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D2-3.1-01, Determining the Appropriate Workout Option (11/12/2014)

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Evaluating the Mortgage Loan for Workout Options

The servicer must be familiar with the terms and eligibility requirements of each of the workout options available to help borrowers when the mortgage loan becomes delinquent or when the borrower’s monthly payment is in imminent default, as they may differ depending on whether the mortgage loan is in an MBS pool, including PFP mortgage loans, or in Fannie Mae’s portfolio.

The servicer must consider Fannie Mae’s workout options for the following conventional mortgage loans:

  • those held in Fannie Mae’s portfolio,

  • those purchased for Fannie Mae’s portfolio but that are subsequently sold to back an MBS pool PFP, and

  • those originally delivered as part of an MBS pool serviced under the special servicing option or shared-risk special servicing option MBS mortgage loans for which Fannie Mae markets the acquired property.

When the servicer uses Fannie Mae’s workout options for any mortgage loan other than those described previously, Fannie Mae will not be responsible for any losses or expenses the servicer incurs and will not pay the incentive fees it usually pays for certain workout options.

For government mortgage loans, the servicer must offer the specific workout options that the mortgage insurer or guarantor makes available.

The servicer must see the F-2-02, Incentive Fees for Workout OptionsF-2-02, Incentive Fees for Workout Options for information on the applicable incentive fees associated with a workout option, and must follow the procedures in F-1-18, Processing a Workout Incentive FeeF-1-18, Processing a Workout Incentive Fee for processing incentive fees.

If the eligibility criteria for a particular workout option are not satisfied but the servicer determines that there are acceptable mitigating circumstances, it must submit a request to Fannie Mae for review.

Evaluating a Borrower for Workout Options

See F-2-10, Fannie Mae’s Workout HierarchyF-2-10, Fannie Mae’s Workout Hierarchy for evaluating a borrower for workout options. The servicer must analyze each case carefully before determining which workout option is most appropriate. To ensure that the final workout option agreed upon is realistic, the servicer must consider the borrower’s financial condition, except as otherwise authorized under this Guide. See D2-2-05, Receiving a Borrower Response PackageD2-2-05, Receiving a Borrower Response Package for information on evaluating the borrower for workout options.

The following table provides the requirements if the servicer has information that the borrower should be evaluated for workout options.

The servicer must...

Explain to the borrower Fannie Mae’s workout options and the borrower’s responsibilities under each.


Obtain a complete BRP, unless stated otherwise in this Guide, to determine the most appropriate workout option.

See D2-2-04, Sending a Borrower a Solicitation Package for a Workout OptionD2-2-04, Sending a Borrower a Solicitation Package for a Workout Option and D2-2-05, Receiving a Borrower Response PackageD2-2-05, Receiving a Borrower Response Package for the requirements for sending a Borrower Solicitation Package and evaluating the borrower for workout options.


Stress the consequences of not meeting the terms of a workout option.

The servicer must not require the borrower to make an upfront cash contribution to be considered for a workout option.

Considering Refinancing a First and Second Lien Mortgage Loan

When Fannie Mae’s mortgage loan is in the second lien position and both the first and second lien mortgage loans need to be modified, it may be more appropriate to consider consolidating and refinancing the total debt. The servicer must submit to Fannie Mae for prior approval any proposals to consolidate and refinance the existing debt in lieu of modifying the outstanding mortgage loans.

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