Servicing Guide

Published September 18, 2018

A2-1-06: Subservicing (02/15/2017)

The servicer may use other organizations to perform some or all of its servicing functions on its behalf. Fannie Mae refers to these arrangements as “subservicing” arrangements, meaning that the servicer (the “subservicer”) other than the contractually responsible servicer (the “master” servicer) is performing the servicing functions.

The following are not considered to be subservicing arrangements:

  • when a computer service bureau is used to perform accounting and reporting functions, and

  • when the originating seller/servicer sells and assigns servicing to another seller/servicer, unless the originating seller/servicer continues to be the contractually responsible servicer.

This topic contains the following:

Requirements for Subservicing Arrangements

The servicer may use a subservicer only if it will not interfere with the servicer’s ability to meet Fannie Mae’s remitting and reporting requirements.

The master servicer may not enter into new subservicing arrangements or extend existing arrangements to include newly originated mortgage loans, unless both the master servicer and the subservicer are Fannie Mae-approved servicers in good standing who are able to perform the duties associated with the master servicer/subservicer arrangement.

The master servicer must ensure that its written agreement with the subservicer acknowledges Fannie Mae’s right to rescind its recognition of the subservicing arrangement if Fannie Mae decides to transfer the master servicer’s portfolio for any reason.

The master servicer is not required to submit each separate subservicing arrangement under an existing subservicing agreement to Fannie Mae for its approval. However, if the arrangement is a new one, the subservicer must submit the applicable Letters of Authorization for P&I Custodial Account (Form 1013) for a P&I custodial account and Letter of Authorization for T&I Custodial Account (Form 1014) for a T&I custodial account indicating that it has established the required custodial accounts and submit these forms electronically to Fannie Mae’s Custodial Accounting Team (see F-4-03, List of Contacts ).

Even if a subservicing arrangement is known, approved of, or consented to by Fannie Mae, the master servicer remains fully liable to Fannie Mae for the performance of all servicing obligations. Fannie Mae may enforce any rights and remedies it may have against the master servicer for breach of the servicing obligations, whether such breach was caused by the master servicer or by the subservicer. In addition to the foregoing and not in limitation thereof, Fannie Mae also may enforce any rights and remedies it may have against the subservicer for breach of the servicing obligations (see A2-7-03, Post-Delivery Servicing Transfers).

The master servicer must confirm its existing subservicing arrangements when it submits the Lender Record Information (Form 582) each year.

The following table describes requirements, pursuant to the MSSC and the Guides, of a subservicing arrangement.

When a master servicer enters into a subservicing arrangement with respect to all related mortgage loans...

The master servicer and the subservicer must execute and submit the Data Access Authorization Form (Form 101) at the inception of the subservicing arrangement.

Note: Each mortgage loan that is subject to a subservicing arrangement must be identified in Fannie Mae’s records. The master servicer and the subservicer must also execute and submit Form 101 at the termination of the subservicing arrangement.

The master servicer represents and warrants to Fannie Mae that the subservicer will service those mortgage loans in accordance with all Fannie Mae requirements.

The subservicer must

  • be approved by Fannie Mae to service special products, if applicable; unless the special product is an eMortgage;

  • continue the subservicing of Fannie Mae mortgage loans until an acceptable disposition of the subserviced portfolio is reached;

  • ensure it has the necessary resources to appropriately support the subserviced portfolios and to govern the required interaction with the master servicer and service level agreements;

  • remove funds from P&I, T&I, or other custodial accounts only as allowed by the Servicing Guide;

  • disclose any and all Fannie Mae assessments or reviews to the master servicer upon request by the master servicer; and

  • disclose to Fannie Mae if it discovers that it and/or the master servicer is in material breach of the Lender Contract or subservicing arrangement in connection with the Fannie Mae subserviced loans, or has been subject to any material legal, regulatory or administrative proceeding or order relating to the subservicing arrangement or Fannie Mae subserviced loans.

The subservicer and master servicer of eMortgages must jointly develop policies and procedures to address servicing functions which include, but are not limited to, mortgage payoffs, modifications to an eNote, foreclosure, bankruptcy, and other legal proceedings.

The master servicer of eMortgages must agree to perform any Fannie Mae and MERS requirements which the subservicer is unable to perform.

The subservicer agrees with Fannie Mae to service those mortgage loans in accordance with all Fannie Mae requirements.

The master servicer must

  • maintain policies and procedures to evaluate the subservicer’s compliance and performance with the master servicer’s Lender Contract, which includes, without limitation, the Servicing Guide; and

  • maintain policies and procedures for selecting and assessing a subservicer.

Note: The master servicer must make any of the above documentation available to Fannie Mae upon request.

The master servicer and subservicer each represent and warrant to Fannie Mae that

  • the provisions of any agreement between the originating lender, the transferor servicer, and any other party providing for servicing those mortgage loans will not continue after the date on which Fannie Mae funds the whole loan delivery or issues the MBS with respect to those mortgage loans, except as the subservicing agreement between the master servicer and the subservicer; and

  • the subservicing agreement does not conflict with Fannie Mae’s servicing requirements.

The master servicer and the subservicer must

  • provide copies of the subservicing agreement and the master servicer’s audits and QC reviews of the subservicer’s performance under the subservicing arrangement upon request from Fannie Mae; and

  • maintain policies and procedures for monitoring compliance in accordance with the Servicing Guide and performance of outsource vendors, including services performed outside the United States.

The master servicer and its subservicers may negotiate the servicing fees that the subservicers will receive. The master servicer’s and the subservicer’s rights to receive the servicing fee and subservicing fee will be terminated if Fannie Mae transfers the servicing portfolio for any reason.

Note: Fannie Mae will not pay the master servicer or subservicer any servicing compensation or other fees that may be payable under a subservicing arrangement.

Each subservicer must establish custodial accounts for all Fannie Mae mortgage loans that it subservices for a master servicer. Funds for MBS pools and for portfolio mortgage loans cannot be commingled in the same custodial account. A subservicer’s custodial accounts related to mortgage loans it is servicing for the master servicer must be separate from any other accounts it maintains for mortgage loans it services directly for Fannie Mae or for any other investor, including other mortgage loans (which are not Fannie Mae mortgage loans) that it services for the master servicer.

The master servicer must report to Fannie Mae under the correct remittance type and must ensure that Fannie Mae receives the proper remittance amount regardless of whether the master servicer allows the subservicer to report activity to the master servicer under a different remittance type.

The master servicer must remit to Fannie Mae all mortgage loan funds in sufficient time to ensure that Fannie Mae receives the correct remittance amount when it is due, regardless of any arrangement the master servicer and subservicer have to accept collections from the subservicer at a later date. If the subservicer uses a remittance date that is later than the one Fannie Mae prescribes, the master servicer must advance any funds necessary.

When Post-Delivery Transfers of Servicing Involve Subservicers

As required in A2-7-03, Post-Delivery Servicing Transfers, the servicer must obtain Fannie Mae’s prior written consent for any transfer of servicing responsibilities involving Fannie Mae mortgage loans. Fannie Mae’s prior written consent is required for all servicing transfers involving a subservicer, including a transfer of servicing responsibilities from

  • one subservicer to another,

  • the master servicer to a subservicer, or

  • the subservicer to the master servicer.

The transferor servicer must indicate on the Request for Approval of Servicing Transfer (Form 629) if the transferee servicer will use a subservicer as a result of the servicing transfer. Both the transferee servicer and the subservicer must execute Form 101 at the inception and the termination of the subservicing arrangement.

As part of its review of the transfer of servicing review, Fannie Mae will also evaluate the performance and capacity of any subservicer the transferee servicer intends to utilize. See A2-7-03, Post-Delivery Servicing Transfersfor additional information.

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-2016–09 October 19, 2016

Announcement SVC-2015–09

June 10, 2015