Selling Guide

Published October 2, 2018

A2-3.1-02: Sanctions, Suspensions, and Terminations (02/23/2016)

This topic contains information on the following subjects:

Imposition of Sanctions

When Fannie Mae determines that a lender’s performance of its selling and/or servicing obligations does not meet the standards in its Lender Contract, Fannie Mae may impose a formal sanction to give the lender official notice of its shortcomings and an opportunity to correct its deficiencies. Prior to imposing any sanction, Fannie Mae will generally give the lender notice of the contemplated action so the lender can submit a written response or request a meeting with its Fannie Mae customer account team. The lender’s written response must include a description and explanation of any mitigating circumstances or specific proposals to satisfy Fannie Mae’s objections to the lender’s performance of its obligations under the Lender Contract. Fannie Mae reserves the right to omit these steps and take immediate action to terminate or suspend the Lender Contract at any time in accordance with the provisions thereof.

If any act, omission, or failure of performance by a lender constitutes a breach of the Lender Contract, Fannie Mae is not obligated to impose a sanction prior to exercising its contractual right to terminate or suspend the lender’s selling arrangement, servicing arrangement, or all of its Lender Contract. If Fannie Mae initially chooses to place a lender under a formal sanction, Fannie Mae can subsequently decide that termination or suspension is the more appropriate action and take immediate steps to effect the termination even if the terms of the sanction have not yet expired.

Suspension of Selling Arrangement

Fannie Mae may suspend a Lender Contract for a specified period of time or it may state that the suspension is for an “indefinite period.” Fannie Mae usually specifies an “indefinite period” when Fannie Mae wants the lender to satisfy certain conditions—such as the hiring of additional staff—before Fannie Mae removes the suspension. Fannie Mae may apply the suspension of a selling arrangement to all products or to specific products, depending on the type and seriousness of the lender’s failure to perform. Even when Fannie Mae suspends a lender’s selling arrangement, it will honor any outstanding whole loan commitments and MBS pool purchase contracts. However, if Fannie Mae decides to terminate the lender’s selling arrangement (or the entire Lender Contract) for cause either at or before the end of the suspension period, it may declare any outstanding pricing or purchase commitments or pool purchase contracts to be void.

Fannie Mae may suspend the Lender Contract whenever a breach has been identified. Fannie Mae may suspend a lender's right to add new mortgage loans to its Fannie Mae servicing portfolio—whether those mortgage loans represent new mortgage loans Fannie Mae would purchase or securitize or existing Fannie Mae-owned or Fannie Mae-securitized mortgage loans that would be transferred from another servicer. The suspension of new servicing may apply to all types of mortgage loans or to specific products, depending on the nature of the lender's performance deficiencies.

Termination

Fannie Mae may terminate the Lender Contract, including selling and servicing, with or without cause, in accordance with Section IX of the MSSC.

Termination Without Cause

Fannie Mae may terminate a lender’s selling arrangement at any time without cause—effective immediately—by providing the lender with written notice of Fannie Mae’s intent to do so.

A lender may terminate its selling arrangement at any time—and effective immediately—by giving Fannie Mae written notice of its intent to do so. Any responsibilities or liabilities related to specific mortgages or MBS pools that the lender had before the termination will continue to exist after the termination unless Fannie Mae expressly agrees in writing to release the lender from those responsibilities and liabilities. The lender shall be responsible for all reasonable and customary costs and expenses related to the transfer of servicing in connection with a lender's voluntary termination of its servicing rights.

Termination of the lender’s selling arrangement does not affect any obligations in connection with any pricing or purchase commitments or pool purchase contracts that the lender has outstanding with Fannie Mae at the time of the termination; provided however that Fannie Mae may declare any outstanding pricing or purchase commitments or pool purchase contracts to be void.

Termination also does not release the lender from its responsibilities or liabilities related to mortgage loans and MBS pools that Fannie Mae purchased, securitized, or contracted to purchase or securitize before the termination, including the obligation to repurchase a mortgage loan in connection with the breach of a selling warranty, even if the breach is not discovered until after the termination, the breach did not result in any Fannie Mae losses, or the selling warranty was assumed in connection with an earlier transfer of servicing to another lender.

Additional provisions related to termination of servicing are described in the Servicing Guide.

Termination With Cause

If Fannie Mae terminates the lender’s selling arrangement with cause, it will be effective immediately and Fannie Mae may declare any outstanding pricing or purchase commitments or pool purchase contracts to be void. Additional provisions related to termination of servicing are set forth in the Servicing Guide.

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2016–02 February 23, 2016
Announcement SEL-2013–03 April 9, 2013