Servicing Guide

Published September 18, 2018

A1-4.2-02: Compensatory Fees for Delays in the Liquidation Process (03/09/2016)

Periodically, Fannie Mae reviews the servicer’s handling of seriously delinquent portfolio mortgage loans or MBS mortgage loans when serviced under the special servicing option to determine whether specific actions, such as referral to foreclosure, foreclosure sale, conveyance or claim filing, are being taken in a timely manner. Fannie Mae reserves the right to review any seriously delinquent mortgage loan and pursue any remedy available to it for delays when it deems appropriate, which may be prior to or after the liquidation of the mortgage loan. If the servicer fails to complete a foreclosure action within the time frame prescribed by Fannie Mae, one of the remedies that Fannie Mae may pursue is the assessment of compensatory fees.

If Fannie Mae selects compensatory fees as the appropriate remedy for delays in connection with a completed foreclosure, compensatory fees will be assessed if the entire period from the date the delinquency began, the LPI date, through the foreclosure sale date is longer than Fannie Mae’s allowable foreclosure time frame in the applicable jurisdiction as described in Assessing the Foreclosure Time Frame. This also includes foreclosure sales that result in a third-party sale.

Fannie Mae has the right to rely on the delinquent mortgage loan status data submitted by the servicer as definitively and conclusively reflecting the status of a mortgage loan for purposes of the assessment and collection of compensatory fees for delays in liquidating delinquent mortgage loans. Accordingly, Fannie Mae may choose to reject any information provided by the servicer to support a status code that is different from the one reported.

The servicer’s failure to report on an accurate and timely basis and to otherwise comply with the requirements of the Servicing Guide may result in the imposition of compensatory fees separate from compensatory fees that may be imposed for foreclosure time frame non-compliance. See A1-4.2-01, Compensatory Fees Other Than Delays in the Liquidation Process for additional information.

For mortgage loans with a foreclosure sale date on or after January 1, 2015, compensatory fees will not be assessed if the aggregate amount of monthly compensatory fees for a specific servicer is less than the minimum threshold amount of $25,000. Compensatory fees not meeting the minimum threshold amount will not be carried over to the following month’s invoice, if any.

Fannie Mae may assess the servicer a compensatory fee of $1,000 for internal administrative costs plus any third-party costs if the servicer must rescind a foreclosure sale due to the servicer’s failure to follow Fannie Mae guidelines or other servicer error or alleged error. Fannie Mae will not reimburse foreclosure fees and costs that are required to complete a new foreclosure following rescission.

This topic contains the following:

Assessing the Foreclosure Time Frame

When determining the servicer’s compliance with Fannie Mae’s time frames for completing foreclosure, adjustments are made for allowable delays. Allowable delays and the applicable number of days permitted for each delay are shown in the Foreclosure Time Frames and Compensatory Fee Allowable Delays Exhibit. See also E-3.2-15, Allowable Time Frames for Completing Foreclosure.

Delays due to urgent or unforeseeable circumstances or for situations in which applicable law necessitates additional time may also be considered; however, such circumstances should be rare.

Calculating Compensatory Fees

Compensatory fees will be applied based on the UPB of the mortgage loan, the applicable PTR, the length of the delay, and any additional costs that are directly attributable to the delay. Fannie Mae assesses the servicer’s foreclosure time frame performance at the state level and on a monthly basis at the mortgage loan level using the process in the following table.

Step Calculating Compensatory Fees
1

a. Calculate the number of days the servicer took to complete the foreclosure process, from the LPI date through the foreclosure sale date.

b. Determine whether the days are fewer than the allowable time frame (”under standard”) or in excess of the allowable time frame (”over-standard”).

2

The compensatory fee or ”credit” for each mortgage loan will be calculated using

  • the UPB of the mortgage loan,

  • the applicable PTR, and

  • the number of days the mortgage loan was over- or under-standard, respectively.

3

Apply any ”credit” if applicable, to offset any compensatory fees that the servicer has incurred for over-standard performance at the state level and within the billing month.

4

If the servicer’s performance is under-standard for the state being evaluated, the servicer will not have a compensatory fee for that state.

Note: The servicer must not apply the remaining ”credit” toward any compensatory fee resulting from over-standard performance in another state.

Note: Any under-standard ”credits” may not be applied to compensatory fee invoices in subsequent months for the same or a different state.

If the servicer’s performance is over-standard for the state being evaluated, the servicer may be assessed compensatory fees for that state.

Note: State-level balances are summarized and the servicer will be billed accordingly each month.

See F-2-03, Compensatory Fee Calculation Examples for examples that illustrate how compensatory fees are calculated.

Appealing a Compensatory Fee Assessment

If the servicer chooses to appeal a compensatory fee in connection with a delay that is outside of the servicer’s control, the servicer must submit an appeal with all relevant supporting documentation to Fannie Mae via the Fannie Mae File Transfer Portal. The servicer must summarize and submit to Fannie Mae all supporting documentation for all uncontrollable delays for which an adjustment is being requested at the initial submission of the appeal. Additional delays claimed in subsequent appeals will not be considered. Supporting documents may include, but are not limited to

  • attorney chronologies,

  • servicing notes, or

  • court documents.

Fannie Mae includes a template for appeals and detailed instructions of the process for appealing compensatory fees with the compensatory fee invoice. The servicer may appeal compensatory fee assessments for both over-standard and under-standard performance. The servicer may request recalculation of compensatory fees in instances where data that was initially reported to Fannie Mae was incorrect.

Related Announcements

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

Announcements Issue Date
Announcement SVC–2016–02 March 9, 2016
Announcement SVC–2015–01 January 14, 2015