Servicing Guide

Published June 13, 2018

E-3.2-02: Initiating Foreclosure Proceedings on a First Lien Conventional Mortgage Loan (11/12/2014)

Upon expiration of the breach letter, the servicer must expedite foreclosure proceedings to the greatest extent allowable under applicable law (and without exploring workout options) in the following circumstances, and provided the borrower is not eligible for relief from foreclosure in accordance with D2-3.4-01, Military Indulgence, or any state law that similarly restricts the right to foreclose:

  • the property has been abandoned or vacated by the borrower and it is apparent the borrower does not intend to make the monthly payments;

  • the borrower was advised in writing of available workout options and his or her written response indicates a lack of interest in the mortgage loan obligation, or provides permission for the commencement of foreclosure proceedings; or

  • income from rental of the property is not being applied to the monthly mortgage loan payments and arrangements cannot be made to apply it.

If the servicer services first lien mortgage loans owned or securitized by Fannie Mae and also services subordinate lien mortgage loans for itself or other investors, the servicer must follow Fannie Mae’s foreclosure guidelines and process both the prereferral review and any foreclosure proceedings for the Fannie Mae mortgage loans in a timely manner. The servicer must not consider the status of, or impact on, any subordinate liens that the servicer is servicing for itself or other investors when performing a prereferral review or proceeding with a foreclosure action. However, the servicer that also services a subordinate lien mortgage loan may assign the first lien mortgage loan to Fannie Mae and file the foreclosure of the first lien mortgage loan in Fannie Mae’s name in order to avoid having to “sue itself” in the foreclosure action.