Establishing P&I Custodial Accounts

As described in P&I Custodial Accounts in A4-1-02, Establishing Custodial Bank Accounts, the funds in the P&I custodial account must relate to monthly P&I payments due Fannie Mae. The servicer of participation mortgage loans must deposit only Fannie Mae’s percentage shares of the funds into the P&I custodial account. However, the servicer is authorized to transfer the entire P&I payment from its clearing account into the custodial account, as long as it removes its share of the funds no later than the next business day after they are deposited into the custodial account. The servicer must deduct the servicing fees and late charges before the servicer transfers P&I payments from its clearing account to the custodial account.

The following table describes the requirements for the collection and disposition of P&I funds.

The servicer must...

Establish a reasonable daily cut-off of its work to ensure that collections are promptly credited to the appropriate account.

Ensure that it deposits any monthly payments collected after the mortgage loan was submitted to Fannie Mae for purchase or securitization, including any payments due from an interest rate buydown account, to the P&I account no later than one business day after it or its designee receives Fannie Mae’s purchase proceeds or the MBS.

Fannie Mae will consider waiving its next-day-deposit requirement when a servicer uses a computer service bureau or a third party as a collection agent if it feels that adequate controls exist.

Maintain records identifying each borrower, the amount of each borrower’s payment, and the custodial account into which each payment is deposited.

Drafting Schedule by Type of Draft

As described in P&I Custodial Accounts in A4-1-02, Establishing Custodial Bank Accounts, the required draft date will differ based on the type of draft.

The following table describes the schedule for various types of drafts.

Draft Type Drafting Schedule

MBS LLPAs

Fifth business day of the month following issuance of the related MBS pool

  • Guaranty fees

  • Guaranty fee buydown charges

Seventh business day of each month (or on the preceding business day if the seventh is not a business day)

Other fees and charges, such as

  • Upfront commitment fees

  • Pair-off or extension fees

  • Pool contract fees

Throughout the month

The servicer is authorized to withdraw funds from the P&I custodial account only for the following purposes:

  • remit the funds due Fannie Mae on the remittance date;

  • reimburse itself for delinquency advances for scheduled/actual and scheduled/scheduled remittance types that are recovered from subsequent collections (to the extent that such collections are payments on the related mortgage loan or are not required to be included in the funds due to Fannie Mae on the next remittance date);

  • remove amounts that have been deposited in error;

  • remove fees, charges, funds due related to servicing transfers, and other amounts that are deposited into the account on a temporary basis;

  • remove interest earned on an interest-bearing custodial account; and

  • clear and terminate the account.

Establishing T&I Custodial Accounts

As described in T&I Custodial Accounts in A4-1-02, Establishing Custodial Bank Accounts, funds in the T&I custodial account may not be commingled with P&I funds, the servicer’s general corporate funds, or with funds held by the servicer for other investors.

The following table describes requirements the servicer must adhere to when establishing custodial accounts for T&I funds.

The servicer must...

Establish a reasonable daily cut-off of its work to ensure that collections are promptly credited to the appropriate account.

Deposit the borrower’s escrow account balance and funds for any interest rate buydown account that are not scheduled for application toward the monthly payment into the T&I custodial account no later than one business day after it (or its designee) receives Fannie Mae’s purchase proceeds or the MBS, for newly purchased or securitized mortgage loans. Fannie Mae may waive its next-day-deposit requirement when a servicer uses a computer service bureau or a third party as a collection agent if it feels that adequate controls exist.

Maintain records if the servicer maintains separate T&I custodial accounts for different remittance types identifying

  • each borrower,

  • the amount of each borrower’s escrow or other deposits, and

  • the custodial account into which each payment is deposited.

Managing T&I Custodial Accounts

As described in T&I Custodial Accounts in A4-1-02, Establishing Custodial Bank Accounts, a T&I custodial account must be used to

  • make escrow-related disbursements, and

  • hold unapplied funds pending final disposition.

The servicer is authorized to withdraw T&I funds from the T&I custodial account for these purposes:

  • pay taxes, insurance premiums, etc., when they are due;

  • apply interest rate buydown funds when due;

  • refund escrow account surpluses to the borrower or pay interest to the borrower;

  • remove any amounts deposited in error;

  • remove funds due to the borrower, such as partial payments or loss draft funds;

  • reimburse itself for T&I servicing advances from subsequent payments on the related mortgage loan once the mortgage loan becomes current; and

  • clear and terminate the account.

Unless otherwise indicated in the Servicing Guide, the following table describes the servicer’s responsibilities related to managing unapplied funds.

The servicer must...

Actively identify and monitor all unapplied funds held in a T&I custodial account on a monthly basis by

  • conducting research to ensure unapplied funds are identified and applied as appropriate;

  • maintaining records of all research and contact efforts made to the borrower related to the funds, and if applicable, the corrective action needed and the expected date of resolution; and

  • determining whether any funds should be returned to the borrower, and if so, return the funds to the borrower in a timely manner.

Provide all relevant documentation with regard to unapplied funds to Fannie Mae upon request.

Implementing Custodial Accounts

As described in A4-1-02, Establishing Custodial Bank Accounts, the servicer is responsible for the safekeeping of custodial funds at all times. For each custodial account the servicer establishes, the servicer and the depository institution must execute

  • a Letter of Authorization for P&I Custodial Account (Form 1013), or

  • a Letter of Authorization for T&I Custodial Account (Form 1014).

When a servicer establishes (or changes) a custodial account for a mortgage loan, it must send the original of each executed Form 1013 or Form 1014 electronically to custodial_account@fanniemae.com.

The servicer is authorized to maintain multiple P&I custodial accounts for a single remittance type. The number of custodial accounts established depends on the number of remittance types under which a servicer is reporting and on whether the servicer chooses to commingle its T&I funds for all remittance types. A servicer could establish as many as eight different custodial accounts (although it could reduce the number of accounts to five by commingling the T&I funds for all remittance types), depending on whether it

  • has mortgage loans accounted for under all three remittance types (including both portfolio mortgage loans and MBS mortgage loans accounted for as the scheduled/scheduled remittance type), and

  • chooses to separate its T&I custodial accounts by each of the remittance types.

On the other hand, a servicer that accounts for portfolio mortgage loans under only one remittance type or that services MBS mortgage loans only would need to establish two custodial accounts.

Custodial accounts established for the deposit of P&I funds must be titled as follows:

”(Name of servicer), as agent, trustee, and/or bailee for the benefit of Fannie Mae and/or payments of various mortgagors and/or various owners of interests in mortgage-backed securities (Custodial Account).”

Custodial accounts established for the deposit of T&I funds must be titled as follows:

”(Name of servicer), as agent and/or trustee for the benefit of Fannie Mae and payments of various mortgagors, respectively (Custodial Account).”

Subservicer-Specific Requirements for Custodial Accounts

A servicer that uses subservicer(s) must have each subservicer execute a separate Letter of Authorization for each custodial account it establishes. The following table describes the steps the servicer and subservicer must take in order to properly implement custodial accounts.

Step Servicer Action
1

A subservicer that is establishing (or changing) a custodial account must execute and send the original and one copy of the executed Form 1013 or Form 1014 to the servicer.

2

The servicer must retain the copy and send the executed original Form 1013 and/or Form 1014 to Fannie Mae at custodial_account@fanniemae.com.

3

The servicer, subservicer, and the custodial depository must each retain a copy of the executed original Form 1013 and/or Form 1014 in its files.

Establishing Drafting Arrangements

The servicer must arrange for drafting of custodial funds in a manner consistent with the requirements of the Servicing Guide and Lender Contract. The servicer must refer to the following table to designate a drafting arrangement for a custodial account or to change an existing arrangement.

Step Servicer Action
1 Confirm Fannie Mae’s Cash Management Unit (see F-4-03, List of Contacts) has a completed and executed Certificate of Authority, Incumbency, and Specimen Signatures (Form 360) on file.

Note: Form 360 must be accompanied by the Resolution(s)/Evidence of Authorization to be considered complete.

2

Complete an Authorization for Automatic Transfer of Funds (Form 1072) for each drafting arrangement with its custodial bank(s).

3

Send the completed and executed Form 360, as applicable, and Form 1072 to Fannie Mae for processing.

Drafting through CRS

Under the CRS, a servicer is authorized to designate as a drafting account one P&I account for each remittance type it services.

If the servicer maintains multiple P&I accounts for a single remittance type, the servicer must designate only one of these accounts as its drafting account for that remittance type. All monies due Fannie Mae for that remittance type must be moved to the designated drafting account prior to the date Fannie Mae drafts the account.

A servicer with multiple P&I custodial accounts is authorized to use a consolidated drafting account in order to facilitate operational efficiencies. If the servicer uses a consolidated drafting account that includes scheduled/scheduled MBS mortgage loans, the servicer must designate a separate account as its drafting account for that remittance type only and all monies due must be moved from various MBS P&I custodial accounts (if the servicer has chosen to use multiple custodial accounts) to a single designated MBS pool consolidated drafting account prior to the date Fannie Mae drafts the account.

A servicer is authorized to designate a separate consolidated drafting account for scheduled/scheduled portfolio, scheduled/actual, or actual/actual mortgage loans. The servicer is authorized to designate

  • any of the portfolio mortgage loan P&I custodial accounts as the consolidated drafting account, or

  • a special consolidated account that is used solely for drafting purposes.

Implementing CRS Drafting Arrangements

The following table describes requirements for implementing drafting arrangements.

If the servicer designates… Then the servicer must…

a drafting arrangement for a consolidated drafting account

fulfill all requirements under the CRS related to establishing drafting arrangements (see CRS User Guide).

The servicer must not deposit into the consolidated drafting accounts funds that are collected on behalf of other investors.

an existing P&I custodial account as a special drafting account

must advise Fannie Mae of the special drafting account by submitting Form 1013 electronically to custodial_account@fanniemae.com.

Reconciling Custodial Bank Accounts

The following table describes the requirements for reconciling custodial bank accounts.

Step Servicer Action
1

Reconcile its cash book to the custodial account(s) every month using the applicable Custodial Account Analysis.

The servicer must…

Use the P&I Custodial Account Analysis (Form 496) to

  • reconcile each P&I custodial account, and

  • reflect the composition of the cash book balance of the account at the close of the reporting period.

Use the T&I Custodial Account Analysis (Form 496A) to

  • reconcile each T&I custodial account, and

  • reflect the composition of the cash book balance of the account at the close of the reporting period.

2

Retain each month’s reconciliation and analysis in its records in the event that Fannie Mae requests the submission of a specific Form 496 or Form 496A to Fannie Mae.

Related Announcements

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

Announcements Issue Date
Announcement SVC-2018-04 June 13, 2018
Announcement SVC-2017-04 May 10, 2017
Announcement SVC–2015–13 October 14, 2015
Announcement SVC–2015–04 March 18, 2015