Servicing Guide

Published June 13, 2018

F-1-04: Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan (11/12/2014)

This Servicing Guide Procedure contains the following:

Processing a Request for the Release of Property Securing a Mortgage Loan

The servicer must evaluate a request for the release of property securing a mortgage loan in accordance with D1-1-01, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan.

Upon receipt of the Application for Release of Security (Form 236), and any other documentation that may be necessary depending on the reason for the request for release of security, the servicer must follow the steps outlined in the following table.

Step Servicer Action
1

Obtain any required approval from

  • the mortgage insurer or guarantor; and

  • the servicer of the first lien mortgage loan, if Fannie Mae’s interest is in a second lien mortgage loan.

2

Determine whether Fannie Mae allows the servicer to approve the release of security on its behalf. If Fannie Mae does not authorize the servicer to approve the release of security on its behalf, submit Form 236 and all documents as specified on Form 236, along with a recommendation, to Fannie Mae’s SF CPM division at partial_releases@fanniemae.com for approval.

Note: The servicer must contact Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) to determine whether Fannie Mae is willing to subordinate the mortgage lien to a burdensome easement if it determines that a burdensome easement

  • is not customary in the area, or

  • interferes with the property owner’s use or enjoyment of the property.

If the request for release, or partial release, of security is approved, continue to Step #3.

3

If an escrow deposit account is maintained to pay property taxes, notify the tax collector or assessor under the following circumstances:

  • a release of any portion of a security property affects the amount of taxes levied against the property, or

  • an authorized substitution of security property will affect either the taxing jurisdiction or the tax assessment.

4

Execute any legal documentation needed for the release of security in accordance with the following table.

If... Then the servicer...

the servicer is the owner of record for the mortgage loan

is authorized to execute any legal documentation needed for the release of security, regardless of whether the release was approved by the servicer or Fannie Mae.

Fannie Mae is the owner of record and the servicer has the required power of attorney to execute documents for release of security, including partial releases, on Fannie Mae’s behalf

is authorized to execute the documents for releases, including partial releases, of security, regardless of whether the release was approved by the servicer or Fannie Mae.

Fannie Mae is the owner of record, the servicer does not have the required power of attorney to execute documents for release of security—including partial releases—on Fannie Mae’s behalf, and the release, or partial release, of security must be approved by Fannie Mae

must send the documents to Fannie Mae’s SF CPM division (see F-4-03, List of Contacts) at the same time it submits Form 236, so that if the release is approved, Fannie Mae can execute the documents at the same time.

Fannie Mae is the owner of record, the servicer does not have the required power of attorney to execute documents for release of security—including partial releases—on Fannie Mae’s behalf, and the servicer is authorized to approve the release, or partial release, of security

must send the following to Fannie Mae’s SF CPM division (see F-4-03, List of Contacts):

  • the documents to be executed (with the Fannie Mae loan number and, if applicable, the MERS MIN clearly identified);

  • a copy of the approved Form 236; and

  • a letter that describes any special instructions related to the execution of the documents and indicates the address to which the executed documents should be returned.

5

Determine whether any cash consideration paid for the release, or partial release, will be

  • applied to the outstanding debt. If so, continue to step 6; or

  • used for property improvements.

Note: For substantial cash consideration, the servicer may collect the entire amount from the borrower and disburse the funds as specific improvements are completed.

6

Apply and report any cash consideration received as part of the release, or partial release, of security as described in the following table.

If... Then the servicer must...

any consideration received is less than the total mortgage debt

  • apply it to pay any past due installments or to make an additional principal payment (curtailment), and

  • appropriately report the application in the next Fannie Mae investor reporting system reporting period.

Note: If the application of the entire consideration to the UPB results in an LTV ratio that is less than the previous ratio, the servicer must require the borrower to apply only the portion of the consideration required to maintain the previous ratio and permit the borrower to retain the excess. However, if there is reason to require a reduced LTV ratio—such as the occupancy status of the property having changed from principal residence or second home to investment property—the servicer must require that the total consideration be applied to the mortgage loan debt.

the proceeds are sufficient to satisfy the mortgage loan debt or if they do not fully satisfy the mortgage loan debt but Fannie Mae has agreed to charge off the difference (in connection with a condemnation or a full taking of the property by eminent domain)

  • remove the mortgage loan from Fannie Mae’s investor reporting system by Reporting an Action Code 71, and

  • remit the proceeds via the CRS as a “Special Remittance” (Remittance Type 370). Also see the Investor Reporting Manual and Fannie Mae’s CRS User Guide.

Note: When a request to grant a burdensome easement or to release a beneficial easement is approved, Fannie Mae does not require the borrower to apply any cash consideration he or she receives for the release toward the mortgage loan debt, although the servicer may require that the consideration be used to make any past due monthly payments.

Protecting Fannie Mae’s Rights Regarding Taking of Property by Condemnation or Eminent Domain

When there is a legal proceeding that may significantly affect Fannie Mae’s rights in the property, the servicer must evaluate a request for release in accordance with Evaluating a Request for the Partial or Total Taking of Property Securing a Mortgage Loan by Condemnation in D1-1-01, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan.

The servicer must take the actions outlined in the following table.

The servicer must...

Determine the method that the government instrumentality used to establish the property value on which the compensation is based.

Determine the amount of the proposed award or compensation to be paid to the property owner.

Pursue any legal remedies that are available if it does not appear that the borrower is being fairly compensated.

If applicable, advise the law firm engaged in any foreclosure or bankruptcy proceedings about the proposed condemnation or taking by eminent domain so that the law firm can assume responsibility for any necessary legal action.