Servicing Guide

Published June 13, 2018

Determining Eligibility for a Fannie Mae Cap and Extend Modification for Disaster Relief

The servicer must not require a complete BRP to evaluate the borrower for a Fannie Mae Cap and Extend Modification for Disaster Relief and is not required to have previously solicited the borrower for a workout option prior to offering a Fannie Mae Cap and Extend Modification for Disaster Relief. However, the servicer must establish QRPC with the borrower during the forbearance plan and must determine whether the borrower is capable of maintaining the current contractual monthly PITI payment, including escrows, and desires a Cap and Extend Modification for Disaster Relief in lieu of a Fannie Mae Flex Modification (see Unique Requirements for a Property Impacted by an Eligible Disaster in D2-3.2-09, Fannie Mae Flex Modification). In order to be eligible for a Fannie Mae Cap and Extend Modification for Disaster Relief, all of the criteria in the following table must be met.

Eligibility criteria for a Fannie Mae Cap and Extend Modification for Disaster Relief

The property securing the mortgage loan, or the borrower’s place of employment, must be located in a FEMA Declared Disaster Area eligible for Individual Assistance.

The mortgage loan must be a first lien mortgage loan.

The mortgage loan must

  • have been current or less than 31 days delinquent when the disaster occurred, and

  • be 31 or more days delinquent but less than 360 days delinquent upon completion of the forbearance plan.

The mortgage loan must not be insured or guaranteed by a federal government agency (e.g. FHA, VA, or RD).

The mortgage loan must not be subject to

  • a recourse or indemnification arrangement under which Fannie Mae purchased or securitized the mortgage loan or that was imposed by Fannie Mae after the mortgage loan was purchased or securitized;

  • a current offer for another workout option, with the exception of a Streamlined Modification Post Disaster Forbearance;

  • an approved liquidation workout option; or

  • an active and performing repayment plan or other forbearance plan where the hardship was not due to a disaster event.

Determining Eligibility for a Texas Section 50(a)(6) Loan

The servicer must obtain Fannie Mae’s prior approval through Fannie Mae’s servicing solutions system for a mortgage loan modification of a Texas Section 50(a)(6) loan. If the servicer receives a notice from the borrower pursuant to Texas Constitution Section 50(a)(6) that a modification fails to comply with the Texas Constitution Section 50(a)(6) requirements, the servicer must immediately, but no later than seven business days after receipt, take the actions listed in the following table.

The servicer must...

Inform Fannie Mae’s Legal department by submitting a Non-Routine Litigation Form (Form 20) and including the borrower notice in its submission.

Collaborate with Fannie Mae on the appropriate response, including any cure that may be necessary, within the 60-day time frame provided by requirements of Texas Constitution Section 50(a)(6).

Performing an Escrow Analysis

The servicer must perform an escrow analysis prior to offering a Trial Period Plan. See Administering an Escrow Account in Connection With a Mortgage Loan Modification in B-1-01, Administering an Escrow Account and Paying Expenses for additional information.

Any escrow account shortage that is identified at the time of the mortgage loan modification must not be capitalized and the servicer is not required to fund any existing escrow account shortage.

If applicable law prohibits the establishment of the escrow account, the servicer must ensure that the T&I premiums are paid to date.

Determining the Fannie Mae Cap and Extend Modification for Disaster Relief Terms

The servicer must follow the procedures in Obtaining a Property Valuation in F-1-13, Processing a Fannie Mae Cap and Extend Modification for Disaster Relief for determining the property value.

The servicer must determine the borrower’s new modified mortgage loan terms by taking the steps in the following table in the order provided in compliance with applicable law.

Step Action
1

Capitalize arrearages.

2

Set the interest rate to a fixed interest rate that is based on the existing mortgage loan amortization type and interest rate.

3

Extend the term in monthly increments up to a maximum of 480 months from the modification effective date.

The servicer must follow the procedures in Determining the New Modified Mortgage Loan Terms in F-1-13, Processing a Fannie Mae Cap and Extend Modification for Disaster Relief for determining the borrower’s new modified mortgage loan terms.

The Fannie Mae Cap and Extend Modification for Disaster Relief must result in a fixed rate mortgage loan.

Note: An ARM or interest-only mortgage loan must be converted to a fully amortizing mortgage loan.

Prior to granting a permanent mortgage loan modification, the servicer must solicit the borrower and place the borrower in a Trial Period Plan using the new modified mortgage loan terms.

Soliciting a Borrower for a Cap and Extend Modification for Disaster Relief

The servicer must mail the borrower a Streamlined Modification Trial Period Plan NoticeEvaluation Notice within five days of the servicer’s decision to offer a Cap and Extend Modification for Disaster Relief if the mortgage loan satisfies the requirements described in Determining Eligibility for a Fannie Mae Cap and Extend Modification for Disaster Relief and Determining the Fannie Mae Cap and Extend Modification for Disaster Relief Terms. The servicer must make appropriate changes to the Evaluation Notice, including the FAQs, to reflect a Cap and Extend Modification for Disaster Relief. See Offering a Trial Period Plan and Completing a Fannie Mae Cap and Extend Modification for Disaster Relief for additional information on the Evaluation Notice and Trial Period Plan.

If a borrower accepts the solicitation for a Fannie Mae Flex Modification Trial Period Plan by submitting the first Trial Period Plan payment (see Soliciting the Borrower for a Fannie Mae Flex Modification in D2-3.2-09, Fannie Mae Flex Modification ), and during the Trial Period Plan contacts the servicer to obtain a Cap and Extend Modification for Disaster Relief in lieu of a Fannie Mae Flex Modification, the borrower must restart a Trial Period Plan and the servicer must send a Streamlined Modification Trial Period Plan NoticeEvaluation Notice based on the borrower’s monthly P&I payment obligation as described in Determining the New Modified Mortgage Loan Terms.

Offering a Trial Period Plan and Completing a Fannie Mae Cap and Extend Modification for Disaster Relief

For an MBS mortgage loan, the servicer must also see Conditions of a First and Second Lien Mortgage Loan Modification for an MBS Mortgage Loan in D2-3.1-02, Working with an MBS Mortgage Loan for Certain Workout Options.

The servicer must communicate with the borrower that the mortgage loan modification will not be binding, enforceable, or effective unless and until all conditions of the mortgage loan modification have been satisfied, which is when all of the following have occurred:

  • the borrower has satisfied all of the requirements of the Trial Period Plan,

  • the borrower has executed and returned a copy of the Loan Modification Agreement (Form 3179), and

  • the servicer or Fannie Mae (depending upon the entity that is the mortgagee of record) executes and dates Form 3179.

The servicer must send an Evaluation Notice (see Sending a Notice of Decision on a Workout Option in D2-2-05, Receiving a Borrower Response Package for the requirements of the Evaluation Notice) to document the borrower’s Trial Period Plan, which begins on the date described in the following table.

If the servicer mails the Evaluation Notice to the borrower... Then the servicer...

on or before the 15th day of a calendar month

must use the first day of the following month as the first Trial Period Plan payment due date.

after the 15th day of a calendar month

must use the first day of the month after the next month as the first Trial Period Plan payment due date.

The Cap and Extend Modification Trial Period Plan for Disaster Relief must be three months long.

If the borrower fails to make a Trial Period Plan payment by the last day of the month in which it is due, the borrower is considered to have failed the Trial Period Plan and the servicer must not grant the borrower a permanent Fannie Mae Cap and Extend Modification for Disaster Relief.

The servicer must see E-3.4-01, Suspending Foreclosure Proceedings for Workout Negotiations for the requirements for suspending foreclosure.

The servicer must use the Form Modification Cover Letter to communicate a borrower’s eligibility for a permanent Fannie Mae Cap and Extend Modification for Disaster Relief, which must be accompanied by a completed Form 3179. Form 3179 must only be revised as authorized in its instructions.

The servicer must ensure that the modified mortgage loan retains its first lien position and is fully enforceable.

Electronic documents, signatures, and notarizations for Fannie Mae Cap and Extend Modifications for Disaster Relief are acceptable provided they comply with Fannie Mae’s requirements. See Selling Guide A2-5.1-03, Electronic Records, Signatures, and Transactions for Fannie Mae’s requirements for electronic records.

The servicer must follow the procedures in Preparing the Loan Modification Agreement, Executing and Recording the Loan Modification Agreement, and Adjusting the Mortgage Loan Account Post-Mortgage Loan Modification in F-1-13, Processing a Fannie Mae Cap and Extend Modification for Disaster Relief for preparing, executing, and recording Form 3179 and adjusting the mortgage loan account upon completion of the mortgage loan modification. The servicer must also follow the procedures in Loan Modifications for an eMortgage in F-1-29, Servicing eMortgages for additional requirements when the modified mortgage loan is an eMortgage.

Processing a Fannie Mae Cap and Extend Modification for Disaster Relief for a Mortgage Loan with Mortgage Insurance

The servicer must see F-2-06, Mortgage Insurer Delegations for Workout Options for the list of conventional mortgage insurers from which Fannie Mae has obtained delegation of authority on behalf of all servicers, which allows the servicer to process a Fannie Mae Cap and Extend Modification for Disaster Relief without obtaining separate mortgage insurer approval at the company or loan level.

Handling Fees and Late Charges in Connection with a Fannie Mae Cap and Extend Modification for Disaster Relief

The servicer must not charge the borrower administrative fees.

The servicer is authorized to assess late charges during the Trial Period Plan. The servicer must waive all late charges, penalties, stop payment fees, or similar charges upon the borrower’s conversion to a permanent mortgage loan modification.

The servicer must follow the procedures in Requesting Reimbursement for Expenses Associated with Workout Options in F-1-05, Expense Reimbursement for advancing funds and requesting reimbursement.

Related Announcements

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

Announcements Issue Date
Announcement SVC-2018-01 February 14, 2018
Announcement SVC-2017-05 June 21, 2017
Announcement SVC–2016–09 October 19, 2016
Announcement SVC–2016–08 September 14, 2016
Announcement SVC–2016–03 April 13, 2016
Announcement SVC–2015–04 March 18, 2015