Fannie Mae Updates Loan Modification Requirements
|April 14, 2011
Fannie Mae recently issued an announcement updating its requirements for modifying conventional mortgage loans, as detailed in Sections 601.02, 602 and 602.02 of the 2010 Servicing Guide. The update is effective for all mortgage loans evaluated for a modification on or after April 15, 2011, and covers standards for eligibility, underwriting, modification process, mortgage insurer approval and reporting, and general reporting requirements.
Pursuant to the updated requirements, a modification should only be considered when a repayment plan is not appropriate to cure the delinquency. A servicer should consider a repayment plan when a delinquency is the result of a temporary hardship that no longer appears to be an issue, and when the borrower appears to be able to meet the payment terms of the repayment plan. In order for a borrower to be eligible for a Fannie Mae modification, the following are required:
- the borrower must be evaluated for a HAMP modification, and if the borrower is not eligible for a HAMP modification or fails a HAMP Trial Period Plan or permanent modification, the borrower may be considered for a Fannie Mae modification;
- the property securing the loan is a principal residence, second home or investment property;
- the property may be vacant but not condemned;
- the borrower must have a financial hardship; and
- the loan is either delinquent or a default is reasonably foreseeable (imminent), in accordance with Section 602 of the Servicing Guide.
With respect to loans that were previously modified, and that become 60 or more days delinquent within the first 12 months of the effective date of the modification, the servicer must immediately work with the borrower to pursue a preforeclosure sale, a deed-in-lieu of foreclosure or commence foreclosure proceedings.
The announcement includes updated underwriting requirements pertaining to verifying financial information, escrow account payments and property valuation. The announcement also includes detailed procedures for conducting Fannie Mae modifications. These procedures include:
- requirements for submitting case information to Fannie Mae for approval through the HomeSaver Solutions Network (HSSN);
- requirements for conducting a Trial Period Plan prior to a permanent modification;
- requirements for preparing and effectuating a permanent loan modification agreement;
- requirements for reclassifying Mortgage Backed Security loans;
- information regarding the documentation and forms required for a Fannie Mae modification; and
- information regarding permissible charges to the borrower.
According to the updated requirements, Fannie Mae has obtained blanket delegations of authority, on behalf of all servicers, from several mortgage insurers. Therefore, servicers will be able to process Fannie Mae modifications without obtaining separate mortgage insurer approval at the company or loan level for those insurers.
A list of the mortgage insurers for which Fannie Mae has obtained blanket delegations of authority can be found at eFanniemae.com
. Finally, the announcement details the various reporting requirements applicable to Fannie Mae modifications, including reporting data through the HSSN, monthly investor reporting, delinquency status reporting and credit bureau reporting.