Servicing Guide

Published September 18, 2018

E-5-04: Allowable Foreclosure Fees (04/12/2017)

The maximum attorney fees that Fannie Mae allows for legal proceedings related to foreclosures appear in the Allowable Foreclosure Attorney Fees Exhibit. Generally, Fannie Mae will not reimburse the servicer for any attorney fees that exceed or are not included within Fannie Mae's maximum allowable foreclosure fee schedule—unless the law firm obtains the appropriate excess fee approval from Fannie Mae's SF CPM division (see F-4-03, List of Contacts). The servicer must also ensure allowable foreclosure fees comply with the proration requirements set forth in E-5-05, Prorated Attorney Fees / Reimbursement of Uncollected Fees, Costs or Advances. The servicer may access additional resources on managing default-related legal services, including the process for the law firm to request Fannie Mae approval for certain excess legal expenses, on Fannie Mae’s website.

The allowable fee applies for the life of the default and covers services necessary to complete a routine foreclosure action in the jurisdiction. In the event that a default is cured, such as by a completed loan modification or reinstatement, and the loan subsequently becomes delinquent again, a new allowable foreclosure fee applies without the need for excess fee approval when the servicer must initiate new foreclosure proceedings.

In general, the maximum allowable foreclosure fee for a judicial foreclosure is intended to cover all services that are typically required to be performed by foreclosure counsel in the prosecution of a judicial foreclosure in accordance with local law. The following table lists the services included in the allowable judicial foreclosure fee.

Judicial Foreclosure Services
A

Ordering title.

B

Reviewing title reports and exceptions.

C

Drafting Complaint, Summons, Lis Pendens, and other papers necessary to initiate the foreclosure action.

D

Filing the foreclosure Complaint and Lis Pendens.

E

Executing all steps necessary to obtain service of process on all defendants, including review of process server affidavits, obtaining court permission to serve by publication, and referral and tracking of published notices.

F

Preparing legal papers for entry of foreclosure judgment, whether by default or through summary judgment process.

G

Obtaining judgment of foreclosure, including one court appearance.

H

Preparing all legal papers to conduct the foreclosure sale.

I

Conducting, or arranging for the sheriff or other third party to conduct, the foreclosure sale.

J

Attending the foreclosure sale, when required.

K

Obtaining judicial confirmation of foreclosure sale, where required by local law.

L

Preparing all legal papers necessary to convey title to Fannie Mae or a successful third-party bidder.

In general, the maximum allowable foreclosure fee for non-judicial foreclosures is intended to cover all services that are typically required to be performed by counsel in the completion of a non-judicial foreclosure resulting in title transferring from the borrower to the highest bidder at the foreclosure sale, in accordance with local laws. The following table lists the services included in the allowable non-judicial foreclosure fee.

Non-Judicial Foreclosure Services
A

Ordering title.

B

Reviewing title reports and exceptions.

C

Preparing all necessary legal papers to initiate the non-judicial foreclosure process, including Substitution of Trustee, Notice of Default, and Notice of Sale.

D

Recording the necessary documents in the appropriate county recorder's office.

E

Executing all steps necessary to obtain service of process on all persons entitled to notice, including review of process server affidavits and referral and tracking of published notices.

F

Publishing and posting the requisite notices as required by local foreclosure law.

G

Preparing all legal papers to conduct the foreclosure sale.

H

Conducting, or arranging for sheriff or other third party to conduct, the foreclosure sale.

I

Attending the foreclosure sale, when required.

J

Preparing and filing a report of sale with the local court or recorder's office, where required by local law.

K

Preparing all legal papers necessary to convey title to Fannie Mae or a successful third-party bidder.

For both judicial and non-judicial foreclosure actions, the full attorney fees cannot be considered to be earned until all of the steps necessary to complete the foreclosure and vest title in Fannie Mae, including any post-sale confirmation or ratification proceedings, have been completed.

For both judicial and non-judicial foreclosure actions, the maximum allowable attorney fee does not include the costs involved in such a proceeding, such as title charges, filing costs, recordation costs, process server expenses, and publication costs, as applicable.

Fannie Mae will reimburse the servicer for reasonable attorney fees necessary to resolve issues caused by unexpected events, unless they are due to

  • a breach or alleged breach of selling warranties or representations or origination or selling activities,

  • the servicer's failure or alleged failure to satisfy its servicing duties and responsibilities, or

  • actual or alleged error or lack of diligence on the part of the servicer as it relates to law firm performance management and compliance oversight.

Events that may require additional legal services include, but are not limited to, the following:

  • additional court appearances due to borrower delay or court-initiated continuances;

  • motions to shorten redemption periods (for instance, when a property has been abandoned);

  • litigation activities, including discovery practice, motions, trial, and appeal, engendered by borrower defenses not related to origination or servicing of the mortgage loan or the acts or omissions of a law firm selected and retained by the servicer;

  • probate court practice required due to the death of the borrower or co-borrower; or

  • intervention by other claimants, including taxing authorities or HOA or condo associations.

The servicer must pay counsel a reasonable fee for services rendered if additional legal services are required to protect Fannie Mae's interest and the legal services

  • are not within the scope of services contemplated by the maximum allowable foreclosure fee; and

  • are required due to a breach or alleged breach of selling warranties or representations or origination or selling activities or to the lender’s failure or alleged failure to satisfy its duties and responsibilities as a servicer. In these circumstances, Fannie Mae will not reimburse the servicer for the fees.

The servicer must not require (and must not permit their affiliates or any outsourcing companies or other third-party vendors utilized by the servicer to assist in servicing defaulted mortgage loan to require) law firms to perform additional services for no compensation.

Some of the services for which the servicer is obligated to pay counsel without reimbursement from Fannie Mae may include, but are not limited to, the following:

  • Title curative work, including judicial proceedings to eliminate recorded liens that are prior in time; judicial proceedings to account for missing intervening assignments; and legal analysis and communications with prior lienholders and title companies.

  • Litigation activities, including discovery practice, motions, trial, and appeal, caused by borrower defenses related to origination or servicing of the mortgage loan, including payment dispute allegations.

Fannie Mae will not reimburse the servicer for legal fees and expenses related to actions that are essentially servicing functions or for expenses that are properly allocated to the law firm’s overhead expenses, since such expenses are taken into consideration when Fannie Mae establishes its fee schedule.

Expenses that are generally considered to be overhead costs include:

  • travel time and expenses,

  • document preparation charges,

  • secretarial and word processing “time” charges,

  • fees for notary services,

  • photocopy charges,

  • charges for certified copies of documents,

  • charges for legal services to the trustee,

  • telephone charges, and

  • any charges for calls or correspondence to the servicer or Fannie Mae.

Related Announcements

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

Announcements Issue Date
Announcement SVC-2017-04 April 12, 2017
Announcement SVC–2016–05 June 8, 2016