Servicing Management Default Underwriter (SMDU ) SMDU Version 6.7 Update

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1 Servicing Management Default Underwriter (SMDU ) SMDU Version 6.7 Update June 02, 2016 This communication is to advise servicers using SMDU that the Fannie Mae Standard Modification Exception functionality described in the SMDU Version 6.7 Release Notes (dated March 11, 2016) will be turned on and go into effect after 7:00 PM Eastern Time on June 4, Important Note: A servicer who is using a third party platform to integrate to SMDU should confirm with their technology provider if/when this functionality will be available to them. For your convenience included with this communication are the SMDU Version 6.7 Release Notes that describe the Fannie Mae Standard Modification Exception (pages 2 and 3). This functionality will be turned on as part of the implementation of SMDU Version 6.8. To implement SMDU Version 6.8, SMDU will not be available to process transactions from 10:00 PM Eastern Time on June 3, 2016, until 7:00 PM Eastern Time on June 4, Please do not submit transactions to SMDU during this period. If you have questions about this update please contact SMDU Support at smdu_support@fanniemae.com Fannie Mae. All rights reserved. 1 SMDU Version 6.7 Release Notes

2 Servicing Management Default Underwriter (SMDU ) Release Notes for SMDU Version 6.7 March 11, 2016 During the weekend of March 19, 2016, Fannie Mae will implement SMDU Version 6.7, which includes new functionality and updates as described below. The changes described in these Release Notes apply to all prequalification and trial structuring requests submitted to SMDU after the implementation of Version 6.7. Therefore, a final structuring request made to SMDU may not include the changes included in these Release Notes if a successful trial structuring request was processed by SMDU prior to March 19, Please refer to the Application of Release Updates section for additional context. To implement this Release, SMDU will not be available to process transactions from 7:00 AM Eastern Time on March 19, 2016, until 1:00 PM Eastern Time on March 20, EVALUATION OF A FANNIE MAE STANDARD MODIFICATION EXCEPTION With this Release, when a servicer makes a trial structuring request and SMDU determines the loan is Ineligible for all the modification products in the Fannie Mae delegated modification hierarchy and the borrower submitted a complete borrower response package (BRP), SMDU may utilize part of Fannie Mae s Loss Mitigation review process to evaluate the loan for a Fannie Mae Standard Modification Exception. This modification is an exception to the delegated Fannie Mae Standard Modification that is also evaluated by SMDU. Important notes: 1) this functionality is currently turned off. Servicers will be notified in a separate communication when the functionality is turned on. 2) SMDU is only utilizing a portion of Fannie Mae s Loss Mitigation review process. Therefore, servicers should continue submitting their non-delegated cases to Fannie Mae s Loss Mitigation Desk for manual review. 6/2/16 Update: The above noted Fannie Mae Standard Modification Exception functionality will be turned on and go into effect after 7:00 PM Eastern Time on June 4, Trial Structuring Eligible When SMDU determines a loan is Eligible for a Fannie Mae Standard Modification Exception trial it will return the following message in the Response File, which includes the applicable campaign identifier (ID). When entering this exception into HSSN/DARTS, use Campaign ID MODSMP SMDU 3 month Approved Fannie Mae Standard Mod Exception. The servicer is responsible for creating a case for the loan in Fannie Mae s HomeSaver Solutions Network (HSSN) using the campaign ID provided in the SMDU Response File. As a reminder, a servicer can use SMDU s case management functionality to automatically create the case in HSSN or manually enter the case into HSSN. A correct campaign ID is required to preserve the limited waiver of representations and warranties provided by SMDU. A SMDU approved Fannie Mae Standard Modification Exception trial will not require review and evaluation by the Fannie Mae Loss Mitigation Desk Fannie Mae. All rights reserved. 2 SMDU Version 6.7 Release Notes

3 Trial Structuring Ineligible If SMDU determines the loan is Ineligible for a Fannie Mae Standard Modification Exception a Fannie Mae Standard Modification Exception response will not be returned in the Response File. However, a servicer may submit the Ineligible Fannie Mae Standard Modification to the Fannie Mae Loss Mitigation Desk for further review. As a reminder, a servicer can use SMDU s case management functionality to automatically create the case in HSSN to request Fannie Mae s review or manually create the case in HSSN. Final Structuring A servicer should use FMMOD as the Workout Type (DD #285) when making a final structuring request for a Fannie Mae Standard Modification Exception. If SMDU determined a loan was Eligible for a Fannie Mae Standard Modification Exception trial, but at final structuring determines the loan is Ineligible, SMDU will return the following new message: Loan is ineligible for Fannie Mae Standard Modification Exception. Please review the request data to determine the cause of ineligibility. If missing or inconsistent data is causing the ineligibility, please correct and resubmit for evaluation. If the Servicer determines this exception is appropriate for the borrower, the servicer may not perform the modification without the express written consent of Fannie Mae. All communications with borrowers must comply with the requirements of applicable laws. (Message 6431) If a loan does not meet the specific parameters of the Fannie Mae Standard Modification Exception SMDU will not return a message indicating the reasons for Ineligibility for the Fannie Mae Standard Modification Exception. When the Fannie Mae Standard Modification Exception is found Ineligible during final structuring, the servicer should submit the case to the Fannie Mae Loss Mitigation Desk for manual review. A servicer should only use SMDU for a final evaluation of a Fannie Mae Standard Modification Exception if SMDU was used to evaluate the trial and returned an Eligible response. SMDU currently does not permit a first-time final for a Fannie Mae Standard Modification Exception. Appeal Request When a servicer makes an appeal request to SMDU in connection with the denial of a delegated modification, the Fannie Mae Standard Modification Exception will not be evaluated as part of the loan workout hierarchy even if SMDU previously determined the loan was Eligible for a Fannie Mae Standard Modification Exception trial. If a borrower who is eligible for a Fannie Mae Standard Modification Exception trial makes an appeal (appeal of the denial of any delegated mortgage loan modification) the servicer should determine if there is a change to the data that was used for trial structuring. If the data changed and the SMDU appeal response indicates the borrower is ineligible for a delegated modification the servicer should send the case to the Fannie Mae Loss Mitigation Desk for review and evaluation Fannie Mae. All rights reserved. 3 SMDU Version 6.7 Release Notes

4 PROPERTY VALUATION DATA With this Release, SMDU can retrieve property valuation data from Fannie Mae s Automated Property Service (APS) for use in the evaluation of a loan. This functionality will give a servicer a more efficient way to retrieve property valuation data from the same APS application they use outside of SMDU. The property valuation data may be retrieved at prequalification, trial structuring, and/or final structuring. A servicer will have the choice to use SMDU to retrieve the property valuation information or provide that information to SMDU. Please see below for additional details. Servicer Chooses SMDU to Retrieve Property Valuation Data A servicer should leave the following three property valuation fields blank. o Property Valuation As Is Value Amount (DD #55) o Property Valuation Type Code (DD #56) o Property Valuation Date (DD #429) After a request is made to SMDU the property valuation data will be retrieved from APS. If the property s predicted value receives: o An acceptable confidence score: SMDU will use the property valuation information to evaluate the loan; the following message will be returned in the Response File. The Property Valuation As Is Amount [Fannie Mae Valuation Property As Is Amount] was retrieved from Fannie Mae internal source and used for Workout evaluation. (Message ID: 6434) o An unacceptable confidence score: SMDU cannot use the property valuation information to evaluate the loan. Therefore, the servicer must provide the data for the three property valuation fields before making a subsequent request to SMDU. The following message will be returned in the Response File. System is unable to determine eligibility for [Workout Display Type Code]. The valuation data obtained internally does not have good confidence score. Please provide the Property Value Amount, Property Value Date and Property Value type code and resubmit for evaluation.) (Message ID: 6432) Servicer Chooses to Provide Property Valuation Data A servicer should provide the following property valuation data to SMDU, which will be used in the evaluation of the loan. o Property Valuation As Is Value Amount (DD #55) o Property Valuation Type Code (DD #56) o Property Valuation Date (DD #429) 2016 Fannie Mae. All rights reserved. 4 SMDU Version 6.7 Release Notes

5 Servicer Chooses to Provide Property Valuation Data (continued) If a servicer only provides partial property valuation data, SMDU will return the following message that instructs the servicer to complete the property valuation data or remove the partial data. System is unable to determine eligibility. The Property Valuation data set is incomplete. Please provide the complete set: Property Valuation As Is Amount, Property Valuation Date, and Property Valuation Type Code in the request to evaluate workout eligibility using your data. If the data set is present, SMDU will use servicer-provided data. If the data set is not present, SMDU will attempt to retrieve current Property Valuation data from an internal source. (Message ID: 6442) If a servicer chooses to complete the property valuation data SMDU will use that information to evaluate the loan. If a servicer chooses to remove the partial data (all three fields are left blank) SMDU will retrieve the property valuation data from APS and use it to evaluate the loan. Please refer to the section entitled, Servicer Chooses SMDU to Retrieve Property Valuation Data on page three for more information. Property Valuation Data for Use in an Appeal Request If a servicer provides the following property valuation data in an Appeal request SMDU will use information in the evaluation of the loan. If a servicer does not provide the property valuation data in the Appeal request SMDU will use the property valuation data from the original request regardless of whether that property valuation data was provided by the servicer or retrieved from APS by SMDU. o Property Valuation As Is Value Amount (DD #55) o Property Valuation Type Code (DD #56) o Property Valuation Date (DD #429) APPLICATION OF RELEASE UPDATES This Release applies to all requests submitted to SMDU after the implementation of Version 6.7. However, it is important to note: SMDU will not process a final structuring request if the most recent prior successful trial structuring response on the same loan was returned by SMDU more than 12 months ago. An Error Code 4 will be returned, at which time the servicer can evaluate the loan outside of SMDU, send the loan to the Fannie Mae Loss Mitigation Desk or contact SMDU Operations at smdu_support@fanniemae.com. Servicers should rely upon the Loss Mitigation Recommendation and findings messages contained in the SMDU response to assist with loss mitigation activities. Limited waiver of liability applies to servicers who, among other things, provide accurate input data and follow the recommendations provided in the SMDU finding messages (see the Single Family Servicing Applications Schedule of the Software Subscription Agreement, available online at fanniemae.com, for specific requirements) Fannie Mae. All rights reserved. 5 SMDU Version 6.7 Release Notes

6 SCHEDULED MAINTENANCE DOWNTIME To implement this Release, SMDU will not be available to process transactions from 7:00 AM Eastern Time on March 19, 2016, until 1:00 PM Eastern Time on March 20, Please do not submit transactions to SMDU during this period. Questions? Please contact SMDU Operations at QUESTIONS AND MORE INFORMATION If you have questions and/or need additional information about this Release and/or SMDU please contact your Fannie Mae Servicing Portfolio Manager Fannie Mae. All rights reserved. 6 SMDU Version 6.7 Release Notes