Servicing Guide

Published July 10, 2019

  • 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 (06/12/2019)

D1-1-01: Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan (06/12/2019)

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

To request a release, or partial release, of property securing a mortgage loan, the borrower must submit an Application for Release of Security (Form 236). An application is considered complete when all required documentation and information, as outlined within this Servicing Guide and Form 236, has been obtained. The servicer must counsel the borrower to consider the costs and benefits of any action covered by this policy prior to evaluating a request.

The servicer must evaluate each request in accordance with this Guide and request Fannie Mae prior approval in circumstances that fall outside of the policies in this Guide. However, with the exception of eminent domain actions that fall within the policies in this Guide, all requests related to Texas Section 50(a)(6) loans must be escalated to Fannie Mae for review and decision. To escalate a request, the servicer must contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts ).

The servicer must also follow the processing requirements found 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 . The evaluation requirements for each of the various types of requests 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 a completed Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

Request for the Release of a Beneficial Easement: The servicer must evaluate the request for the release of a beneficial easement to determine whether or not the release will adversely affect the value of the property securing a mortgage loan by considering the following:

  • the convenience, access, or other benefits provided by the easement, which will be lost upon release, and

  • the value of the property with the easement in place compared with the value of the property without the easement.

The servicer must assess the effect a release of the easement may have on the use or value of the property.

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 adversely affect the value of the property securing a mortgage loan or 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 adversely affect the value of the property securing a mortgage loan, and the LTV based on the estimated property value after the easement is released is less than 60% is authorized to approve the request to release the easement on Fannie Mae’s behalf.

will adversely affect the value of the property securing a mortgage loan, and the LTV based on the estimated property value after the easement is released is greater tan or equal to 60%

is authorized to approve the request to release the easement if the borrower agrees to reduce the mortgage loan balance to maintain the LTV ratio immediately prior to releasing the easement.

expected to adversely affect the future use of marketability of the property securing a mortgage loan

must decline the request to release the easement.

Request for the Grant of a Burdensome Easement: The servicer must evaluate the request for the granting of a burdensome easement to determine the extent to which granting a burdensome easement adversely affects the use, value or future marketability 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;

  • the value of the property without the easement in place compared with the value of the property with the easement in place; 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, and the LTV based on the estimated property value with the easement in place is less than 60%

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, and the LTV based on the estimated property value without the easement in place is greater than or equal to 60% is authorized to approve the request to release the easement if the borrower agrees to reduce the mortgage loan balance by an amount sufficient to maintain the LTV ratio immediately prior to granting the easement.

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.

Any request to grant a burdensome easement on a limited basis (e.g., granting access to specific persons as opposed to all current and future owners of the property) must be denied.

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 requests to lease oil, gas, or mineral rights to the property, the servicer must ensure that the borrower submits a completed Form 236. A complete application must include all information and documentation required per the form.

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. The servicer must take the following 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 conditions in the following table.

Conditions required to approve a lease of oil, gas, or mineral rights
The mortgage loan must be current.
The mortgage must have been originated greater than 12 months prior to the date of the request.

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.

Granting of oil, gas, or mineral leases is customary in the area.
Exercise of the lease does not prevent its use for residential purposes or expose the residents to health or safety hazards.
Any reduction in the value of the property as a result of the lease does not exceed the amount of any royalty payments received in exchange for the lease.
Any drill sire located on the property lies outside of a 500-foot radius from the exterior walls of the residential dwelling or any other structures associated with the collateral property, including but not limited to detached garages, storage sheds, or accessory dwelling units.

The servicer must evaluate requests for the leasing of oil, gas, and mineral rights based on the specific circumstances of the request, as described in the following table.

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

meets all of the conditions and the LTV based on the estimated property value with the lease, any applicable drill site and/or ingress and egress across the property in place is less than 60%

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 all of the conditions and the LTV based on the estimated property value with the lease, any applicable drill site and/or ingress and egress across the property in place is greater than or equal to 60% is authorized to approve the lease on the Fannie Mae’s behalf if the borrower agrees to apply royalties to the mortgage loan balance by an amount sufficient to maintain the LTV ratio immediately prior to the lease.

does not meet any of the conditions

must deny the request.

Evaluating a Request for the Partial Release of Real Property

When a borrower requests a partial release of real property securing Fannie Mae’s mortgage loan, the servicer must ensure that the borrower submits a completed Form 236. A complete application must include all information and documentation required per the form.

The servicer must determine whether the release of a portion of the real property meets the conditions in the following table.

Conditions required to approve a partial release of security

The mortgage loan must be current.

The mortgage loan must have been originated greater than 12 months prior to the date of the request.

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.

The release may not result in the property becoming inaccessible by public roads.

The servicer must evaluate requests to release a portion of the real property seuring the mortgage loan based on the specific circumstance of the request, as described in the following table.

If the partial release of real property... Then the servicer...
meets all of the conditions and the LTV based on the estimated property value after the release is less than 60% is authorized to approve the release of real property on Fannie Mae’s behalf.
meets all of the conditions and the LTV based on the estimated property value after the release is greater than or equal to 60% is authorized to approve the release on Fannie Mae’s behalf if the borrower agrees to reduce the mortgage loan balance by an amount sufficient to maintain the LTV ratio immediately prior to granting the release.
does not meet any of the conditions. must deny the request.

If the request to release a portion of the real property securing the mortgage loan includes a concurrent request to add land, the requirements for each request type must be met.

Evaluating a Request for the Addition of Land

When a borrower requests to add land to the real property securing the mortgage loan, the servicer must ensure that the borrower submits a complete Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

The servicer must determine whether the request to add the land to the real property securing the mortgage loan meets the conditions in the following table.

Conditions required to approve an addition of land
The mortgage loan must be current.
The mortgage loan must have been originated greater than 12 months prior to the date of the request.
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.
The additional land parcel must be conveyed in its entirety and must have the same basic zoning requirements as the existing property (e.g., residential, agricultural).
The entire property may contain only one dwelling unit. Limited additional non-residential structures located on the additional land are acceptable.
The additional land must not contain any hazardous materials, dilapidated, or unsafe structures or other issues that may adversely affect the value or marketability of the combined property.
Any structures present on the additional land must be compliant with local building codes.
The additional land parcel and the existing property securing a mortgage loan must be adjoined. Parcels that otherwise would be adjoined, but are divided by a road, are acceptable if the parcel without a residence is a non-buildable lot (e.g., waterfront properties where the parcel without the dwelling provides access to the water but may not be built upon due to local building codes).
The LTV of the property securing a mortgage loan after the release must not be higher than the LTV ratio of the mortgage loan immediately prior to the release.

The servicer must evaluate requests to add land to the real property securing the mortgage loan based on the specific circumstances of the request, as described in the following table.

If the addition of land... Then the servicer...
meets all of the conditions and the LTV based on the estimated property value after the release is less than 60% is authorized to approve the release of real property on Fannie Mae’s behalf.
meets all of the conditions and the LTV based on the estimated property value after the release is greater than or equal to 60% is authorized to approve the lease on Fannie Mae’s behalf if the borrower agrees to reduce the mortgage loan balance by an amount sufficient to maintain the LTV ratio immediately prior to the addition of land.
does not meet any of the conditions must deny the request.

If the request to add a portion of the real property securing the mortgage loan includes a concurrent request to release land, the requirements for each request type must be met.

Evaluating a Request for the Partition of Real Property

When a borrower requests a partition of the property, the servicer must ensure that the borrower submits a complete Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

The servicer must evaluate requests to partition real property based on the specific circumstance of the request, as described in the following table.

Conditions required to approve a partition of real property

The mortgage loan must be current.

The mortgage loan must have been originated greater than 12 months prior to the date of the request.

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.

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

The primary dwelling must be located within the boundaries of a single parcel to be retained as encumbered under Fannie Mae’s mortgage lien.

The servicer must evaluate requests to partition real property based on the specific circumstance of the request, as described in the following table.

If the partition of real property... Then the servicer...
meets all of the conditions and the LTV based on the estimated property value after the partition is less than 60% is authorized to approve the partition on Fannie Mae’s behalf.
meets all of the conditions and the LTV based on the estimated property value after the partition is greater than or equal to 60% is authorized to approve the partition on Fannie Mae’s behalf if the borrower agrees to reduce the mortgage loan balance by an amount sufficient to maintain the LTV ratio immediately prior to the partition.
does not meet any of the conditions must deny the request.

If the request for the partition of real property includes a request to release a borrower 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. To evaluate a borrower’s financial ability to make the mortgage payments the servicer should follow the procedures in F-1-29, Reviewing a Transfer of Ownership for Credit and Financial Capacity.

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 ensure that the substitution of property securing the mortgage loan satisfies the subdivision requirements of the applicable jurisdiction(s) and complies with all applicable zoning requirements and building codes. A complete application must include all information and documentation required per the form.

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 of the dwelling, or demolition of the dwelling and reconstruction of a replacement dwelling, 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 of the existing dwelling or demolition and reconstruction of a replacement dwelling.

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.

Confirm completion of the planned relocation of the improvements to the new location or demolition and reconstruction of the dwelling.

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. In the instance of eminent domain action, the servicer must also pursue any available legal remedies if it appears the compensation award offer does not accurately reflect the value of the property.

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.

When a government takes eminent domain action against a property securing Fannie Mae’s mortgage loan, the servicer must ensure that an Application for Release of Security (Form 236) is completed to adequately document the government action, and its impact to the property. A complete application must include all information and documentation required per the form.

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

  • all required documentation has been received,

  • the compensation award is sufficient to fully satisfy the mortgage debt, and

  • the compensation award is determined to be an accurate representation of the property’s value based on the servicer’s assessment of the provided property valuation.

If the amount of the compensation award applied to the mortgage loan balance will not be sufficient to fully satisfy the mortgage debt, the servicer is authorized to agree for Form 236 if

  • the provided valuation document indicates the current value of the property prior to the seizure, the value of the property to be seized, and the value of the remaining property;

  • the provided valuation document was produced within six months of the date of the request;

  • the compensation offer is determined to be an accurate representation of the property’s value based on the servicer’s assessment of the provided property valuation; and

  • the LTV is less than or equal to the LTV ratio of the loan immediately prior to the eminent domain action.

If the value was not produced within six months of the date of the request, is determined to be inaccurate, or is missing one or more of the required values (current value of the property prior to the seizure, the value of the property to be seized, and the value of the remaining property) but all of the other conditions have been met, the servicer may evaluate the accuracy of the value or establish a value for the property for the purpose of assessing the compensation award by obtaining a value from one of the following sources:

  • Fannie Mae’s APSTM;

  • Freddie Mac’s AVM;

  • a third-party AVM; or

  • the servicer’s own internal AVM, provided that

    • the servicer is subject to supervision by a federal regulatory agency, and

    • other servicer’s primary federal regulatory agency has reviewed the model.

If Fannie Mae’s APSTM, Freddie Mac’s AVM, the third-party AVM, or the servicer’s internal AVM does not render a reliable confidence score, or if the value provided by the government agency lies outside of a 10% threshold in comparison to the value provided by an approved valuation model, the servicer must submit the application to Fannie Mae for review.

If the servicer disagrees that the compensation award is an accurate representation of the property’s value, the documentation provided is incomplete, or the provided value is missing one of more of the required values and cannot be confirmed via an alternative value, the servicer should contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) to determine the action Fannie Maw 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.

Evaluating a Request to Lease Real Property for the Installation of a Semi-Permanent Structure

When a borrower requests to lease a portion of the property for the installation of any semi-permanent structure such as a wind turbine, cellular base station or other similar structure, the servicer must ensure that the borrower submits a complete Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

Before approving any agreement related to the placement of a semi-permanent structure on the security property, 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. The servicer must take the following into consideration:

  • The extent to which the rights granted by the agreement infringe on the property owner’s rights.

  • Any hazards, nuisances, or damages that may result from the exercise of the rights granted by the lease.

The servicer must determine whether the request to lease real property for the installation of a semi-permanent structure meets the conditions in the following table.

Conditions required to approve the installation of a semi-permanent structure
The mortgage loan must be current.
The mortgage loan must have been originated greater than 12 months prior to the date of the request.
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.

Exercise of the lease does not prevent its use for residential purposes or expose the residents to health or safety hazards.
The installed structure lies outside of a 500-foot radius from the dwelling and any additional structures, including but not limited to detached garages, storage sheds, or accessory dwelling units.

The servicer must evaluate requests to lease real property for the installation of a semi-permanent structure based on the specific circumstance of the request, as described in the following table.

If leasing a portion of the real property for the installation of a semi-permanent structure... Then the servicer...
meets all of the conditions and the LTV based on the estimated property values with the semi-permanent structure installed is less than 60% is authorized to approve the lease on Fannie Mae’s behalf and waive Fannie Mae’s interest in any contractual payments under the current terms of the lease.
meets all of the conditions and the LTV based on the estimated property value with the semi-permanent structure installed is greater than or equal to 60% is authorized to approve the lease on Fannie Mae’s behalf if the borrower agrees to reduce the mortgage loan balance by an amount sufficient to maintain its LTV ratio equivalent to its LTV ratio immediately prior to the lease becoming effective.
does not meet any of the conditions. must deny the request.

Evaluating a Request for the Subdivision of Real Property

When a borrower requests a subdivision of the property, the servicer must ensure that the borrower submits a complete Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

The servicer must determine whether the request to subdivide real property meets the conditions in the following table.

Conditions required to approve a request to subdivide real property
The mortgage loan must be current.
The mortgage loan must have been originated greater than 12 months prior to the date of the request.
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.
Any existing structures associated with the collateral property, including but not limited to detached garages, storage sheds, or accessory dwelling units, must be located completely within the boundaries of a single lot created through the subdivision.
The subdivision of the property satisfies the subdivision laws of the county or jurisdiction, if applicable, and complies with all zoning requirements or codes.

The servicer must evaluate requests to subdivide real property based on the specific circumstance of the request, as described in the following table.

If the subdivision of real property... Then the servicer...
meets all of the conditions and the LTV based on the estimated property value after the subdivision is less than 60% is authorized to approve the subdivision of real property on Fannie Mae’s behalf.
meets all of the conditions and the LTV based on the estimated property value after the subdivision is greater than or equal to 60% is authorized to approve the subdivision of real property on Fannie Mae’s behalf if the borrower agrees to reduce the mortgage loan balance by an amount sufficient to maintain the LTV ratio immediately prior to the subdivision.
does not meet any of the conditions must deny the request.

Related Announcements

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

Announcements Issue Date
Announcement SVC-2019-04 June 12, 2019