Servicing Guide

Published September 18, 2018

A1-4.2-01: Compensatory Fees Other Than Delays in the Liquidation Process (02/15/2017)

If Fannie Mae believes the servicer is failing to comply with Fannie Mae’s servicing requirements, it may pursue a variety of remedies, either to correct a specific problem or to improve the servicer’s overall performance. One possible remedy is the imposition of a compensatory fee to compensate Fannie Mae for damages and to emphasize the importance Fannie Mae places on a particular aspect of the servicer’s performance. Sometimes, a compensatory fee will relate to the action the servicer took (or failed to take) for a specific mortgage loan. At other times, the compensatory fee may relate to the effect that the servicer’s deficiencies may have on Fannie Mae’s cash flow.

Fannie Mae may charge a compensatory fee in any of the following situations when it feels the imposition of a fee — which gives the servicer a financial incentive to correct its servicing problems — will improve the quality of the servicer’s performance.

The following table describes some of the types of compensatory fees Fannie Mae may charge and the calculation of the relevant compensatory fee.

Compensatory Fee Category Calculation of the Compensatory Fee

Delayed remittance of claim proceeds

In some cases, MI claim settlements serviced under the special servicing option are sent directly to the servicer in error. The servicer must remit the claim proceeds to Fannie Mae within the required time frames outlined in F-1-06, Filing an MI Claim for a Liquidated Mortgage Loan or Acquired Property. If the servicer does not remit the claim proceeds timely, Fannie Mae may impose a daily interest charge until it does receive them. This interest charge will be calculated at the prime rate that was in effect on the first business day of the month in which the remittance was due (as published in The Wall Street Journal’s prime rate index), plus 3%.

Late submission of REOgram

The servicer must notify Fannie Mae of an acquired property in accordance with E-4.1-01, Notifying Fannie Mae of an Acquired Property. If Fannie Mae does not receive the REOgram as required, Fannie Mae may charge the servicer $100 a day until it does receive it. Fannie Mae will not enforce this fee if the servicer provides a reasonable explanation for the delay; however, the servicer must indemnify and hold Fannie Mae harmless against all Fannie Mae losses that result from its failure to submit the information to Fannie Mae in a timely manner.

Unauthorized transfer of servicing

The servicer must obtain Fannie Mae’s prior approval of any transfer of servicing or subservicing as outlined in A2-7-03, Post-Delivery Servicing Transfers. If a servicer fails to obtain Fannie Mae’s prior approval of any transfer of servicing, Fannie Mae may assess a compensatory fee that can vary depending on the circumstances and exercise any other available remedy; however, it will not exceed 1% of Fannie Mae’s share of the aggregate UPB of the applicable mortgage loans being transferred.

Late remittance of monthly collections

The servicer must remit funds to Fannie Mae as outlined in the Investor Reporting Manual. If the servicer does not remit the funds or does not remit the funds when due, Fannie Mae may (in addition to exercising its other available remedies) charge the compensatory fees outlined in the following table to cover Fannie Mae’s internal administrative costs and risk.

Delayed Remittance Formula for Calculation of Compensatory Fee Compensatory Fees Not Less Than

First Instance

1. Multiply the calculated late remittance by the number of days the remittance is late, and then

2. Multiply that product by the sum of the prime interest rate*, plus 3%.

In any given month, not less than $250.

Second Instance (if it occurs within one year of the first instance)

1. Multiply the calculated late remittance by the number of days the remittance is late, and then

2. Multiply that product by the sum of the prime interest rate*, plus 3%.

In any given month, not less than $500.

Subsequent Instances (if they occur within one year of most recent instance)

1. Multiply the calculated late remittance by the number of days the remittance is late, and then

2. Multiply that product by the sum of the prime interest rate*, plus 3%.

In any given month, not less than $1,000.

*Prime interest rate as published in The Wall Street Journal’s prime rate index.

Excessive amount of delinquent installments

Fannie Mae evaluates the servicer’s delinquencies for actual/actual remittance type mortgage loans to determine their effect on its cash flow. In any given month, Fannie Mae may compare the amount of past due installments for the delinquencies the servicer reports to Fannie Mae to the total installments for all of the mortgage loans in its Fannie Mae servicing portfolio. If this ratio is too high, Fannie Mae will work with the servicer to establish a goal for improvement and a time frame for accomplishing the goal.

If the goal is not met within the established time frame, Fannie Mae may charge the servicer a compensatory fee on that portion of the goal that is not met. Generally, the fee will be calculated at the prime rate that was in effect on the first business day of the month in which the remittance was due (as published in The Wall Street Journal’s prime rate index), plus 3%.

Fannie Mae may continue to charge a compensatory fee until the goal is met or until it becomes evident that Fannie Mae must consider more serious disciplinary actions, and may charge a higher compensatory fee as well.

Late submission of annual financial statements/reports

The servicer must submit its annual financial statements to Fannie Mae or Fannie Mae may charge a compensatory fee, as outlined in Selling Guide A4-2-02, Financial Statements and Reports.

Late or inaccurate submission of Fannie Mae investor reporting system reports

If the servicer fails to submit its reports by the required deadlines or submits inaccurate Fannie Mae investor reporting system reports or reports not in the correct format as required in the Investor Reporting Manual, the servicer may be subject to the compensatory fees for Fannie Mae’s internal administrative costs as outlined in the following table.

Late or Inaccurate Monthly Reporting Compensatory Fee

First Instance

Greater of $250 or $50 per mortgage loan up to a maximum of $5,000

Second Instance

Greater of $500 or $50 per mortgage loan up to a maximum of $10,000

Each Subsequent Instance (if it occurs within one year of the most recent prior instance)

Greater of $1,000 or $50 per mortgage loan up to a maximum of $15,000

Fannie Mae reserves the right to elect instead of to hold the servicer liable for actual damages.

Instances of late reporting include, but are not limited to

  • Untimely Reporting of ARM Loan Conversions – The servicer must provide information about the conversion when it submits its monthly Fannie Mae investor reporting system reports to Fannie Mae as required by the Investor Reporting Manual.

  • Failure to Comply with Reporting Deadlines – The servicer must comply with the reporting time frames outlined in the Investor Reporting Manual.

  • Delayed Remittance of Collections – The servicer must comply with the reporting time frames outlined in the Investor Reporting Manual.

Related Announcements

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

Announcements Issue Date
Announcement SVC–2017–02 February 15, 2017
Announcement SVC-2017–01 January 18, 2017
Announcement SVC–2016–10 November 9, 2016
Announcement SVC–2016–04 May 11, 2016