Servicing Guide

Published September 18, 2018

C-1.1-01: Servicer Responsibilities for Processing Mortgage Loan Payments (11/12/2014)

The following table outlines the servicer’s responsibilities for processing payments for any mortgage loan that Fannie Mae owns or securitizes.

The servicer must...

Notify the borrower of upcoming payment changes in accordance with the mortgage loan documents, applicable law, or as specifically required by this Servicing Guide.

Apply scheduled payments, including late charges (if applicable), in the order specified in the security instrument.

Note: When multiple payments are received, each payment must be applied separately.

Ensure payments for all mortgage loans are credited upon receipt and that each portion of the payment is accounted for in its records.

Apply all funds as intended by the borrower, when applicable.

Note: Funds intended by the borrower for first lien mortgage loans must not be reallocated as payment towards any subordinate lien.

Deposit all funds into a custodial account in a financial institution that meets Fannie Mae’s rating requirements for custodial depositories (or within its own institution if it qualifies) within 24 hours of receipt. When the servicer uses a lockbox agent to collect mortgage payments, the payments must be deposited into the collection clearing account no later than the 1st business day after they are received by the lockbox agent. This means that the funds must be deposited into the applicable custodial account no later than the 2nd business day after the servicer’s lockbox agent receives them.

Follow any specific requirements of FHA, HUD, or VA, when applicable.

Follow any specific requirements of the SCRA, when applicable. The servicer must follow the procedures in F-1-22, Processing Military Indulgence.

For all mortgage loan modifications with a step interest rate adjustment, the servicer must send the borrower a notification of the mortgage loan interest rate adjustment. All payment change notifications for mortgage loan modifications with a step interest rate adjustment must include the information shown in the following table.

Notice Requirements

The amount and effective date of the interest rate increase.

The amount and due date of the borrower’s new monthly payment.

An explanation pursuant to the terms of the modification agreement, that at the end of the initial fixed-rate term, the interest rate will increase according to the schedule in the modification agreement until it reaches the interest rate cap. Furthermore, the explanation should, as applicable, include statements regarding the following:

  • how the interest rate cap was set; and

  • notification that once the interest rate reaches the interest rate cap, it will be fixed for the remaining life of the mortgage loan.

A payment schedule table, similar to the one included in the modification agreement, that outlines the future interest rates and monthly payment amounts (identifying P&I, and estimated escrows) and the effective dates for such amounts, or the servicer may explain these terms, dates, and amounts.

An explanation that the monthly payment includes an escrow for property taxes, applicable property insurance, and the other escrowed expenses, which, if changed, will change the monthly payment.

An explanation of how the new monthly payment was determined.

Servicer contact information and instructions to the borrower to contact the servicer if the borrower has questions or concerns about the new monthly payment.

The Homeowner’s HOPE™ Hotline Number (1–888–995–HOPE).

An explanation that the borrower can seek assistance with household budgeting at no charge from HUD-approved housing counseling agencies that can be found on HUD.gov.

Information regarding the availability of additional educational resources at Fannie Mae’s Know Your Options™ website.

The servicer must send notifications for all mortgage loans with step interest rate adjustments in compliance with the timing requirements provided in the following table.

Type of Interest Rate Adjustment Days Prior to Change At a minimum, the servicer must send...

Mortgage Loan Modification Initial Step Interest Rate Adjustment

150 to 90

the first written notification detailing the pending change.

75 to 60

the second written notification detailing the pending change.

Mortgage Loan Modification Subsequent Year Step Interest Rate Adjustments

120 to 60

notification detailing the pending change.

The servicer must follow the procedures in Applying a Mortgage Loan Payment in F-1-09, Processing Mortgage Loan Payments and Payoffs for specific instructions related to this topic.