D1-1-02, Evaluating a First Lien Mortgage Loan for Charge-Off and Release of Lien (09/11/2024)
The servicer must review and submit to Fannie Mae for approval a request for approval to cease collection efforts on a delinquent mortgage loan when the following requirements have been met:
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the mortgage loan becomes 120 days delinquent, or the mortgage loan has reached maturity plus 120 days,
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all appropriate measures to collect under the Servicing Guide have been exhausted, and the servicer has deemed the debt to be uncollectable,
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the mortgage loan is secured by a property that was the borrower's principal residence at loan origination, any home on the property is currently occupied, and the land and any structures on the land are being maintained and preserved in compliance with municipal requirements as supported by property inspections, and
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at least one of the following conditions apply:
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a foreclosure sale cannot be completed for a first lien conventional mortgage loan that Fannie Mae owns or securitizes;
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the mortgage loan, or the property securing it, is the subject of an agreement to resolve a legal dispute, or a court has permitted the mortgage loan to be satisfied (see
); Note: When an issue is presented that may pose a significant legal or reputational risk to Fannie Mae, the servicer must follow the procedures in accordance with
. - the property securing the mortgage loan is or has been the subject of either:
- a government seizure (see
); - foreclosure by condominium/homeowner's association and the property has been sold; or
- a receivership proceeding and the property has been sold;
- a government seizure (see
- the mortgage loan has an impediment or encumbrance making it impossible or impracticable to obtain clear title to the mortgaged premises, and the mortgage loan is not subject to repurchase as outlined in
; - the UPB is $5,000 or less and the total indebtedness is $15,000, or less;
Note: In the event the UPB is greater than $5,000 or the indebtedness exceeds $15,000, and all other criteria has been met, the request may be submitted for consideration.
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the property securing the mortgage loan is a unit in a condominium, cooperative, or similar project, and either the unit is damaged, and the repair of the unit is not feasible because of the physical condition of the remainder of the project; or the project is not presently economically viable; or the governing body or a court has terminated the association;
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the property has suffered a natural or man-made disaster that results in earth movement (e.g., a landslide or a mudslide) such that rebuilding on the land is impracticable or impossible; or
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a third-party is willing to accept legal responsibility for the property securing the mortgage loan.
Note: Confirmation of transfer of ownership to the third party will be required if the charge-off is approved.
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Fannie Mae must determine if a charge-off and release of the related first lien is the most beneficial outcome for the mortgage loan.
Investor Reporting Manual for reporting a charge-off to Fannie Mae, and
The table below provides references to recently issued Announcements that are related to this topic.
Announcements | Issue Date |
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September 11, 2024 | |
Announcement SVC-2019-03 | May 15, 2019 |