Fannie Mae Clarifies that Principal Reduction Amount Initiatives will not apply to MBS

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Fannie Mae Clarifies that Principal Reduction Amount Initiatives will not apply to MBS

On August 2, 2010, the United States Department of the Treasury released Supplemental Directive 10-07, Making Home Affordable - Interactions with HFA Hardest-Hit Fund Programs, which clarifies servicer roles and responsibilities under state Housing Finance Agencies' Hardest-Hit Fund Programs (HHFs) for unemployed and delinquent borrowers. One option under that Supplemental Directive, which requires applicable borrowers to be evaluated for principal reductions on their mortgage loans, will not apply to mortgage loans which are backing Fannie Mae single-family mortgage-backed securities (MBS).

Other borrower relief measures under HHFs may apply to mortgage loans backing Fannie Mae MBS, depending on the individual program specifics enacted by each state Housing Finance Agency. Market participants should consult our October 29, 2010 Lender Letter for additional information regarding HHFs and mortgage loans backing Fannie Mae MBS, and our June 1, 2009 MBS Prospectus for additional information regarding our trust agreement provisions and servicing practices regarding troubled mortgage loans.

Investors may also contact our Fixed-Income Securities Helpline at 1-888-BOND HLP (1-888-266-3457) if they have additional questions.

Originally published: 10/29/10