The Mortgage Selling and Servicing Contract requires the lender to warrant for each loan it delivers to Fannie Mae that the property is not damaged by fire, wind, or other cause of loss and that there are no proceedings pending for the partial or total condemnation of the property. The lender also warrants that the mortgage conforms to all applicable requirements in the Selling Guide, including the requirement that the mortgage is an acceptable investment. Finally, the lender represents and warrants that it knows of nothing involving the mortgage or the property that can reasonably be expected to cause the mortgage to become delinquent or adversely affect the mortgage's value or marketability.
The lender must be able to make the warranties that are described above. Therefore, before delivery of a mortgage loan to Fannie Mae where the property may have been damaged by a disaster, the lender is expected to take prudent and reasonable actions to determine whether the condition of the property may have materially changed. The lender is responsible for determining if an inspection of the property and/or new appraisal is necessary to support this warranty. If a property is located in a condo or co-op project, both the condition of the unit and the condition of the building in which the unit is located must be assessed.
The following table summarizes Fannie Mae’s requirements depending on the status of the loan at the time of the disaster, and whether the lender intended to deliver the loan with an appraisal or an appraisal waiver.
|Loan Status As Of Disaster||Loan Files With Appraisals||Loan Files With Appraisal Waiver Offers|
|In Process||Determine if condition of the property has materially changed since the appraisal effective date.||Lender may not exercise an appraisal waiver offer and must obtain an appraisal. Loan casefiles must be resubmitted to DU.|
|Closed, But Not Delivered||Determine if condition of the property has materially changed since the appraisal effective date.||Determine if condition of the property has materially changed since the note date. Lender may exercise the appraisal waiver, if the condition has not materially changed.|
|Delivered||See the Fannie Mae Servicing Guide, Chapter D1-3.|
The above requirements are necessary to support the lender’s property representations and warranties, and apply through the end of the delivery process, which is the whole loan purchase date or MBS settlement date.
Lenders should use the following criteria when determining if the mortgage loan can be delivered to Fannie Mae:
If the property has been damaged and the damage does not affect the safety, soundness, or structural integrity of the property and the repair items are covered by insurance, the lender may deliver the mortgage to Fannie Mae. In these circumstances, the lender must obtain documentation of the professional estimates of the repair costs and must ensure that sufficient insurance proceeds are available for the borrower's benefit to guarantee the completion of the repairs.
If the property was damaged and the damage is uninsured or the damage affects the safety, soundness, or structural integrity of the property, the property must be repaired before the mortgage loan is delivered to Fannie Mae.
DU is updated periodically to incorporate ZIP codes included in FEMA-Declared Disaster Areas. Fannie Mae may also add areas impacted by other disasters or emergencies at its discretion. Properties in those ZIP codes are excluded from consideration for an appraisal waiver. However, DU is not aware of all disasters and the lender may need to obtain an appraisal even if DU offered an appraisal waiver.
After Fannie Mae has received an acceptable appraisal that was performed following a disaster, that appraisal can serve as the basis for a future appraisal waiver. DU may issue appraisal waiver offers in disaster areas as soon as 120 days following a disaster. Lenders may exercise these offers in accordance with the requirements in B4-1.4-10, Appraisal Waivers.
When a loan is secured by a property located in a FEMA-Declared Disaster Area eligible for individual assistance, Fannie Mae provides additional flexibilities. The following requirements apply:
The underwriting documentation, including credit reports and verifications of income and assets, must be dated no more than 180 days before the note date.
Lenders may disregard the message in the DU Underwriting Findings Report that indicates if the loan casefiles has not already closed, the credit report has expired.
The appraisal must be dated no more than 180 days before the note date. Lenders must comply with the property eligibility requirements above.
Lenders who wish to receive representation and warranty relief offered by the DU validation service must continue to comply with all conditions in the DU Underwriting Findings Report, including the close by date.
Loans originated in accordance with the age of documentation flexibilities, must be delivered to Fannie Mae no later than two years from the date of the disaster declaration by FEMA.
See B5-4-02, Disaster-Related Limited Cash-Out Refinance Flexibilities for information related to certain flexibilities offered for a disaster related limited cash-out transaction.
The table below provides references to the Announcements that have been issued that are related to this topic.