General Requirements for All Bidding Instructions

The servicer must issue bidding instructions to the law firm for all mortgage loans referred for foreclosure. The servicer must pay particular attention to any bidding requirements issued by FHA, VA, RD, or the mortgage insurer to make sure that Fannie Mae will not be prevented from recovering the full amount due under the insurance or guaranty contract.

The following table provides the servicer with additional information related to submitting property valuation requests when required by applicable law, Fannie Mae, or the MI company.

The servicer must…

Request the property valuation for bidding instructions as soon as it is aware of the foreclosure sale date, but no earlier than 90 days prior to the foreclosure sale date.

Include a completed VMS Valuation Order Template with the request.

Note: To obtain access to the VMS application, the servicer must complete a VMS User Setup Template and submit it to Fannie Mae’s SF CPM division (see F-4-03, List of Contacts). The servicer must include the cost of the property value order in the MI claim, when applicable.

Obtain the results of property valuation order requests for the purposes of bidding instructions through Fannie Mae’s servicing solutions system within 7 to 10 calendar days from the date the servicer submits the request.

Fannie Mae will not email the results of the property valuation to the servicer.

The servicer must not issue bidding instructions to the law firm if its preforeclosure property inspection reveals, or if the servicer otherwise discovers, that the property has incurred significant hazard damage without a claim having been filed with the insurance carrier. Instead, the servicer must contact its Fannie Mae Servicing Representative (see F-4-03, List of Contacts) to determine whether or not a property insurance claim should be filed, and if so, what foreclosure bid should be entered.

Bidding Instructions for Conventional Mortgage Loans

The servicer must contact its Fannie Mae Servicing Representative (see F-4-03, List of Contacts) to obtain bidding instructions for all conventional second lien mortgage loans.

For all first lien mortgage loans and co-op share loans that are in a first lien position, the servicer must issue bidding instructions based on the following guidelines, which are designed to ensure that a third party's bidding at the foreclosure sale will not result in Fannie Mae's eventually acquiring the property for more than the total mortgage indebtedness or for less than Fannie Mae's reserve price as described in When to Obtain a Reserve Price.

For Fannie Mae's bidding instructions, the servicer must consider whether or not

  • the mortgage loan has MI;

  • the property is located in a state (or jurisdiction) that has a redemption period in which the borrower (or a junior lienholder) can redeem the property for the amount of the foreclosure bid;

  • the property is located in a state (or jurisdiction) that does not have a redemption period, but that levies transfer taxes and/or other related fees and costs on the winning bidder at the foreclosure sale;

  • the property is located in a state (or jurisdiction) that recognizes Fannie Mae's exemption from the payment of real estate transfer taxes; and

  • the property has a property or flood insurance claim that has been filed.

When to Obtain a Reserve Price

The servicer must obtain a reserve price from Fannie Mae in any of the following circumstances:

  • when preparing bids for uninsured conventional first lien mortgage loans,

  • when applicable laws do not require that an appraisal report be used to set the bid, or

  • if the mortgage insurer of a first lien mortgage loan elects not to issue bidding instructions and defers to Fannie Mae.

The following table provides a list of servicer requirements for obtaining and using a reserve price.

The servicer must…

Request the reserve price through the VMS in Fannie Mae’s servicing solutions system between 30 and 90 days before the scheduled foreclosure sale date.

Note: The servicer must use the reason code “Reserve Price Bid Instructions” when submitting a request to obtain a reserve price.

Request an updated reserve price when the “expiration date” of the reserve price will occur prior to the scheduled foreclosure sale date. The servicer must always use an unexpired reserve price to establish the bid amount.

Provide bidding instructions to the law firm in a timely manner so as not to delay, cancel, or stop a scheduled foreclosure sale. In circumstances where the servicer is unable to provide the law firm with the bidding instructions in a timely manner, it must document the mortgage loan servicing file accordingly.

Note: The servicer must bid the total indebtedness amount minus any outstanding property or flood insurance claim(s) if the calculated reserve price is not available in sufficient time prior to the foreclosure sale date to enable the law firm to enter a specified bid at the foreclosure sale.

The following tables provide Fannie Mae's requirements for the preparation of bidding instructions for a first lien mortgage loan, depending on whether or not the mortgage loan is insured.

For an Uninsured Conventional First Lien Mortgage Loan:

If the security property is in a state or jurisdiction… Then the servicer must…

that has a redemption period

instruct the law firm to bid

  • an amount equal to the lesser of

    • 100% of the reserve price obtained from Fannie Mae, or

    • 100% of the total mortgage indebtedness minus any outstanding property or flood insurance claims, or

  • such other amount as may be required by applicable law (e.g., judgment amount).

that does not have a redemption period and does not levy transfer taxes or other related fees and costs on the winning foreclosure bid, or does levy transfer taxes to which Fannie Mae's real estate transfer tax exemption applies

that does not have a redemption period, but which levies transfer taxes or other related fees and costs on the winning foreclosure bid and does not recognize Fannie Mae's exemption from paying real estate transfer taxes

instruct the law firm to enter an initial bid of $100 (or any other minimum amount the state requires in order for the bid to be considered valid), and continue bidding until it either

  • wins the bidding, or

  • bids an amount equal to the lesser of:

    • 100% of the reserve price obtained from Fannie Mae, or

    • 100% of the total mortgage indebtedness minus any outstanding property or flood insurance claims, or

  • such other amount as may be required by applicable law (e.g., judgment amount).

If the bid amount cannot be increased because the person conducting the foreclosure is prohibited from accepting a range of bids from the servicer, the servicer must instruct the law firm to bid as if the property were in a jurisdiction with a redemption period as indicated above.

For an Insured Conventional First Lien Mortgage Loan:

For a first lien mortgage loan covered by MI, the servicer must bid an amount approved by the mortgage insurer. If the mortgage insurer elects not to issue bidding instructions per its guidelines, or defers to Fannie Mae for foreclosure sale bidding instructions, the servicer must follow the policies and requirements for an uninsured conventional first lien mortgage loan.

If the mortgage insurer’s bidding instructions or requirements include preserving deficiency rights, and where permitted by applicable law, the servicer must preserve the mortgage insurer’s right to pursue a deficiency action in accordance with the mortgage insurer’s instructions.

Bidding Instructions for FHA-Insured Mortgage Loans

The amount the servicer must bid for a FHA-insured mortgage loan depends on when the mortgage loan was endorsed for insurance. The following table provides additional bidding information based on the policy endorsement date.

If the FHA mortgage loan... Then the bid amount... And the servicer must...

was endorsed for insurance before November 30, 1983

must include the full amount of the indebtedness consisting of the

  • UPB;

  • accrued interest to the date of the sale using the rate in effect for each payment on the date it became due;

  • any advances for T&I; and

  • other foreclosure costs, including attorney fees and any reimbursable property inspection fees.

  • subtract from the total indebtedness any funds that it is holding for a mortgage loan insured under an FHA Escrow Commitment or for a mortgage loan that is subject to an interest rate buydown plan, and

  • send Fannie Mae any funds it holds as soon as the foreclosure sale is held.

was endorsed for insurance on or after November 30, 1983

will vary depending on whether FHA elects to have the property appraised.

When FHA has the property appraised, it will advise the servicer of the amount to bid at the foreclosure sale. The bid amount will reflect the fair market value of the property, appropriately adjusted for FHA's estimate for holding costs and resale costs that it would incur if the property were conveyed.

bid the exact amount specified by FHA as long as the servicer receives FHA’s bid amount within the five days before the foreclosure sale — unless state law requires a higher amount to be bid.

If the servicer does not receive FHA’s bid amount within the five days before the foreclosure sale, it must bid the full amount of Fannie Mae's indebtedness.

Bidding Instructions for VA-Guaranteed Mortgage Loans

For VA mortgage loans, the bid must be the amount that VA specified as its “upset price.” If VA does not specify an upset price and Fannie Mae has not authorized a VA no-bid buydown as further discussed in Evaluating VA No-Bid Buydowns, the servicer must determine the bid amount by subtracting the amount the VA will pay under its guaranty from the amount required to satisfy the indebtedness.

Evaluating VA No-Bid Buydowns

The servicer must evaluate whether a VA no-bid buydown is feasible and makes sound economic sense. When evaluating whether a VA no-bid buydown is feasible the servicer must take the actions listed in the following table.

The servicer must...

Compare the amount needed to buy down the debt to the level at which the VA will be willing to accept conveyance of the property to the loss Fannie Mae might expect from acquiring and disposing of the property.

Ensure the proposed action will not affect the validity of the foreclosure or the indebtedness that will be established against the borrower.

Ensure the proposed action will be binding on all parties.

Ensure Fannie Mae's recovery of the full claim amount due to it under the VA guaranty will not be jeopardized.

Obtain Fannie Mae’s prior written approval by submitting its recommendation and all pertinent information to Fannie Mae via Fannie Mae’s servicing solutions system. The servicer must follow the procedures in Requesting Approval for a VA No-Bid Buydown in F-1-27, Requesting Fannie Mae’s Approval via Fannie Mae’s Servicing Solutions System.

If the servicer does not receive the VA's no-bid letter until after the cut-off date has passed, it must contact the VA to request a revised cut-off date if it does not believe that it has sufficient time to obtain Fannie Mae's approval to the no-bid buydown and reschedule the foreclosure sale.

The following table provides additional instructions to the servicer based on Fannie Mae’s review of the VA no-bid buydown.

If Fannie Mae... Then the servicer must...

does not agree to the no-bid buydown

follow Fannie Mae’s general procedures related to

  • bidding at the foreclosure sale,

  • filing claims under the VA guaranty, and

  • managing the acquired property.

agrees to the no-bid buydown

follow the debt reduction procedures established by the applicable VA regional office, and the procedures Fannie Mae generally has in effect for properties that are conveyed to the VA.

The servicer also must report the VA no-bid buydown in the next delinquency status information it transmits to Fannie Mae after the date of Fannie Mae’s decision to authorize the buydown.

Bidding Instructions for RD-Guaranteed Mortgage Loans

For RD mortgage loans, the servicer must bid the full amount of the indebtedness. This amount consists of

  • the UPB;

  • accrued interest to the date of the sale;

  • any advances for T&I; and

  • other foreclosure costs, including attorney fees and any reimbursable property inspection fees.

Related Announcements

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

Announcements Issue Date
Announcement SVC–2015–11 August 12, 2015
Announcement SVC–2015–03 February 11, 2015