Fannie Mae Updates Problem Drywall Forbearance Policies and Clarifies Policies for Pooling of Repurchased Loans in MBS

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Fannie Mae Updates Problem Drywall Forbearance Policies and Clarifies Policies for Pooling of Repurchased Loans in MBS

On August 16, 2010, Fannie Mae initiated a "unique hardships" policy for qualified borrowers experiencing temporary, unforeseen events or conditions that are unlikely to reoccur.

Under the unique hardships policy, Fannie Mae has directed servicers to grant forbearances for up to six months where the property secured by a mortgage loan has problem drywall that was new when installed between 2001 and 2008, and the related borrower has suffered financial hardship due to additional housing expenses and remediation. Starting today, after evaluating the borrower's continued financial hardship and progress towards remediation, servicers may extend the forbearance for an additional six months.

Extending the forbearance period for homes with problem drywall from six to twelve months may delay the timing of principal repayments on your certificates. Though Fannie Mae's general policy is to purchase loans that are delinquent as to four or more consecutive monthly payments from single-family MBS trusts, it does not currently purchase loans in forbearance. The purchase of a delinquent loan from an MBS trust has the same effect on the timing of certificate principal repayment as a borrower prepayment in full, and therefore extensions of forbearance periods could delay such purchases and the related certificate principal repayments. Please consult our June 1, 2009 MBS Prospectus for additional information regarding our trust agreement provisions and servicing practices regarding troubled loans, including purchases of delinquent loans from our single-family MBS trusts.

Additionally, Fannie Mae is clarifying that a mortgage loan that a party other than Fannie Mae (e.g., a private investor or other GSE) required the lender to repurchase is not eligible for pooling in an MBS trust. These types of mortgage loans are not eligible for pooling in an MBS trust even if the identified defect has been cured by the lender, and the loan otherwise satisfies our underwriting guidelines. However, when Fannie Mae has demanded the repurchase of a mortgage loan, or a mortgage loan was delivered to a party other than Fannie Mae by mistake and is then repurchased by the lender, the mortgage loan that was repurchased can be pooled in an MBS trust as long as any condition making the mortgage loan ineligible has been corrected and the loan otherwise satisfies Fannie Mae's current underwriting guidelines.

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

 

Originally published: 11/29/10