A2-1-03, Servicer's Duties and Responsibilities Related to Mortgage Loans with Resale Restrictions or Shared Equity Transactions (05/10/2023)

This topic describes additional requirements only applicable to servicers.

See Selling Guide Section B5-5.2, Loans with Resale Restrictions and Section B5-5.3, Shared Equity Transactions for information on resale restriction mortgage loans and shared equity transactions.

The servicer must service mortgage loans subject to resale restrictions (as described in Selling Guide Section B5-5.2, Loans with Resale Restrictions) or shared equity transactions (as described in Selling Guide Section B5-5.3, Shared Equity Transactions) in accordance with this Guide, the mortgage loan documents, the recorded resale restriction agreement or shared equity transaction agreement, as applicable, and in compliance with applicable law. Any resale restrictions, including those related to a shared equity transaction, as applicable, must not impair the servicer's ability to carry out its general servicing duties and responsibilities in accordance with this Guide, including, but not limited to

• managing escrows,
• providing delinquent management and loss mitigation, and 
• conducting default servicing including managing foreclosure proceedings.

The servicer must notify its Fannie Mae Servicing Representative (see  F-4-02, List of ContactsF-4-02, List of Contacts) if it becomes aware of any such impairments related to a mortgage loan.

Failure by the parties to comply with any requirements of a resale restriction agreement or a shared equity transaction agreement, including, but not limited to the following, as applicable, must not impair the servicer's ability to carry out its obligations under this Guide, the mortgage loan documents, and applicable law:

• determining eligible homeowner or occupancy status,
• property maintenance and improvements, 
• maintaining property and flood insurance,
• payment fees and assessments,
• determining the property value and resale price, 
• transfers to eligible transferees,
• the exercise of purchase option rights, and 
• providing proper notifications to the borrower or servicer.

The servicer shall have no obligation to enforce the terms and conditions of any resale restriction agreement or shared equity transaction agreement, as applicable. However, in connection with a shared equity transaction, the servicer must cooperate with the shared equity program provider in carrying out its servicing-related obligations under the Shared Equity Amendment (Form 2200) or the Community Land Trust Ground Lease Rider (Form 2100) as applicable.

Pursuant to the terms of any resale restriction agreement or shared equity transaction agreement, as applicable, the servicer shall have the right but not the obligation to work with the borrower during an event of default under such agreement in order to protect the interests of Fannie Mae. Additionally, the servicer is authorized, but not required, to participate in any arbitration or mediation between the parties to any such agreement that the servicer believes may impact the servicing of the mortgage loans as required by this Guide.

Unless the servicer has the borrower's prior written authorization, and only as permitted by applicable law, the servicer must not provide any notices required to be provided to the borrower in accordance with this Guide to any other party to the resale restriction agreement or shared equity transaction agreement, as applicable, including, but not limited to:

• notices provided in connection with early delinquency outreach and loss mitigation,
• legal notices, such as breach and acceleration letters, and
• any notice of foreclosure sale or Mortgage Release.

However, the servicer must give notices of delinquency and any other notices to the shared equity program provider in accordance with the terms of the Shared Equity Amendment (Form 2200) or Community Land Trust Ground Lease Rider (Form 2100), as applicable, for purposes of preventing any disruption to the servicer in carrying out its obligations to assist a borrower who is facing default, including offering a workout option in accordance with the Guide.

Shared Equity Transactions - Purchase Option

A shared equity program may grant a program provider or its designee a purchase option or right of first refusal option to purchase the property securing the mortgage loan in the event of a proposed transfer of the property by the borrower, upon commencement of foreclosure proceedings after the borrower's failure to resolve a delinquency including through a workout option, or upon the servicer's acquisition of the property at foreclosure sale or through a Mortgage Release, after satisfying all amounts due under the mortgage loan. Under the terms of Shared Equity Amendment (Form 2200), within 60 days of foreclosure or a Mortgage Release, the shared equity program provider must provide notice to servicer of its intent to purchase the property, and the purchase must be completed within 90 days of such notice. If the shared equity program provider fails to give such notice, or advance funds to complete the purchase, within such periods, the purchase option shall be without further effect or validity following such foreclosure or Mortgage Release. See the purchase options described in the Shared Equity Amendment (Form 2200) and Community Land Trust Ground Lease Rider (Form 2100) for additional information. 

The servicer is responsible for adhering to Fannie Mae's established processes and time frames for completing routine foreclosure proceedings. See  E-3.2, Initiating and Processing Foreclosure Proceedings E-3.2, Initiating and Processing Foreclosure Proceedings  or additional information.

Additionally, the servicer must notify Fannie Mae of the shared equity program provider's acquisition of the property pursuant to a purchase option. See  E-4.1-01, Notifying Fannie Mae of an Acquired PropertyE-4.1-01, Notifying Fannie Mae of an Acquired Property for additional information.

Shared Equity Transactions - Excess Proceeds

The servicer must cooperate with the shared equity program provider to pay any excess proceeds due to the shared equity program provider in accordance with the terms of the shared equity transaction agreement. Excess proceeds are any proceeds that result from an eminent domain proceeding, foreclosure sale, Mortgage Release, or other transfer of the property securing the mortgage loan after the repayment in full of all amounts due under the mortgage and otherwise satisfying any of the borrower's defined maximum resale price interest in the property as described in the shared equity transaction agreement.