Servicing Guide

Published September 18, 2018

F-1-31: Reviewing a Transfer of Ownership for Credit and Financial Capacity (11/08/17)

Prior to approving a release of liability, the servicer must determine that the transferee's credit and financial capacity is acceptable as required in Chapter D1-4, Transfers of Ownership.

The servicer must refer to the following Selling Guide topics to determine whether the transferee's credit and financial capacity is acceptable in accordance with Fannie Mae's underwriting guidelines:

  • Selling Guide B1-1, Application Package Documentation;

  • Selling Guide B2-2, Borrower Eligibility;

  • Selling Guide B3-3, Income Assessment;

  • Selling Guide B3-4, Asset Assessment;

  • Selling Guide B3-5, Credit Assessment; and

  • Selling Guide B3-6, Liability Assessment.

For a mortgage loan that has not been modified, the servicer is authorized to use Fannie Mae's automated underwriting system, Desktop Underwriter (DU) (see the Selling Guide B3-2, Desktop Underwriter (DU)) to determine the transferee's credit and financial capacity. If a servicer is not authorized to access DU, the servicer can obtain access by contacting Fannie Mae (see F-4-03, List of Contacts).

If utilizing DU, the servicer must

  • submit the transaction as a limited cash-out refinance in DU, and

  • use the original value of the property as defined in the Selling Guide.

Note: For a mortgage loan that has been modified, the servicer must contact Fannie Mae to determine the transferee's credit and financial capacity (see F-4-03, List of Contacts).

The servicer must follow the procedures in Obtaining MI Approval for a Conventional Mortgage Loan in F-1-20, Processing a Transfer of Ownership for information on obtaining mortgage insurer approval, if applicable.

The following table provides the requirements for evaluating a request for a release of liability.

If the servicer has determined that the transferee... Then the servicer...
is capable of assuming the mortgage loan obligation and the mortgage loan
  • does not have MI, or

  • has MI and the mortgage insurer agrees to the release

is authorized to approve the release of liability.
is capable of assuming the mortgage loan obligation but the mortgage loan has MI and the mortgage insurer does not agree to the release must deny the request for the release of liability, although the transfer may still be processed without a release of liability.

Note: The denial must state the mortgage insurer’s decision as its reason for not approving the request.

is not capable of assuming the mortgage loan obligation must deny the request for release of liability, although the transfer may still be processed without a release of liability.

Related Announcements

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

Announcements Issue Date
Announcement SVC-2017-10 November 8, 2017