Requesting Approval for the Assumption of a Delinquent Conventional Mortgage Loan

The servicer must evaluate a request for an assumption of a delinquent conventional mortgage loan that includes a due-on-sale (or due-on-transfer) provision in accordance with Allowing a Delinquent Mortgage Loan to be Assumed in D1-4.2-02, Conventional Mortgage Loans That Include a Due- on-Sale (or Due-on-Transfer) Provision.

To determine whether Fannie Mae is will waive the enforcement of the due-on-sale (or due-on-transfer) provision and approve the assumption, the servicer must provide through Fannie Mae’s servicing solutions system the information described in the following table.

The servicer must provide through Fannie Mae’s servicing solutions system…

A description of the borrower’s financial circumstances.

The property market value analysis from an appraisal or an interior BPO.

Information about any conditions of the mortgage insurer’s approval, if applicable.

The servicer’s recommendation to waive the due-on-sale (or due-on-transfer) provision and permit the assumption based on the creditworthiness of the prospective purchaser.

Fannie Mae will work with the servicer and the mortgage insurer, if applicable, to determine the exact terms of the assumption, including any cash contribution that must be made by the borrower or the prospective purchaser.

Fannie Mae will not approve an assumption if the mortgage loan has subordinate financing unless arrangements are made to pay off the subordinate lien(s).

Note: The servicer does not need to make any changes to its monthly investor reporting system reports to reflect mortgage assumptions for portfolio mortgage loans.

Requesting Approval for a Workout Option for a New Transferee Owner

The servicer must request Fannie Mae’s approval for any workout option it determines is appropriate for a new transferee owner in accordance with D1-4.1-02, Allowable Exemptions Due to the Type of Transfer. The servicer must comply with the requirements shown in the following table.

Servicer Action

Submit the case into Fannie Mae’s servicing solutions system under the recommended workout option.

Indicate in the case comments section that the case is associated with a transfer of ownership or an assumption.

Fannie Mae will determine the terms of the workout and any related assumption.

Requesting Approval for a Non-Delegated Mortgage Release Case

The servicer must evaluate a borrower for a Mortgage Release in accordance with D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure).

The following table outlines the required servicer actions to request Fannie Mae’s prior written approval for a Mortgage Release as a non-delegated case.

Step Servicer Action
1

Transmit the following through Fannie Mae’s servicing solutions system:

  • a description of the borrower's financial circumstances,

  • a property valuation,

  • general summary information about satisfaction of the eligibility criteria for Mortgage Release,

  • an indication of whether the borrower can make a cash contribution to reduce Fannie Mae's loss, and

  • its recommendation to Fannie Mae.

2

Obtain Fannie Mae’s decision regarding the Mortgage Release through Fannie Mae’s servicing solutions system. Fannie Mae will make its decision available shortly after Fannie Mae receives the servicer’s recommendation.

If... Then the servicer must...

Fannie Mae approves the Mortgage Release

continue to step 3.

Fannie Mae denies the Mortgage Release and instructs the servicer to continue with foreclosure

report the initiation of foreclosure in the next delinquency status information it transmits to Fannie Mae after the date of Fannie Mae's decision. Do not continue to step 3.

3

Obtain the letter including the terms and conditions of Fannie Mae's decision about acceptance of the Mortgage Release through Fannie Mae’s servicing solutions system.

4

Have its attorney prepare the deed of conveyance and file a claim with the insurer or guarantor. Also see E-4.2-01, Completing Conveyance Documents.

5

File a claim with the insurer or guarantor, if applicable.

Requesting Approval for a Mortgage Release for a Second Lien Mortgage Loan

The servicer must evaluate a borrower of a second lien mortgage loan for a Mortgage Release in accordance with D2-3.4-02, Offering a Mortgage Release (Deed-in-Lieu of Foreclosure) for a Second Lien Mortgage Loan.

The following table outlines the required servicer actions to request Fannie Mae’s prior written approval for a Mortgage Release.

Step Servicer Action
1

Transmit the following through Fannie Mae’s servicing solutions system:

  • a description of the borrower's financial circumstances,

  • a property valuation,

  • general summary information about satisfaction of the eligibility criteria for a Mortgage Release,

  • an indication of whether the borrower can make a cash contribution to reduce Fannie Mae's loss,

  • an analysis of the first lien mortgage loan servicer’s intentions and the possibility of recovery on the second lien mortgage loan if the mortgage loan is a second lien mortgage loan and Fannie Mae does not have an interest in the first lien mortgage loan, and

  • its recommendation.

Note: If the borrower has non-retirement cash reserves greater than $50,000, the servicer must specify that when it submits the case. Specifically, the servicer must enter the dollar amount, as applicable, in the “assets” field in Fannie Mae’s servicing solutions system.

2

Obtain the letter including the terms and conditions of Fannie Mae's decision about acceptance of the Mortgage Release through Fannie Mae’s servicing solutions system. This letter will be available shortly after Fannie Mae receives the servicer’s recommendation.

3

Have its attorney prepare the deed of conveyance and file a claim with the insurer or guarantor. Also see E-4.2-01, Completing Conveyance Documents.

Requesting Approval for a Charge-Off of a First Lien Mortgage Loan

When the servicer has decided to request Fannie Mae approval for a first lien mortgage loan charge-off pursuant to D1-1-02, Evaluating a First Lien Mortgage Loan for Charge-Off and Release of Lien, the servicer must observe the following procedure.

The servicer must provide all required documentation as applicable from the table below when submitting a charge off request to Fannie Mae via Fannie Mae's servicing solutions system.

Required Documentation
Documentation to support a specific circumstance outlined in D1-1-02, Evaluating a First Lien Mortgage Loan for Charge-Off and Release of Lien.
Hardship and financial information for each borrower, if available.
Documentation indicating the occupancy status and property condition, including hazard claim status, repair and/or demolition estimates, if applicable.
A current value from either an appraisal or BPO, if available.
Current payoff amount including all advances.
Documentation related to any additional unpaid judgements and liens.

For all approved charge-offs, the servicer must take the steps outlined in the following table.

The servicer must...
Notify tax authorities that future tax bills should be sent to the borrower (if applicable).
Inform the borrower in writing that
  • The lien against the subject property has been released,

  • The servicer will not/no longer pursue foreclosure proceedings, and

  • The borrower is responsible for the payment of property taxes, insurance, and maintenance of the property in accordance with applicable requirements.

Remove the mortgage loan from Fannie Mae's investor reporting system by reporting an Action Code 70 or 72 as indicated by Fannie Mae in its approval letter.

Note: To the extent feasible, Fannie Mae will require the charge-off and lien release to be conducted simultaneously, unless awaiting receipt of proceeds associated with the mortgage loan. In the event of proceeds, the servicer must remit the proceeds via the CRS as a “Special Remittance” using the Remittance Type as indicated by Fannie Mae in its approval letter. Also see the Investor Reporting Manual and Fannie Mae's CRS User Guide.

Requesting Approval for a Charge-Off of a Second Lien Mortgage Loan

The servicer must evaluate a second lien mortgage loan for a charge-off in accordance with D2-3.4-02, Offering a Mortgage Release (Deed-in-Lieu of Foreclosure) for a Second Lien Mortgage Loan.

Fannie Mae’s decision on whether or not to charge off the second lien mortgage loan debt will depend on the circumstances outlined in the following table.

If... Then...

Fannie Mae has an interest in both the first and second lien mortgage loans

Fannie Mae may choose to consolidate the two mortgage loans and modify the borrower’s payments instead of charging off the debt.

Fannie Mae does not have an interest in the first lien mortgage loan

Fannie Mae may decide to either

  • pursue a workout for the second lien mortgage loan,

  • pay off the first lien mortgage loan and foreclose the second lien mortgage loan, or

  • charge off the second lien mortgage loan debt.

The following table outlines the required servicer actions to request Fannie Mae’s prior written approval for the charge-off of a second lien mortgage loan.

Step Servicer Action
1

Measure Fannie Mae’s outstanding debt against

  • the estimated cost of continued collection efforts;

  • the estimated cost of any required legal actions;

  • the status, UPB, and ownership of the first lien mortgage loan;

  • the mortgage insurer’s policy regarding the filing of an insurance claim when the debt is abandoned (if the mortgage loan is insured);

  • the condition of the property and the estimated market value for the property; and

  • the borrower’s ability to reinstate the mortgage loan(s).

2

If, based on the results of step 1 above, the servicer still recommends a charge-off, submit its recommendation through Fannie Mae’s servicing solutions system.

3

Obtain the letter including the terms and conditions of Fannie Mae's decision about charging-off the mortgage loan through Fannie Mae’s servicing solutions system. This letter will be available shortly after Fannie Mae receives the servicer’s recommendation.

Requesting Approval for a VA No-Bid Buydown

The servicer must evaluate a request for a VA no-bid buydown in accordance with Evaluating VA No-Bid Buydowns in E-3.3-05, Issuing Bidding Instructions.

To request Fannie Mae’s approval of a VA no-bid buydown, the servicer must transmit items listed in the following table to Fannie Mae through Fannie Mae’s servicing solutions system.

The servicer must provide through Fannie Mae’s servicing solutions system…

The date of the foreclosure sale.

Information about any other factors that might affect Fannie Mae’s decision.

The servicer’s recommendation.

A letter including terms and conditions of Fannie Mae’s decision about the VA no-bid buydown will be available to the servicer through Fannie Mae’s servicing solutions system shortly after Fannie Mae receives the servicer’s recommendation.

Requesting Approval for a Non-Delegated Short Sale Case

The servicer must evaluate a borrower for a short sale in accordance with D2-3.3-01, Fannie Mae Short Sale.

The following table outlines the required servicer actions to request Fannie Mae’s prior written approval for a short sale as a non-delegated case.

Step Servicer Action
1

Submit the following through Fannie Mae’s servicing solutions system:

  • a description of the borrower’s financial circumstances,

  • a property market value analysis,

  • the specifics about the purchase offer, and

  • the servicer’s recommendation to Fannie Mae.

Note: If the borrower has non-retirement cash reserves greater than $50,000, the servicer must specify that when it submits the case. Specifically, the servicer must enter the dollar amount, as applicable, in the “assets” fields in Fannie Mae’s servicing solutions system.

2

Send the same information submitted through Fannie Mae’s servicing solutions system and any required documentation to the mortgage insurer by overnight mail delivery (whenever possible).

Note: Fannie Mae and the mortgage insurer must be notified of a sales offer immediately and simultaneously to avoid jeopardizing Fannie Mae’s claim under the MI contract.

3

Obtain the letter including the terms and conditions of Fannie Mae’s decision through Fannie Mae’s servicing solutions system. This letter will be available shortly after Fannie Mae receives the servicer’s recommendation.

Related Announcements

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

Announcements Issue Date
Announcement SVC-2018-01 February 14, 2018