C-1.2-01, Processing Additional Principal Payments (11/13/2024)

The servicer must immediately accept and apply an additional principal payment (referred to as a principal curtailment) identified by the borrower as such for a current mortgage loan.

The servicer must follow the procedures in Processing a Principal Curtailment in F-1-09, Processing Mortgage Loan Payments and PayoffsF-1-09, Processing Mortgage Loan Payments and Payoffs for detailed instructions related to applying a principal curtailment for a current mortgage loan.

For additional contractual information as it pertains to principal curtailments, see Fannie Mae’s Selling Guide Topic B2–1.5–05: Principal Curtailments.

Mortgage Loans Subject to a Payment Deferral or a Modification: The following table outlines how the servicer must apply a principal curtailment on a mortgage loan subject to a payment deferral or a modification.

In the case of a delinquent mortgage loan, any additional principal payments identified as such must first be applied toward curing the delinquency. If there are any remaining funds, the servicer must then apply them in accordance with Processing Additional Principal Payments for Current Mortgage Loans.

Upon a borrower’s written or verbal request, the servicer is authorized to reapply principal prepayments to cure a delinquency if the request meets the conditions in the following table.

Upon receipt of Fannie Mae’s request to reduce the UPB of a mortgage loan for a partial release of security, a condemnation award, or insurance proceeds sent to the servicer, the servicer must process the funds as an additional principal payment.

The following table lists the servicer’s responsibilities when the borrower requests that the mortgage loan be re-amortized to reduce the contractual monthly mortgage loan payment after a substantial principal curtailment.