Servicing Guide

Published September 18, 2018

  • Servicing Guide: Main Page
    • Part D: Providing Solutions to a Borrower
      • D1: Assisting the Borrower with Property-Related Issues and Legal Actions
        • D1-1: Requests for the Release of Property and/or Charge-Off of a Mortgage Loan
          • D1-1-01: Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan (11/12/2014)

D1-1-01: Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan (11/12/2014)

This topic provides information related to evaluating a request for the release, or partial release of property securing a mortgage loan.

The servicer must also follow the procedures in Processing a Request for the Release of Property Securing a Mortgage Loan in F-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan for detailed processing requirements. The requirements for the various types of releases of property securing a mortgage loan are described as follows.

This topic contains the following:

Evaluating a Request for the Release of a Beneficial Easement or the Grant of a Burdensome Easement

When a borrower requests a release or grant of an easement, the servicer must ensure that the borrower submits all of the information listed in the following table with the Application for Release of Security (Form 236).

Information that must accompany Form 236

The purpose for granting the easement or the justification for releasing the easement.

The intended use of the easement, if the request is for the granting of an easement.

The anticipated effect(s) of granting or releasing the easement.

A survey or plat showing the location of the easement that is being proposed or released.

The amount of any cash consideration to be paid for granting or releasing the easement.

Whether the subordination of Fannie Mae’s mortgage lien to an easement is being requested.

Request for the Release of a Beneficial Easement: The servicer must evaluate the request for the release of a beneficial easement based on whether or not the release will have a detrimental effect on the value of the property securing a mortgage loan. The following table describes the servicer's action based upon the impact to the property securing a mortgage loan.

If the servicer has determined that releasing a beneficial easement... Then the servicer...

will not have a detrimental effect on the value of the property securing a mortgage loan and will not restrict the borrower’s use of the property securing a mortgage loan

is authorized to approve the request to release the easement on Fannie Mae’s behalf.

will have a detrimental effect on the value of the property securing a mortgage loan

must approve the request to release the easement if the borrower agrees to apply

  • part of the cash consideration to make any past due mortgage loan payments, if applicable; and

  • any additional amount required to reduce the mortgage loan balance to an amount that results in the mortgage loan retaining its current LTV ratio.

has potential long-term negative implications that could affect the value of the property securing a mortgage loan at a later date

must decline the request to release the easement.

Note: The servicer may contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) if it prefers to discuss the situation with Fannie Mae before making a final decision or if it has information that there are mitigating circumstances that suggest that the easement should be released.

Request for the Grant of a Burdensome Easement: The servicer must evaluate the request for the granting of a burdensome easement based on the extent to which granting a burdensome easement interferes with either the use or value of the property securing a mortgage loan, which depends on the following:

  • the degree and quantity of rights that are released with the easement;

  • the community’s customs, attitudes, and prevalent practices regarding such easements; and

  • the manner and extent of the use of the easement.

The servicer is authorized to approve any request for a customary public utility easement as long as

  • A subsurface utility easement does not extend under the house or other improvements to the property.

  • An above-surface utility easement for distribution purposes that runs along any of the property lines or easements for drainage purposes that run along the rear property line if the easements do not extend more than 12 feet from the property line, do not interfere with any of the improvements or use of the property, and do not present a health or safety hazard.

The servicer must evaluate requests for other types of easements based on the specific circumstance of the request, as described in the following table.

If the servicer has determined that granting a burdensome easement... Then the servicer...

will not adversely affect the value of the property securing a mortgage loan

is authorized to approve the request to grant the easement on Fannie Mae’s behalf.

will adversely affect the value of the property securing a mortgage loan

must only approve the request to grant the easement if any cash consideration is applied to the outstanding mortgage loan debt.

has potential long-term negative implications that could affect the value of the property securing a mortgage loan or impact Fannie Mae's ability to foreclose on the mortgage loan

must decline the request to grant the easement.

Note: The servicer may contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) if it prefers to discuss the situation with Fannie Mae before making a final decision or if it has information that there are mitigating circumstances that suggest that the easement should be granted.

If a request to grant a burdensome easement includes subordinating the mortgage lien to the easement, the servicer is authorized to agree on Fannie Mae's behalf to subordinate the mortgage lien to the easement if

  • the easement is the type that is customary in the area and does not interfere with the property owner’s use or enjoyment of the property, and

  • any cash consideration is applied to the outstanding mortgage loan debt in accordance with the mortgage loan documents.

Evaluating a Request for the Lease of Oil, Gas, or Mineral Rights

When a borrower wants to lease oil, gas, or mineral rights to the property, the servicer must ensure that the borrower submits a copy of the proposed lease agreement with Form 236.

Before agreeing to a lease of oil, gas, or mineral rights, the servicer must consider the extent to which the subject property and neighboring properties may be affected by the exercise of the rights covered in the lease. In particular, the following should be taken into consideration:

  • The extent to which the rights granted by the lease infringe on the property owner’s rights. For example, if the lease permits removal of deposits by directional exploration from an area outside of the property, there may be little or no adverse effect, depending on the location of the exploration area and the attitude of the community. On the other hand, if the lease allows for complete ingress and egress to explore any part of the property or to store or install equipment on it, the property may no longer have any real value as a residential property.

  • Any hazards, nuisances, or damages that may result from the exercise of the rights granted by the lease. In mineral areas where subsidence from directional mining may be a problem, the potential extent of a hazard or nuisance can be determined by reviewing the past history of such operations in the locality and taking into consideration the property’s subsurface soil structure and the extent and depth of the proposed mining. In oil-producing areas, hazards, nuisances, and damages can result from drilling operation, ingress and egress, storage, pipeline transportation, fire, explosion, or gusher wells. The effect of these potential hazards or nuisances on the value of the property would depend on their intensity and closeness and the community’s attitude toward such hazards or nuisances. For example, in areas in which oil exploration is a major part of the economy, the risk may be considered acceptable, whereas it might be unacceptable in areas in which such exploration has a minor effect on the economy.

The servicer must determine whether the leasing of oil, gas, or mineral rights meets the following conditions:

  • granting of oil, gas, or mineral leases is customary in the area;

  • exercise of the lease does not have a material impact on the value of the property securing a mortgage loan;

  • exercise of the lease does not prevent use of the property as a residence; and

  • exercise of the lease does not expose the residents to health or safety hazards.

The following table describes the servicer’s action based upon whether or not granting of the lease meets these conditions.

If the leasing of oil, gas, or mineral rights... Then the servicer...

meets all of the conditions

is authorized to approve the lease on Fannie Mae’s behalf and waive Fannie Mae’s interest in any royalties under the current terms of the lease.

meets at least one, but not all of the conditions

must submit the following to Fannie Mae’s SF CPM division (see F-4-03, List of Contacts):

  • Form 236,

  • a copy of the proposed lease agreement, and

  • its recommendation.

does not meet any of the conditions

must deny the request.

Note: The servicer may contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) if it prefers to discuss the situation with Fannie Mae before making a final decision.

Evaluating a Request for the Partial Release of Real Property

The servicer is authorized to approve partial releases of security on Fannie Mae’s behalf if all of the conditions in the following table are satisfied.

Conditions required to approve a partial release of security

The mortgage loan must be current.

The mortgage loan must not have been

  • greater than 30 days past due more than once in the most recent 12-month period, or

  • otherwise in default under the terms of the mortgage loan over the most recent 12-month period.

The priority of Fannie Mae’s mortgage lien must not be impacted by any claims of subordinate lienholders.

The reduction in the value of the remaining property must not be greater than the amount of any cash consideration.

Note: Requests for partial release that involve no cash consideration are acceptable as long as the value of the remaining property is enhanced, or is at least not diminished, by the release. A BPO or the servicer’s own estimate of the value of the property to be released is acceptable unless the estimated value of the property to be released is $10,000 or more, in which case the servicer must obtain an appraisal that shows the value of the property securing a mortgage loan before and after the release.

Note: Fannie Mae will not reimburse the servicer for the cost of the property valuation.

Any cash consideration paid for the release, less the expense of obtaining the release, must either be

  • applied to the outstanding mortgage loan debt, if required to satisfy Fannie Mae’s LTV ratio requirements (see below); or

  • used for proposed property improvements after the release.

The ratio of the UPB, as reduced by any available cash consideration, to the value of the property securing a mortgage loan after the release must not be higher than the LTV ratio of the mortgage loan immediately before the release.

If the servicer is uncertain about whether all of the conditions have been met or if it has information that there are mitigating circumstances for permitting the release even though all of the conditions have not been met, the servicer may contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts).

Evaluating a Request for the Partition of Real Property

The servicer has the authority to approve a partition of real property on Fannie Mae’s behalf if all of the conditions in the following table are satisfied.

Conditions required to approve a release in connection with a partition of real property

The mortgage loan must be current.

The mortgage loan must not have been

  • greater than 30 days past due more than once in the most recent 12-month period, or

  • otherwise in default under the terms of the mortgage loan over the most recent 12-month period.

The priority of Fannie Mae’s mortgage lien must not be impacted by any claims of subordinate lienholders or any encumbrances or title.

The ratio of the UPB of the mortgage loan to the new value of the property securing a mortgage loan must not be higher than the original LTV ratio of the mortgage loan.

The partition of the property satisfies the subdivision laws of the county or jurisdiction, if applicable, and complies with all zoning requirements or codes.

If the servicer is uncertain about whether all of the conditions have been met or if it has information that there are mitigating circumstances for permitting the release even though all of the conditions have not been met, the servicer may contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts).

If the mortgage loan consists of multiple borrowers and the request for the partition of real property includes a request to release the borrower who has possession of the partitioned property from liability under the mortgage loan, the servicer is authorized to approve the request if the borrower who retains possession of the property securing a mortgage loan has the financial ability to make the mortgage loan payments.

Evaluating a Request for the Substitution of Property Securing a Mortgage Loan

The servicer must submit all requests for the substitution of property securing a mortgage loan, along with its recommendation, to Fannie Mae’s SF CPM division (see F-4-03, List of Contacts). Prior to submitting the request to Fannie Mae, the servicer must take the actions listed in the following table.

Actions the servicer must take prior to submitting the request to Fannie Mae

Ensure that the borrower submits a plat map with Form 236 showing the proposed location of the improvements, walks, driveways, utilities, as well as footings, foundations, and slab details, after the relocation.

Determine that the release and substitution of property securing a mortgage loan satisfies the subdivision laws of the county or jurisdiction, if applicable, and complies with all zoning requirements or codes.

Obtain an appraisal for the property securing the mortgage loan as it will exist following completion of the move of the improvements to the new location, which must be based on the assumption that all requirements of the move have been met.

If Fannie Mae approves the substitution of property securing a mortgage loan, the servicer must take the actions described in the following table.

If Fannie Mae agrees to the substitution of property securing a mortgage loan, the servicer must...

Advise the borrower that he or she

  • is solely responsible for financing the costs of the relocation, unless Fannie Mae agrees to absorb some of the costs;

  • bears all risks of damage to the house or failure to complete the move; and

  • must obtain flood insurance coverage, if the new lot or location is in a Special Flood Hazard Area for which Fannie Mae requires flood insurance. See Chapter B-3, Flood Insurance Requirements for Fannie Mae’s flood insurance requirements.

Verify that all building code and zoning requirements are met in connection with the relocation.

Ensure that Fannie Mae’s mortgage lien

  • remains a good and valid lien of the same priority during and after the move to a new lot,

  • is extended to cover the new lot before the move and is a good and valid lien of the same priority on the new lot, and

  • is released from the old lot after the move.

Evaluating a Request for the Partial or Total Taking of Property Securing a Mortgage Loan by Condemnation or Eminent Domain

The servicer must do and pay for whatever is necessary to protect Fannie Mae’s interest in the property securing the mortgage loan when there is a legal proceeding that may significantly impact Fannie Mae’s interest. The servicer must follow the procedures in Protecting Fannie Mae’s Rights Regarding Taking of Property by Condemnation or Eminent Domain in F-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan to protect Fannie Mae’s interest in the property and Fannie Mae’s rights under the security instrument.

The servicer must refer to the terms of the security instrument to determine how compensation awards are to be distributed in the event of either a partial taking or total taking of a property securing a mortgage loan. However, the terms of the security instrument permit some flexibility in determining how the proceeds should be applied if the borrower has abandoned the property or does not acknowledge a specific offer to award compensation or settle a claim.

The servicer is authorized to agree to Form 236 related to a partial or full taking of the property if the compensation award is sufficient to fully satisfy the mortgage debt. However, if the mortgage loan debt will not be fully satisfied in connection with a full taking of the property, the servicer should contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) to determine the action Fannie Mae wants it to take. If the borrower has abandoned the property or fails to respond within 30 days to the servicer’s notification that the government has offered to pay a compensation award or settle a claim for damages in connection with a condemnation or taking by eminent domain, the servicer may disburse the proceeds without contacting the borrower. Generally, the servicer must apply the proceeds to reduce the mortgage loan debt unless there is only a partial taking of the property securing a mortgage loan and foreclosure proceedings have been initiated. In such cases, the servicer must contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) to determine how to apply the proceeds, as Fannie Mae may prefer to use the proceeds to restore or repair the property.