculation by providing the Reverse Mortgage Rate Changes Report to the servicer on the second business day of the month before each interest rate adjustment date via eBoutique. If the servicer disagrees with Fannie Mae’s calculations, it should contact its reverse mortgage loan Single Family Operations Specialist. (Also see Monthly Reports in 6.2-01, Fannie Mae-Generated Reports).

This topic contains information on the following:

Adjusting the Interest Rate Specific to Home Keeper Mortgage Loans

All Home Keeper mortgage loans are originated using ARM Plan 1526. The characteristics of this plan are that it has no per-adjustment interest rate cap and has a lifetime interest rate adjustment cap of 12%. Adjustments to the mortgage loan interest rate will change the monthly interest accrual that is added to the mortgage loan balance, but will have no effect on the size of the borrower’s scheduled payments or the amount available for withdrawal under a line of credit.

The servicer must adjust the mortgage loan interest rate on the first day of the month following the date of mortgage loan closing and on the first day of each subsequent month for the remaining term of the mortgage loan—as long as changes in the index value dictate such adjustments. The new interest rate will be the sum of the index value that was in effect 30 days before the scheduled interest rate adjustment date and the mortgage loan margin specified in the note, rounded to the nearest 0.125%. When the cumulative interest rate adjustments result in a new interest rate that would be more than 12% above the initial mortgage loan interest rate, the interest rate must be the capped rate and no additional interest rate increases will be permitted for the remaining term of the mortgage loan (although downward adjustments can be made). The servicer must advise the borrower of the new interest rate (including the index value and the publication date on which the new rate is based) before each rate adjustment goes into effect, if required by applicable law.

The interest that accrues on any payments made to the borrower during the month, along with any interest that accrues on the mortgage loan balance that was outstanding on the first of the month, will be based on the interest rate that became effective on the first day of the month and will be included in the outstanding mortgage loan balance as of the end of the month.

Adjusting the Interest Rate Specific to Home Equity Conversion Mortgage Loans

The FHA HECM loans that Fannie Mae purchased were ARMs originated under the three plans described in the following table.

HECM ARM Plan

Characteristics

856

  • CMT-indexed plan that provides for annual interest rate adjustments.
  • Interest rate cap of 2% per adjustment.
  • The interest rate may not increase or decrease by more than 5% over the term of the mortgage loan.

857

  • CMT-indexed plan that provides for monthly interest rate adjustments.
  • Lifetime interest rate cap that is 10% above the initial mortgage loan interest rate.
  • This plan has no floor.

4287

  • LIBOR-indexed plan that provides for monthly interest rate adjustments.
  • Lifetime interest rate cap that is 10% above the initial mortgage loan interest rate.
  • This plan has no floor.

The initial interest rate—and all subsequent rate adjustments—for these plans may be rounded to the nearest 0.125% only if the lender specifies the rounding option at mortgage loan closing.

The servicer must adjust the mortgage loan interest rate in accordance with the terms of the ARM plan the borrower selected. The servicer must use the weekly average index value that is in effect for one-year Treasury securities or the LIBOR index on the day that is exactly 30 days before the interest rate adjustment date.

The new interest rate will be the sum of the index value and the mortgage loan margin specified in the note, rounded to the nearest 0.125% if the borrower selected the rounding option at mortgage loan closing. If this calculated rate exceeds the previous interest rate for an ARM Plan 856 by more than 2%, the new interest rate will be the sum of the previous interest rate and 2%. If the calculated rate exceeds the original interest rate by more than a specified percentage—5% for ARM Plan 856 and 10% for ARM Plan 857—the new interest rate will be the sum of the original interest rate and 5% or 10% (as applicable) and no additional interest rate increases will be permitted for the remaining term of the mortgage loan (although downward adjustments may be made). On the other hand, if the calculated rate for an ARM Plan 856 is less than the original interest rate, the borrower’s interest rate must be reduced accordingly—although it does not have to be decreased by more than 5% (even if the difference is greater than that). The servicer must advise the borrower of the new interest rate (including the index value and the publication date on which the new rate is based) at least 25 days before the new interest rate becomes effective.

Adjustments to the mortgage loan interest rate will change the monthly interest accrual that is added to the borrower’s mortgage loan balance, but will have no effect on the size of the borrower’s scheduled payments or the amount available for withdrawal under a line of credit. The interest that accrues on any payments made to the borrower during a month, along with any interest that accrues on the mortgage loan balance that was outstanding on the first of the month, will be based on the interest rate in effect on the first day of the month and will be included in the outstanding mortgage loan balance as of the end of the month.

3-03, Changes to Borrower’s Payment Plan (05/28/2014)

This topic contains information on the following:

  • Changes to Borrower’s Payment Plan Applicable to All Reverse Mortgage Loans
  • Changes to Borrower’s Payment Plan Specific to Home Keeper Mortgage Loans  

Changes to Borrower’s Payment Plan Applicable to All Reverse Mortgage Loans

The borrower may request a change to his or her payment plan at any time. The new payment plan is effective on the first day of the month following the date the servicer reports the payment plan change to Fannie Mae. The servicer must process the payment plan change promptly. If, for any reason, it fails to report the plan change to Fannie Mae in a timely manner, the servicer must nevertheless make payments to the borrower according to the terms of the new plan, even if it has to advance its own funds to do so. Also see 6-01-02, Payment Change Transactions.

The servicer must send its calculations of the new payment terms to the borrower and provide a standardized acceptance statement on which the borrower must

  • indicate acceptance of the change to a new payment plan in writing, and
  • acknowledge the effective date of the change.

The servicer must retain the borrower’s signed acceptance of the payment plan change and all related documents in the borrower’s individual mortgage loan file. 

For HECM loans, the servicer must follow all applicable HUD requirements for changes to a borrower’s payment plan.

Changes to Borrower’s Payment Plan Specific to Home Keeper Mortgage Loans

The servicer may charge the borrower up to $50 for each payment plan change it processes. The borrower may finance the payment of this fee, but if he or she does so, the new net principal limit used in the calculations of the payment terms for the new plans must be reduced accordingly. A change in payment plans will have no effect on the funds remaining in any set-aside accounts that have been previously established.

When a borrower requests a payment plan change, the servicer must determine the new payments and/or line of credit. To make this determination, the servicer must have access to the original net principal limit and a tenure conversion factor, both of which were determined at mortgage loan origination.

The borrower’s signed acceptance of the payment plan change must be retained in the individual mortgage loan file.

The procedures for processing different types of changes to the borrower’s payment plan are described in the following table.

If a borrower changes…

Then the servicer must…

to a line of credit plan

  1. determine a new net principal limit by reducing the original net principal limit by the sum of all payments that have been made to the borrower, then
  2. increase the result by any partial repayments of mortgage loan advances that the borrower has made.

This new net principal limit will be the line of credit that is available to the borrower under the new line of credit payment plan.

to a tenure plan

  1. determine a new net principal limit by reducing the original net principal limit by the sum of all payments that have been made to the borrower, then
  2. increase the result by any partial repayments of mortgage loan advances that the borrower has made.

To determine the new tenure payments the borrower will be able to receive under the new tenure payment plan, the servicer must multiply this new net principal limit by the tenure conversion factor.

 

If a borrower changes…

Then the servicer must…

to a modified tenure plan

determine a new net principal limit.

The following table describes the method for doing this, which will vary depending on whether the borrower specifies the size of the desired line of credit or the size of the desired tenure payments.

If the borrower requests…

Then the servicer must…

line of credit of a specified size

  1. determine the new net principal limit by reducing the original net principal limit by the sum of all payments that have been made to the borrower, 
  2. increase it by any partial repayments of mortgage loan advances that the borrower has made, and finally deducting an amount equal to the desired line of credit, and then
  3. determine the new tenure payments the borrower will be able to receive under the new modified tenure payment plan by multiplying this new net principal limit by the tenure conversion factor.

The borrower’s line of credit under the new payment plan will be the amount the borrower specified.

tenure payments of a specified size

  1. divide the desired payment amount by the tenure conversion factor, then
  2. determine the new net principal limit by reducing the original net principal limit by the sum of the result of this division and the total payments that have been made to the borrower and then increasing it by any partial repayments of mortgage loan advances that the borrower has made.

This new net principal limit will be the line of credit that is available to the borrower under the new modified tenure payment plan. The borrower’s new tenure payments will be in the amount the borrower specified.

 

If a borrower changes…

Then the servicer must…

the terms of a modified tenure plan

reallocate the net principal limit that exists between the line of credit and the tenure payments.

The following table describes the method used to reallocate the net principal limit, which will differ, depending on whether the borrower wants to increase the size of the line of credit or the size of the tenure payments.

If the borrower requests to increase the size of…

Then the servicer must…

the line of credit

  1. determine the new net principal limit by reducing the original net principal limit by the sum of all payments that have been made to the borrower and the amount of the desired new line of credit,
  2. increase it by any partial repayments of mortgage loan advances that the borrower has made, and then
  3. determine the new tenure payments the borrower will be able to receive under the revised modified tenure payment plan by multiplying this new net principal limit by the tenure conversion factor.

The borrower’s line of credit under the revised payment plan will be the amount the borrower specified.

the tenure payment

  1. divide the desired payment amount by the tenure conversion factor,
  2. determine the new net principal limit by
  3. reducing the original net principal limit by the sum of the result of this division and the total payments that have been made to the borrower and then
  4. increasing it by any partial repayments of mortgage loan advances that the borrower has made.

This new net principal limit will be the line of credit that is available to the borrower under the revised modified tenure payment plan.

The borrower’s revised tenure payments will be in the amount the borrower specified.

NOTE: The tenure conversion factor is the ratio of the maximum monthly tenure payment available to the borrower at origination to the maximum line of credit available to the same borrower at origination.

3-04, Payment of Taxes and Insurance (04/11/2018)

Generally, the borrower is responsible for the timely payment of all applicable property taxes, ground rent, special assessments, property insurance premiums, and flood insurance premiums. However, in certain circumstances, the borrower may request that the servicer pay these expenses from the proceeds of the reverse mortgage loan. In such cases, the borrower must again take responsibility once all the proceeds have been exhausted.

For Home Keeper mortgage loans, if the servicer uses a third-party tax vendor to advise it about when a borrower is delinquent in making a property tax payment, the servicer must include a question as part of its annual occupancy verification form to ascertain whether the borrower has entered into a tax deferral program and also must include the same or a similar question on other documents it sends to the borrower—such as a notification of a change to the mortgage loan interest rate or an account activity statement—along with a reminder that the borrower must contact the servicer if he or she ever enters into a tax deferral program. If the borrower’s response indicates that he or she has entered into a tax deferral plan or the servicer discovers there is a tax deferral, the servicer must obtain confirmation that the program is subordinate to the Home Keeper mortgage lien and retain evidence of that confirmation in the individual mortgage loan file. Also see 3-07, Annual Occupancy Certification Requirements.

This topic contains information on the following:

When the Servicer Makes Payments

When a borrower requests the servicer to pay T&I premiums on his or her behalf from the proceeds of the reverse mortgage loan, the servicer must ensure that the borrower is aware of the following: 

  • how payment of the property charges will be handled,
  • payments will be made only if funds are available in the borrower’s “net principal limit,” and
  • the responsibility for payment of these expenses is back with the borrower once all of the proceeds from the reverse mortgage loan have been exhausted.

The method the servicer uses to make payments for T&I premiums varies according to the payment plan. The servicer must follow the process described in the following table.

If a borrower changes…

Then the servicer must…

to a line of credit plan

  1. determine a new net principal limit by reducing the original net principal limit by the sum of all payments that have been made to the borrower, then
  2. increase the result by any partial repayments of mortgage loan advances that the borrower has made.

This new net principal limit will be the line of credit that is available to the borrower under the new line of credit payment plan.

to a tenure plan

  1. determine a new net principal limit by reducing the original net principal limit by the sum of all payments that have been made to the borrower, then
  2. increase the result by any partial repayments of mortgage loan advances that the borrower has made.

To determine the new tenure payments the borrower will be able to receive under the new tenure payment plan, the servicer must multiply this new net principal limit by the tenure conversion factor.

 

If a borrower changes…

Then the servicer must…

to a modified tenure plan

determine a new net principal limit.

The following table describes the method for doing this, which will vary depending on whether the borrower specifies the size of the desired line of credit or the size of the desired tenure payments.

If the borrower requests…

Then the servicer must…

a line of credit of a specified size

  1. determine the new net principal limit by reducing the original net principal limit by the sum of all payments that have been made to the borrower, 
  2. increase it by any partial repayments of mortgage loan advances that the borrower has made, and finally deducting an amount equal to the desired line of credit, and then
  3. determine the new tenure payments the borrower will be able to receive under the new modified tenure payment plan by multiplying this new net principal limit by the tenure conversion factor.

The borrower’s line of credit under the new payment plan will be the amount the borrower specified.

tenure payments of a specified size

  1. divide the desired payment amount by the tenure conversion factor, then
  2. determine the new net principal limit by reducing the original net principal limit by the sum of the result of this division and the total payments that have been made to the borrower and then increasing it by any partial repayments of mortgage loan advances that the borrower has made.

This new net principal limit will be the line of credit that is available to the borrower under the new modified tenure payment plan. The borrower’s new tenure payments will be in the amount the borrower specified.

 

If a borrower changes…

Then the servicer must…

the terms of a modified tenure plan

reallocate the net principal limit that exists between the line of credit and the tenure payments.

The following table describes the method used to reallocate the net principal limit, which will differ, depending on whether the borrower wants to increase the size of the line of credit or the size of the tenure payments.

If the borrower requests to increase the size of…

Then the servicer must…

the line of credit

  1. determine the new net principal limit by reducing the original net principal limit by the sum of all payments that have been made to the borrower and the amount of the desired new line of credit,
  2. increase it by any partial repayments of mortgage loan advances that the borrower has made, and then
  3. determine the new tenure payments the borrower will be able to receive under the revised modified tenure payment plan by multiplying this new net principal limit by the tenure conversion factor.

The borrower’s line of credit under the revised payment plan will be the amount the borrower specified.

the tenure payment

  1. divide the desired payment amount by the tenure conversion factor,
  2. determine the new net principal limit by
  3. reducing the original net principal limit by the sum of the result of this division and the total payments that have been made to the borrower and then
  4. increasing it by any partial repayments of mortgage loan advances that the borrower has made.

This new net principal limit will be the line of credit that is available to the borrower under the revised modified tenure payment plan.

The borrower’s revised tenure payments will be in the amount the borrower specified.

When the Borrower Makes Payments

When the borrower decides to make the payments for T&I premiums, proof that a payment has been made must be sent to the servicer no later than 30 days after the due date of the payment. If the borrower does not provide this proof of payment, fails to respond to the servicer’s written request for proof of payment within 30 days, or if the servicer receives a delinquency notice from the taxing authority or insurer, then the servicer must contact the applicable taxing authority or insurer to determine whether the payment has been paid. If payment has not been made, the servicer must make the payment plus any applicable late charges or penalties and add the amount paid to the borrower’s monthly mortgage loan balance at the end of the month in which the payment is made.

The servicer must contact the borrower after verifying the delinquency with the taxing authority or insurance agent, but no more than 30 days after the date of the delinquency notice. The contact with the borrower with respect to a delinquency in making property tax payments should be made both by telephone and by mail. Only written contact with the borrower is required for a delinquency in paying insurance premiums; however, the servicer should follow up with the insurance agent to make sure that the borrower’s payment is received. The written communication with the borrower must

  • emphasize the seriousness of the borrower’s failure to pay the taxes and/or insurance premium and the need to work with the servicer to avoid future delinquencies in making these payments;
  • refer the borrower to a counselor who can give the borrower information about agencies in the area that may be able to assist the borrower (the counselor may be the counselor that advised the borrower about the Home Keeper mortgage loan at loan closing or a HUD-approved counseling agency); and
  • describe the next action the servicer intends to take, which will depend on the terms and status of the borrower’s payment plan.

In all cases, the servicer must remind the borrower that the failure to make timely payment of these property-related charges can be considered a default under the terms of the mortgage loan. The servicer also should indicate to the borrower that it can handle the payment of these expenses on the borrower’s behalf in the future if funds are available in the borrower’s net principal limit. 

When the borrower does not provide proof of payment or respond to the servicer’s letter within 20 days, the servicer must make the payment (including any late charges or penalties) and add the amount it paid to the borrower’s mortgage loan balance at the end of the month in which the payment is made. The servicer should then request Fannie Mae to reimburse it for the unscheduled payment under Fannie Mae’s standard disbursement procedures.

If, after 30 days from the date of the servicer’s initial letter, the borrower still has not responded to either the letter or repeated follow-up telephone calls, the servicer must send the borrower an occupancy verification request. At the same time, the servicer must attempt to contact the borrower’s nearest relative or third-party contact person (making sure that such communications are in compliance with the requirements of the Fair Debt Collections Practices Act). Then, if the servicer still does not hear from the borrower or the borrower’s representative within 30 days of the date of the occupancy verification request, it must contact its Reverse Mortgage Loan Servicing Representative to request approval to call the mortgage loan due and payable.

For HECM loans, the servicer must follow all applicable HUD requirements for tax and insurance payments.

The following table describes required actions by the servicer depending on the payment plan type.

Payment Plan Type

Servicer Action

Term or tenure payment plan

The servicer must notify the borrower that the payment plan will have to be changed to a payment plan that provides a line of credit sufficient to fund the servicer’s unscheduled payment.

For HECMs specifically, if the servicer elects to make future payments on the borrower’s behalf, it must also advise the borrower that it will deduct an estimated accrual for those payments from the borrower’s scheduled payments each month.

Line of credit or modified term or tenure plan

When there are sufficient funds remaining in the credit line to cover the servicer’s advance, the servicer must inform the borrower that it will initiate a draw against the credit line for the amount it advanced to pay the tax or insurance bill.

When the balance remaining in the credit line is not sufficient to cover the servicer’s advance, the servicer must issue a demand for repayment of the advance. The servicer must advise the borrower that, if the advance is not repaid within 30 days, the servicer will use whatever funds that are still available to the borrower (either in the credit line or through scheduled tenure payments) to repay the advance and, if appropriate, will change the terms of the repayment plan to reallocate any remaining funds. Should there be no additional funds available to the borrower under the payment plan, the servicer must advise the borrower that he or she will be declared “in default under the terms of the mortgage loan” if the advance is not promptly repaid. Also see 4-02, Acceleration of the Debt.

3-05, Managing Partial Repayments or Payments in Full (05/28/2014)

The servicer must accept partial repayments or payments-in-full from the borrower at any time during the month, without imposing a prepayment premium. Such payments must be applied to the mortgage loan balance on the date they are received so that any interest accrued for the month will be based on the reduced mortgage loan balance. The amount required to satisfy the mortgage loan in Fannie Mae’s records is the total outstanding debt at the time of the mortgage loan payoff. The servicer must remit to Fannie Mae any payments received within 24 hours.

The mortgage loan balance for a reverse mortgage loan has three components: principal, interest, and fees. The servicer must track and account for each of these components separately. Partial repayments must be applied to the mortgage loan balance in the following order: first to interest, then to fees, and finally to principal.

Partial repayments increase the borrower’s net principal limit. Partial repayments made by a borrower with a line of credit or modified tenure payment plan must be applied to the existing line of credit to increase the amount of funds available for the borrower’s future use. Partial repayments made by a borrower with a tenure, modified term, or modified tenure payment plan must specify whether the payment should be applied to the credit line or to the term or tenure payment account. The servicer must create a line of credit in the amount of the partial repayment (which, in effect, changes the plan to a modified tenure payment plan). However, a borrower who has a term or tenure payment plan may request that, instead of creating a line of credit, the servicer recalculate his or her tenure payments to take into consideration the partial repayment. See 6-01-02, Payment Change Transactions for additional information.

When a mortgage loan is paid in full, the servicer must submit a release request to Fannie Mae’s DDC. If Fannie Mae needs to release a separate satisfaction document, the servicer must submit that document to Fannie Mae’s SF CPM Division (see 7-03, List of Contacts).

3-06, Providing Account Statements to the Borrower (05/28/2014)

This topic contains information on the following:

Annual Mortgage Loan Account Statements

By January 31 of each year, the servicer must send the borrower a statement of mortgage loan account activity during the past year. This statement may be used to satisfy the IRS requirement for notifying borrowers of the total interest received from them and reported to the IRS for the preceding year. The servicer is not authorized to charge the borrower for the annual statement or the detailed analysis.

The annual statement that the servicer sends to a borrower who has a reverse mortgage loan must advise the borrower to seek advice about the tax consequences of a reverse mortgage loan. The statement must provide detailed information regarding the elements described in the following table.

The annual statement must include detailed information regarding…

 

all payments made to the borrower (whether they were scheduled payments or unscheduled draws from a line of credit).

 

all payments for taxes, property insurance, mortgage insurance (if applicable), and repair charges the servicer made on the borrower’s behalf.

 

the total servicing fees paid to the servicer and any other fees the borrower paid or financed for payment plan changes.

 

any payments made by the borrower.

 

the total accrued interest (and, if the borrower made any payments, the total interest he or she actually paid).

 

the mortgage loan balance at the end of the year.

 

the original principal limit and the current net principal limit at year-end.

 

the original line of credit, the current net line of credit at year-end, and any outstanding cash balance due the borrower.

Periodic Account Statements

The servicer also must provide a detailed analysis of all transactions relating to the borrower’s payments or set-aside account whenever the borrower requests it.

For Home Keeper mortgage loans: Within 15 days after the end of each calendar quarter, the servicer must send a borrower who has a Home Keeper mortgage loan a statement summarizing all of the interest rates that were in effect during that quarter, as well as information about all other activity that occurred during the quarter. If required by applicable law, the servicer must send these statements more often.

The quarterly statement must provide detailed information regarding the mortgage loan activity as described in the following table.

The quarterly statement must include detailed information regarding…

 

all monthly payments and draws against a line of credit that were sent to the borrower.

 

an itemized list of all payments that were made on the borrower’s behalf for taxes, insurance premiums, repairs, fees for payment plan changes, and appraisal charges.

 

total servicing fees paid to the servicer.

 

total amount of interest that accrued.

 

the balance of the mortgage loan at the end of the statement period.

 

the original principal limit and the current net principal limit.

 

the original line of credit, the current net line of credit, and the remaining balance available for withdrawal.

For HECM loans: The servicer must follow all applicable HUD requirements for providing account statements to borrowers.

3-07, Annual Occupancy Certification Requirements (05/28/2014)

The borrower does not have to repay the outstanding mortgage loan balance as long as the security property is owner-occupied as a principal residence; for Home Keeper mortgage loans, the borrower also must not be absent from the property for more than 12 consecutive months. To verify that a borrower is complying with the terms of the mortgage loan, a servicer must send the borrower an occupancy certification annually as long as the debt remains outstanding.

The servicer must send an occupancy certification to the borrower no later than 30 days after the anniversary date of the first month after loan closing and annually thereafter. The certification must include the requirements outlined in the following table.

If the servicer uses a third-party tax vendor to advise it about when a borrower is delinquent in making a property tax payment, the servicer must include a question as part of its annual occupancy verification form to ascertain whether the borrower has entered into a tax deferral program and also must include the same or a similar question on other documents it sends to the borrower—such as a notification of a change to the mortgage loan interest rate or an account activity statement—along with a reminder that the borrower should contact the servicer if he or she ever enters into a tax deferral program.

The annual occupancy certification must include…

 

a statement that the property continues to be the borrower’s principal residence.

 

a reminder that the borrower must give the servicer written notice about any absences from the property that are greater than two consecutive months (and provide a temporary mailing address).

 

a request for confirmation of the borrower’s designated third-party contact.

 

a question to ascertain whether the borrower has entered into a tax deferral program and a reminder to inform the servicer if that is so.

 

a borrower’s signature line that provides the following attestation:

 “WARNING: Section 1001 of Title 18 of the United States Code makes it a criminal offense to make a willfully false statement or misrepresentation to any department or agency of the United States government as to any matter within its jurisdiction.”

The servicer must advise the borrower that the certification must be signed and returned within 30 days.

3-08, Property Inspection Requirements (05/28/2014)

The servicer must follow all applicable HUD requirements for property inspections for HECM loans.

3-09, Requirements upon Completion of Property Repairs (05/28/2014)

A repair set-aside is available for a Home Keeper mortgage loan that has a line of credit payment plan or a modified tenure payment plan, if the completion of certain repairs is required as a condition of the borrower’s obtaining the mortgage loan and the borrower prefers not to pay for the repairs from his or her funds.

When a repair set-aside was established at mortgage loan closing, the servicer must monitor the progress of the repairs. The required repairs must be completed within 12 months of the date of mortgage loan closing. The servicer must have in place an early warning system to notify a borrower when the time frame for completing repairs is about to elapse, as well as “post-warning” procedures to encourage a borrower who falls behind in making repairs to begin complying with the repair schedule as soon as possible so that the work can be completed as required.

For HECM loans, the servicer must follow all applicable HUD requirements for the completion of property repairs.

This topic contains information on the following:

When Repairs Are Delayed

If repairs are not completed within the required time frame, the servicer generally should not make any scheduled or unscheduled payments to the borrower until the repairs are satisfactorily completed. The servicer must assess each borrower’s situation individually and make every effort not only to avoid causing the borrower undue hardship, but also to ensure that Fannie Mae is not exposed to losses as the result of the borrower’s failure to have the necessary repairs completed. The servicer has the discretion to take the following actions:

  • continue making the payments if the servicer believes that the repairs will be completed in the near future—and cessation of the payments would create a severe hardship for the borrower, or
  • discontinue making payments to the borrower and reserve the line of credit for funding repairs and other mandatory items (such as property charges, tax and insurance payments, etc.).

The servicer must provide the borrower with a written notice that explains the deficiencies, includes a statement that the mortgage loan may be called due and payable if the repairs are not completed.

If the borrower does not begin the repairs within 30 days of the date of this notice, the servicer must contact Fannie Mae to obtain its approval to declare the mortgage loan due and payable. Within 45 days after the end of the time period allowed for completing the repairs, the servicer must have the property inspected (and may charge the borrower an inspection fee of $50 or less, which the borrower may pay from personal funds or by adding the expense to the mortgage loan balance in connection with a change in the payment plan).

Requirements Upon Completion of Repairs

Once the servicer receives a certificate of completion or equivalent documentation indicating that the repairs have been completed as agreed (such as a punch list, contractor’s sheet, or an inspection report), it must disburse the funds to pay for the completed work jointly to the borrower and the contractor(s). Payments may be made either as specific repairs are completed or after all of the required repairs have been completed. When the servicer disburses the funds to pay for completed work, it should use Fannie Mae’s standard disbursement procedures to request an unscheduled payment from the repair set-aside and increase the mortgage loan balance accordingly.

Surplus Funds in the Repair Set-Aside: If the repair set-aside has funds remaining after all of the contractors have been paid, the amount in the set-aside will be transferred to the borrower’s net line of credit. The borrower may then choose either to receive a direct cash payment or to have the balance added to his or her net principal limit (thus gaining additional borrowing power). If a borrower who has a modified tenure payment plan chooses to increase the net principal limit, the borrower’s payment plan will need to be changed if he or she wants to increase the amount of the scheduled tenure payments. The servicer is not authorized to charge the borrower for this payment plan change.

For HECMs, if the repair set-aside has funds remaining after all of the contractors have been paid, the amount in the set-aside will be transferred to the borrower’s net line of credit. If the borrower does not have a line of credit, the borrower’s payment plan will need to be changed to one of the plans that includes a credit line.

Refer to 6-01-02, Payment Change Transactions.

Insufficient Funds in the Repair Set-Aside: If the repair set-aside does not have sufficient funds to pay for the entire cost of the repairs, the servicer must advance funds to pay the additional amount and inform the borrower that it will initiate a draw against the borrower’s line of credit for the amount of its advance. If the borrower’s line of credit balance is not sufficient to cover the servicer’s advance, the servicer must notify the borrower that his or her payment plan will have to be changed to a plan that provides for a line of credit that is sufficient to fund the amount of the servicer’s advance for the additional repair costs, unless the borrower chooses to use his or her own funds to reimburse the servicer for the additional amount it advanced.

Refer to Declaring the Debt Due and Payable in 4-02, Acceleration of the Debt, and 6-01-02, Payment Change Transactions.

3-10, Home Equity Conversion Mortgage Loan-Specific Requirements for the Assignment of the Mortgage Loan to HUD (04/11/2018)

The servicer must follow all applicable HUD requirements for the assignment of a mortgage loan to HUD for HECM loans.

The servicer must assign a HECM loan eligible for assignment to HUD once the outstanding mortgage loan balance—including all payments made to or on behalf of the borrower, all mortgage insurance premium accruals, servicing fees, and accrued interest—equals 98% (but is not more than 100%) of the maximum claim amount shown on the Mortgage Insurance Certificate.

Requests to assign HECM loans when the outstanding mortgage loan balance is greater than 100% of the maximum claim amount must be sent to the servicer’s Reverse Mortgage Loan Servicing Representative (see 7-03, List of Contacts) for approval prior to assigning to HUD.

As soon as the servicer receives the custodial documents, it must prepare and execute the appropriate legal instruments to assign the mortgage loan to HUD. The servicer must file a claim for insurance benefits in Fannie Mae’s name. FHA Mortgagee Number 9500109998 must be used if the claim forms require Fannie Mae’s FHA Mortgagee Number. To ensure that HUD sends the claim settlement directly to Fannie Mae, the servicer must show Fannie Mae’s name and address on the claim form as described in 7-03, List of Contacts.

To notify Fannie Mae of the forthcoming claim settlement, the servicer must send a copy of the applicable claim form filed with HUD along with documentation supporting the claim, to Fannie Mae’s SF CPM division (see 7-03, List of Contacts) within two business days after it files the claim. The claim form must be identified by the

  • applicable Fannie Mae and servicer mortgage loan numbers,
  • servicer’s name, and
  • seller/servicer identification number.

3-11, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan (06/12/2019)

Servicers evaluating a borrower request for release or partial release (including but not limited to requests to grant or release easements; requests to lease land for the installation of a cellular base station or wind turbine; requests to lease oil, gas, or mineral rights; requests to partition or subdivide real property; and condemnation or eminent domain actions) related to reverse mortgage loans must obtain approval from their Reverse Mortgage Loan Servicing Representative (see 7-03, List of Contacts).

 

 

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 2, Doing Reverse Mortgage Loan Business with Fannie Mae

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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