Servicing Guide

Published September 9, 2020

For best results, pose your search like a question.

Guide Resources

For a comprehensive list of resources such as forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

Customers Recommend Ask Poli

AskPoli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Launch Ask Poli  

Download PDF Guide

You can also download the printable ~800 page PDF, which include links.

Download Now

Fannie Mae Single-Family Reverse Mortgage Loan Servicing Manual June 12, 2019 (Chapter 4, Assisting Borrowers at Risk of Default or in Default)

See below for Chapter 4: Assisting Borrowers At Risk of Default or In Default 

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 3: General Servicing Requirements

Chapter 5: Processing Claims and Managing Acquired Properties

Chapter 6: Reporting through eBoutique

Chapter 7: Quick Reference Materials

 

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

This chapter contains the following topics:

4-01, Effect of Bankruptcy Filing (05/28/2014)

A Fannie Mae mortgage loan may be the subject of a bankruptcy proceeding initiated by the borrower or someone other than the borrower (especially if the original borrower has died and the ownership of the property passed under a will or by intestacy). When a Fannie Mae mortgage loan is the subject of bankruptcy proceedings, the servicer must refer the mortgage loan to the selected law firm and seek guidance on whether to immediately stop making payments in accordance with the provisions of the reverse mortgage loan agreement and, if not, on the next course of action that it should take.

Regardless of the type of bankruptcy filed, the servicer must work with the law firm to ensure that the requirements of Servicing Guide E-1.1-01, General Requirements for Referring a Mortgage Loan to a Law Firm are followed.

For HECM loans, the servicer must follow all applicable HUD requirements for bankruptcy filings.

This topic contains information on the following:

Chapter 7 Filings 

The reverse mortgage loan agreement permits the servicer to cease making payments to, or advances on behalf of, the borrower when a bankruptcy is filed under Chapter 7. However, the agreement does not provide for a declaration of bankruptcy to be a default event that allows the servicer to declare the mortgage loan due and payable.

If the servicer suspended periodic payments or advances as the result of the bankruptcy filing and the mortgage loan is subsequently discharged from the bankruptcy, the servicer must contact its Reverse Mortgage Loan Servicing Representative (see 7-03, List of Contacts) to determine whether and in what manner payments or advances can be resumed.

Chapter 13 Filings 

The reverse loan agreement does not provide for a declaration of bankruptcy to be a default event that allows the servicer to declare the mortgage loan due and payable when a bankruptcy is filed under Chapter 13. However, the agreement does authorize the servicer to suspend payments made to, or on behalf of, the borrower while the bankruptcy reorganization plan is in effect. In fact, making such payments is prohibited unless they are specifically authorized by the bankruptcy court.

Since a Chapter 13 reorganization plan can last for several years, the servicer must immediately advise the law firm on the occurrence of any event that would otherwise be grounds for accelerating the debt.

4-02, Acceleration of the Debt (04/11/2018)

This topic contains information on the following:

Declaring the Debt Due and Payable

The determination of whether to declare the debt due and payable is dependent upon the reverse mortgage loan product. The servicer must request Fannie Mae’s permission to call a Home Keeper mortgage loan due and payable if the default balance exceeds $2,000. If the default balance of the Home Keeper mortgage loan is less than or equal to $2,000, before calling the loan due and payable the servicer should first contact its Reverse Mortgage Loan Servicing Representative (see 7-03, List of Contacts) to determine whether Fannie Mae supports some other alternative.

Once a mortgage loan has been called due and payable, the borrower (which also includes the borrower’s estate) may not receive any further scheduled or unscheduled payments for as long as the mortgage loan remains due and payable. The servicer may continue to make required T&I payments and add them to the borrower’s mortgage loan balance (if it is responsible for making such payments or the borrower fails to meet his or her responsibility for making them). In addition, the servicer must continue to add servicing fees and accrued interest to the outstanding balance of the mortgage loan until the debt is satisfied or the default is otherwise cured.

For HECM loans, the servicer must follow all applicable HUD requirements for declaring the debt due and payable.

Home Keeper Specific Requirements

The debt for a Home Keeper mortgage loan may be accelerated by calling it due and payable under the terms of the mortgage loan when any of the following circumstances occur:

  • the last surviving borrower dies or sells the property,
  • interest in the property is transferred to another person, or
  • the borrower defaults, including the borrower’s
          • no longer occupying the property as the primary residence,
          • inability or unwillingness to maintain the property,
          • failure to make T&I payments as they come due, or
          • violation of any other covenant of the mortgage loan.

The servicer declares a mortgage loan due and payable by sending the borrower (which includes the borrower’s estate) a Notice of Immediate Payment. The content of this notice will vary depending on the reason the mortgage loan debt is being accelerated and is described in the following table.

When the mortgage loan is being called due and payable because…

Then the servicer must send a Notice of Immediate Payment that…

the last surviving borrower has died or sold the property,

  • specifies the outstanding mortgage loan balance, and the amount that must be repaid to satisfy the debt, and
  • states that full repayment is due and payable immediately and that, if the payment is not received within 30 days, foreclosure proceedings will be initiated.

If the borrower still owns the property, the servicer may indicate that it may be willing to extend the time allowed for the repayment if a good faith effort is currently being made to sell the property.

the borrower has failed to occupy the property, has failed to make T&I payments (or to reimburse the servicer for advances it made to pay them), or has otherwise violated one of the mortgage loan covenants,

  • specifies the nature of the default,
  • describes the action(s) required to cure the default,
  • provides a period of not less than 30 days (from the date the notice is delivered or mailed) within which the borrower may cure the default,
  • indicates that, if the borrower fails to cure the default within the allowed time period, all sums the borrower owes will become due and payable, and
  • specifies the amount that would have to be repaid to satisfy the debt.

NOTE: Any advances the servicer made on the borrower’s behalf that have not already been added to the borrower’s outstanding mortgage loan balance or repaid by the borrower should be included in the mortgage loan balance that is used to determine the amount required to satisfy the debt

4-03, Curing the Default (04/11/2018)

After receiving the Notice of Immediate Payment, the borrower may correct any covenant violations that led to the notice of acceleration or the borrower may sell the property to pay off the outstanding debt.

The borrower may cure a default of one of the mortgage loan covenants by taking appropriate corrective action—reoccupying the property, providing proof of adequate insurance coverage, paying outstanding tax bills or assessments, repairing the property, etc. Following the curing of a default, the servicer must update the eBoutique status code in order to notify Fannie Mae that it can resume disbursing payments to the borrower. See 6-01-03, General Servicing Transactions for additional information.

If the borrower sells the property, the servicer must accept as the amount required to satisfy the indebtedness proceeds equal to the lesser of the outstanding debt or the current appraised value of the property, if Fannie Mae required an appraisal. If the property is sold after the initiation of foreclosure proceedings, any foreclosure expenses that were incurred should be included in the outstanding debt amount.

If the current appraised value is the less than the outstanding debt (including foreclosure expenses incurred), Fannie Mae may reduce the amount required to satisfy the debt by the sales commission that the real estate broker received for selling the property. The servicer must contact the Deed-In-Lieu Short Sale mailbox at dil-shortsale_reverse@fanniemae.com if it believes that such a reduction in the amount required to satisfy the debt is appropriate.

When the debt is satisfied, the servicer must report the payoff to Fannie Mae and request the release of any custodial documents to Fannie Mae’s DDC.

Fannie Mae will draft the funds for satisfaction of the mortgage loan from the servicer’s designated custodial account within 24 hours after the servicer notifies Fannie Mae that it has received the payoff proceeds. See 6-01-03, General Servicing Transactions for additional information.

For HECM loans, the servicer must follow all applicable HUD requirements for curing the default.

4-04, Acceptance of the Deed-in-Lieu (12/12/2018)

After the Notice of Immediate Payment is received, the borrower may offer the servicer a deed to the property in exchange for full satisfaction of the debt. Fannie Mae will consider accepting a deed-in-lieu as long as good and marketable title to the property can be conveyed.

For Home Keeper mortgage loans:  The servicer must refer any offer of a deed-in-lieu to the Deed-In-Lieu Short Sale mailbox at dil-shortsale_reverse@fanniemae.com. If Fannie Mae agrees to accept the offer, the servicer must advise the borrower that a deed conveying title of the property to Fannie Mae must be executed. Also see Servicing Guide D2-3.3-02, Fannie Mae Mortgage Release for additional information.

For HECM loans:  The servicer must follow all applicable HUD requirements for the acceptance of a deed-in-lieu.

For both Home Keeper and HECM loans:  The servicer must schedule property inspections prior to the borrower’s (or his or her estate’s) execution of a deed-in-lieu in accordance with the requirements of Obtaining a Property Valuation and Evaluating the Condition of the Property in Servicing Guide D2-3.3-02, Fannie Mae Mortgage Release.

Within 24 hours after a borrower (or his or her estate) executes a deed-in-lieu, the servicer must submit an REOgram™ to notify Fannie Mae’s SF Credit Ops division or its delegate of the property acquisition (see 5-01, Submitting the REOgram for additional information). When the servicer receives the executed deed, it must immediately submit it for recordation.  The servicer must ensure that the property is vacant and in broom-swept condition at the time of delivery to Fannie Mae, however, the servicer is not responsible for conducting a final interior property inspection, unless otherwise instructed by Fannie Mae.

If after submitting the REOgram to Fannie Mae the servicer identifies an issue that requires the elimination of an acquired property from REO inventory, the servicer must submit a request for elimination to Fannie Mae within five days. See Servicing Guide E-4.1-02, Eliminations and Rescissions of Foreclosure Sales for additional information.

4-05, Initiation of Foreclosure Proceedings (04/11/2018)

If the borrower does not respond to the Notice of Immediate Payment by paying off the mortgage loan, offering a deed-in-lieu, or otherwise curing the default, the servicer must begin foreclosure proceedings by no later than the 180th day after the Notice of Immediate Payment.

Generally, the servicer should instruct the law firm to enter a foreclosure sale bid that is equal to the lesser of the borrower’s outstanding mortgage loan balance (which should include any outstanding servicer advances) or the appraised value of the property. The servicer may instruct the law firm to bid the borrower’s outstanding mortgage loan balance unless it believes that the property value is less than the borrower’s outstanding balance. If that is the case, the servicer must contact its Reverse Mortgage Loan Servicing Representative to determine whether Fannie Mae is willing to enter a “short” bid.

If a third-party acquires the property at the foreclosure sale, the servicer must report the acquisition of the property by removing the mortgage loan from Fannie Mae’s accounting records, collect the sales proceeds, and remit the amount Fannie Mae is due within 5 business days. See 5-05, Submitting Special Remittances and 6-01-03, General Servicing Transactions for additional information.

When the servicer’s foreclosure bid is successful, the servicer must notify Fannie Mae of the property acquisition by submitting an REOgram within 24 hours of the foreclosure sale. Fannie Mae will then develop an appropriate marketing strategy for disposing of the property. See 5-01, Submitting the REOgram for additional information.

The servicer must record Fannie Mae’s title to the property in the appropriate land records at the earliest allowable time. Fannie Mae also may request that the servicer perform certain other administrative functions in connection with Fannie Mae’s disposition of the acquired property. See Servicing Guide C-4.1-01, Notifying Credit Repositories and Chapter E-4, Managing Acquired Properties for additional information.

The servicer may request reimbursement for any expenses incurred in connection with the foreclosure proceedings (including law firm’s fees) or for expenses associated with any administrative functions it performs for an acquired property. To do this, the servicer should submit an expense reimbursement claim via the appropriate system. See 2-06, Submitting Expense Reimbursement Claimsand Servicing Guide E-5-01, Requesting Reimbursement for Expenses for additional information.

For HECM loans, the servicer must follow all applicable HUD requirements for the initiation of foreclosure proceedings.

Home Keeper-Specific Requirements Related to the Initiation of Foreclosure Proceedings

This topic contains information on Home Keeper-Specific Requirements Related to the Initiation of Foreclosure Proceedings.

The servicer may initiate foreclosure proceedings:

  • by the 60th day after the Notice of Immediate Payment was issued if the mortgage loan was called due and payable as the result of the borrower’s death, sale of the property, or failure to occupy the property as a principal residence; or
  • between the 30th and 60th days after the Notice of Immediate Payment was issued if the mortgage loan was called due and payable for any other reason and the borrower did not cure the default within the specified 30-day time period.

If appropriate, a servicer may tailor a foreclosure prevention workout plan to cure the default and avoid a foreclosure. The granting of an extension is often enough to cure the default. On the other hand, if a permanent solution is called for, the servicer must consider proposing a short sale or deed-in-lieu before it initiates foreclosure proceedings.

The servicer is authorized to submit a request for a short sale when the surviving spouse or heirs desire to purchase the property and the transaction is not arms-length. Parties involved in a short sale transaction are required to provide a signed Short Sale Affidavit (Form 191) at the closing; however, for transactions involving the surviving spouse or heirs as the purchaser, the servicer must revise the form to delete the arms-length requirement between the seller(s) and buyer(s).

When there is no practical alternative to foreclosure, Fannie Mae expects the servicer to foreclose the mortgage loan expeditiously by using competent and diligent law firms who are highly experienced in handling foreclosure proceedings. See Servicing Guide E-1.1-01, General Requirements for Referring a Mortgage Loan to a Law Firmfor additional information.

4-06, Determination of Payoff Proceeds Due From Borrower-Specific to Home Keeper Mortgage Loans (05/28/2014)

To determine the amount required to satisfy a Home Keeper mortgage loan, use the following formula:

+ 0

Ending Loan Balance from Prior Period

+ 0

Interest on Ending Loan Balance from Prior Period1

+ 0

Scheduled Payment Amount for Current Period (if applicable)

+ 0

Interest on Scheduled Payment Amount for Current Period (if applicable)2

+ 0

Unscheduled Payments for Current Period (if applicable)

+ 0

Interest on Unscheduled Payments for Current Period (if applicable)3

- 0

Partial Repayments for Current Period (if applicable)

- 0

Interest on Partial Repayments for Current Period (if applicable)4

+ 0

Servicing Fee for Current Period

= 0

Total Payoff Due Fannie Mae

NOTE: If this amount is greater than the current appraised value of the property, the borrower is required to pay Fannie Mae only the current appraised value of the property.

NOTE:   

1.    Beginning Balance ´ Current Interest Rate / 365) ´ (Elapsed Days Between End of Prior Reporting Period and Payoff Date)

2.    (Scheduled Payment Amount ´ Current Interest Rate / 365) ´ (Elapsed Days Between Date of Scheduled Payment and Payoff Date)

3.    (Unscheduled Payment Amount ´ Current Interest Rate / 365) ´ (Elapsed Days Between Date of Unscheduled Payment and Payoff Date)

4.    (Partial Repayment Amount ´ Current Interest Rate / 365) ´ (Elapsed Days Between Date of Partial Repayment and Payoff Date)

 

4-07, Determination of Payoff Proceeds Due From Borrower-Specific to Home Equity Conversion Mortgage Loans (05/28/2014)

To determine the amount required to satisfy a HECM loan, use the following formula:

+ 0

Loan Balance from Prior Period

+ 0

Interest on Loan Balance from Prior Period1

+ 0

FHA Mortgage Insurance Premium (MIP) on Loan Balance from Prior Period2

+ 0

Scheduled Payment Amount for Current Period (if applicable)

+ 0

Interest on Scheduled Payment Amount for Current Period (if applicable)3

+ 0

MIP on Scheduled Payment Amount for Current Period4

+ 0

Unscheduled Payments for Current Period (if applicable)

+ 0

Interest on Unscheduled Payments for Current Period (if applicable)5

+ 0

MIP on Unscheduled Payments for Current Period (if applicable)6

- 0

Partial Repayments for Current Period (if applicable)

- 0

Interest on Partial Repayments for Current Period (if applicable)7

- 0

MIP on Partial Repayments for Current Period (if applicable)8

+ 0

Servicing Fee for Current Period

= 0

Total Payoff Due Fannie Mae

 

NOTE:    
1.    Beginning Balance x Current Interest Rate / 365) x (Elapsed Days Between End of Prior Reporting Period and Payoff Date)
2.    (Beginning Balance x Annual MIP Rate) / 365) x (Elapsed Days Between End of Prior Reporting Period and Payoff Date)
3.    (Scheduled Payment Amount x Current Interest Rate / 365) x (Elapsed Days Between Date of Scheduled Payment and Payoff Date)
4.    (Scheduled Payment Amount x Annual MIP Rate / 365) x (Elapsed Days Between Date of Scheduled Payment and Payoff Date)
5.     (Unscheduled Payment Amount x Current Interest Rate / 365) x (Elapsed Days Between Date of Unscheduled Payment and Payoff Date)
6.    (Unscheduled Payment Amount x Annual MIP Rate / 365) x (Elapsed Days Between Date of Unscheduled Payment and Payoff Date)
7.    (Partial Repayment Amount x Current Interest Rate / 365) x (Elapsed Days Between Date of Partial Repayment and Payoff Date) 
8.    (Partial Repayment Amount x Annual MIP Rate / 365) x (Elapsed Days Between Date of Partial Repayment and Payoff Date 

 

Have You Tried Ask Poli?

Poli knows. Just ask.

Ask Poli features exclusive Q&As and
more—plus official Selling & Servicing
Guide
content.

Try Ask Poli

Related Articles


AskPoli

Customers Recommend Ask Poli

If you have additional questions, Fannie Mae customers can visit Ask Poli to get information from other Fannie Mae published sources.

Guide Resources

For a comprehensive list of resources such as access forms, announcements, lender letters, notices and more.

Visit Selling and Servicing Guide Communications and Forms

X
Having Issues with Seeing this Page Correctly?

Use Firefox or Chrome   How to do a hard refresh in Internet Explorer
We recommend that you use the latest version of FireFox or Chrome.

Download Firefox
Download Chrome
  A hard refresh will clear the browsers cache for a specific page and force the most recent version of a page.
    Hold the Ctrl key and press the F5 key.
     

Email Us
If you still have Technical Support questions, feel free to emailAsk_Poli@fanniemae.com.