Servicing Guide

Published September 18, 2018

Representation and Warranty Requirements for All Fannie Mae Mortgage Loans

In order to sell mortgage loans to Fannie Mae or deliver pools of mortgage loans to Fannie Mae for MBS, the seller makes certain representations and warranties concerning the seller itself as well as the mortgage loans it is selling or delivering. The MSSC contains specific representations and warranties as does the Selling Guide. See Selling Guide A2-1-01, Contractual Obligations for Seller/Servicers for additional information on the MSSC and general contract terms. Additional representations and warranties are contained in the Servicing Guide and elsewhere in the Lender Contract. Violation of any representation or warranty is a breach of the Lender Contract, including the warranty that the mortgage loan complies with all applicable requirements of the Lender Contract, which provides Fannie Mae with certain rights and remedies.

All selling representations and warranties are made to Fannie Mae as of the date a seller/servicer transfers mortgage loans to Fannie Mae and continue and survive

  • the sale of mortgage loans to Fannie Mae or delivery of pools of mortgage loans for Fannie Mae MBS,

  • any subsequent resale of the mortgage loans by Fannie Mae, and

  • termination of the MSSC and any agreement that is part of the Lender Contract unless Fannie Mae expressly releases the seller/servicer from them in writing.

The seller/servicer makes each representation and warranty set forth in the Lender Contract separately and independently from every other warranty it makes for a specific mortgage loan.

Representations and warranties are not limited to matters of which the seller/servicer had knowledge, except for the warranties numbered 10, 11, and 17 of Section IV, A: Specific Warranties, of the MSSC, which are violated only if the seller/servicer had knowledge of the untruth or, acting as a prudent seller/servicer, should have known about it through the exercise of due diligence. Although warranty number 17 is limited to matters of which the seller/servicer has knowledge or, as a prudent seller/servicer, should have discovered, this limitation does not in any way limit the seller/servicer’s warranty number 1 that the mortgage loan meets all applicable requirements in the Lender Contract, nor does it affect any other warranty. The seller/servicer is deemed to know matters that are of public record.

Because the selling warranties are not limited to matters within a seller/servicer’s knowledge, except as noted above, the action or inaction (including misrepresentation or fraud) of the borrower, or a third party, as well as the action or inaction (including misrepresentation or fraud) of the seller/servicer will constitute the seller/servicer’s breach of a selling warranty.

The servicer that acquires the servicing of a mortgage loan (either concurrently with or subsequent to Fannie Mae’s purchase of the mortgage loan) assumes and is responsible for the same selling warranties that the party responsible for the selling representations and warranties made when the mortgage loan was sold to Fannie Mae. When the servicer transfers its contractual right to service some or all of its servicing responsibilities to another Fannie Mae-approved servicer, any variance or waiver granted to a transferor servicer does not automatically transfer to the transferee servicer. In addition, the transferor servicer and transferee servicer must ensure that all existing special servicing obligations associated with the transferred mortgage loan are disclosed.

By submitting any mortgage loan or participation interest to Fannie Mae under any execution, including MBS, or a portfolio mortgage loan, the seller/servicer represents and warrants that

  • there is no agreement with any other party providing for servicing the mortgage loans that continues after such date unless there is full compliance with all the Fannie Mae Guide requirements for subservicing, or

  • any prior servicing agreement is made expressly subordinate to Fannie Mae’s rights as owner of the mortgage loans.

The party that was servicing for the seller/servicer prior to such date may become the servicer for Fannie Mae, if there is full compliance with all the Servicing Guide requirements that provide for assignment of servicing from the seller/servicer concurrent with conveyance of the mortgage loan to Fannie Mae. For additional information, see A2-7-01, Concurrent Servicing Transfers.

Representation and Warranty Requirements for Mortgage Loans with Mortgage Insurance

The seller represents and warrants that each mortgage loan it sells and delivers is insurable and that no fraud or material misrepresentation has been committed

  • by any employee, any agent of the responsible party, or any third party including, without limitation, the borrower;

  • by act or omission, in connection with the origination of the mortgage loan or servicing prior to the sale; and

  • regardless of the level or type of documentation, verification, or corroboration of information that may be required by the Selling Guide or any other contract.

A mortgage loan is insurable if a mortgage insurer would not decline to insure it by reason of any fraud, misrepresentation, negligence, or dishonest, criminal, or knowingly wrongful act in origination or servicing, and would not be entitled to deny a claim by reason of any of the foregoing.

See Chapter B-8, Mortgage Insurance for additional information.

Indemnification for Losses

For information regarding Fannie Mae's Indemnification requirements and process, see Selling Guide A2-1-03, Indemnification for Losses.

Related Announcements

The following table provides references to Announcements that are related to this topic.

Announcements Issue Date
Announcement SVC-2017-07 August 16, 2017
Announcement SVC-2016-04 May 11, 2016