Announcement October 31, 2008

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1 Announcement October 31, 2008 Amends these Guides: Servicing Miscellaneous Servicing Changes Introduction This Announcement contains updates and clarifications to several current servicing policies, as itemized below: Changes to military indulgence as a result of the Housing and Economic Recovery Act of 2008 (HERA) Use of electronic records Procedural changes for modifications of government mortgage loans Servicing requirements for Fannie Mae-Owned or -securitized mortgages loans with subordinate liens Revised Request for Approval of Servicing Transfer (Form 629) Revised Letter of Authorization for P&I Custodial Accounts (Form 1013) and Letter of Authorization for T&I Custodial Accounts (Form 1014) Fannie Mae address for instruments of record Changes to Military Indulgence as a Result of HERA On July 30, 2008, HERA was enacted into law. Provisions of the Act made both temporary and permanent changes to the existing protections in the Servicemembers Civil Relief Act. As a result, Fannie Mae is modifying the specific policies that were affected by the law. These changes became effective on July 30, Six Percent Mortgage Interest Rate Cap Servicing Guide, Part III, Chapter 1, Exhibit 1: Military Indulgence Pursuant to the Servicemembers Civil Relief Act, if the fixed interest rate (or the adjusted rate for ARMs) on eligible mortgage loans exceeds six percent, the monthly installment Announcement Page 1

2 of principal and interest owed must be reduced to reflect interest at six percent while the borrower is on active U.S. military duty. The new provision in HERA extends the six percent rate cap to twelve months after the termination of active duty. Stay of Foreclosure The Servicemembers Civil Relief Act also requires a stay of foreclosure and other legal proceedings on eligible loans for 90 days following the termination of a service member s active duty. The new law extends the 90-day period of stay to a period of nine months, effective through December 31, 2010, unless extended by Congress. After the expiration date, servicers are required to limit the granting of a stay of foreclosure or other legal proceedings to a maximum of 90 days after termination of active duty. Use of Electronic Records Servicing Guide, Part I, Section 402: Use of Electronic Records Fannie Mae is clarifying that Section 402 of the Servicing Guide applies to loan modifications and HomeSaver Advance (HSA) notes. Any lender submitting an electronic loan modification or HSA note to Fannie Mae must ensure that the electronic record complies with all other requirements of the Servicing Guide and applicable law. Loan Modifications Effective immediately, Fannie Mae will no longer require that notarial acknowledgements be obtained in conjunction with electronic loan modifications that are not required to be recorded. Fannie Mae will also continue to require that electronic and non-electronic loan modifications be provided to a servicer s document custodian. While it is preferable that the document custodian be able to accept electronically signed modifications, if the custodian is not yet electronically enabled, Fannie Mae will not object to the provision of a paper copy of an electronic modification being provided to the custodian. However, the servicer must implement processes which ensure that the integrity of the information in the paper copy has been preserved. HSA Notes The third-party servicer of HSA notes has entered into an arrangement with a specific technology provider to accept electronic documents. Servicers interested in originating HSA notes using electronic means should contact the Servicing Solutions Center for additional information. Announcement Page 2

3 Procedural Changes for Modifications on Government Mortgage Loans Servicing Guide, Part VII, Section : Modifying Government Mortgages When processing a modification of a government mortgage loan, servicers are no longer required to send a photocopy of the signed Agreement for Modification or Extension of a Mortgage (Form 181) to Fannie Mae. Servicers are instructed to submit the modification electronically through Fannie Mae s Home Savers Solutions Network. Additionally, servicers no longer need to submit the original executed (and recorded if applicable) document to the applicable document custodian but should retain the original Form 181 in the servicer s individual mortgage file. Servicing Requirements for Fannie Mae-Owned or -Securitized Mortgages with Subordinate Liens Fannie Mae is clarifying requirements for servicers who service first lien mortgage loans owned or securitized by Fannie Mae and also service subordinate lien mortgages for themselves or other investors. These requirements are meant to ensure that first lien mortgage loans owned or securitized by Fannie Mae are serviced without consideration of the status of or impact on the subordinate liens. Funds Received for Payment Servicing Guide, Part III, Chapter 1, Mortgage Payments All funds tendered by the borrower for application to a first lien mortgage loan that Fannie Mae owns or securitizes (whether such loan is current or delinquent), must be applied as intended by the borrower and should not be reallocated as payment towards any subordinate lien. Use of Applicable Loss Mitigation Alternatives Servicing Guide, Part VII, Chapter 5, Loss Mitigation Alternatives If a servicer determines that a borrower of a first lien mortgage loan owned or securitized by Fannie Mae is eligible for one of the loss mitigation solutions, an offer to the borrower to accept the loss mitigation solution should not be contingent upon the borrower making payments or bringing current any subordinate liens which may also exist on the property. However, Fannie Mae recognizes that in some cases it may be necessary to make a small payment to a subordinate lien holder when the servicer determines that it is otherwise beneficial to pursue either a short sale, a deed-in-lieu of foreclosure, or a loan modification (which may require a resubordination of the subordinate lien) as the loss mitigation alternative. In those instances, the servicer must have Fannie Mae s prior approval to make the payment. Announcement Page 3

4 Ensuring Timely Foreclosure Actions Servicing Guide, Part VIII, Chapter 1: Foreclosures In the event that a servicer must initiate a foreclosure action against the property for a mortgage loan owned or securitized by Fannie Mae, the servicer must follow Fannie Mae s foreclosure guidelines and process the foreclosure in a timely manner. A servicer should not consider the status of or impact on any subordinate liens that the servicer is servicing for itself or other investors when evaluating or proceeding with a foreclosure action. Revised Request for Approval of Servicing Transfer (Form 629) Servicing Guide, Part I, Section 205: Post-Delivery Transfers of Servicing The Request for Approval of Servicing Transfer (Form 629) has been revised to update the address to which the form should be mailed (or ed). The list of special products has been updated to include Mortgages with Resale Restrictions. Additionally, the revised form clarifies the submission requirements for servicing transfers of I/O Strip loans. Servicers must submit the request at least 60 days prior to the effective date of the transfer. I/O Strip transfers must be requested on a separate Form 629 request (not combined with any other non-i/o loan transfers) and be submitted with a loan-level transfer file. The updated form is available as an interactive form on efanniemae.com. The updated Form 629 should be completed and submitted to the new address with all servicing transfer requests submitted after the date of this Announcement. Revised Letter of Authorization for P&I Custodial Accounts (Form 1013) and Letter of Authorization for T&I Custodial Accounts (Form 1014) Servicing Guide, Part IX, Section 104: Establishing Custodial Accounts Fannie Mae has updated Form 1013 and Form 1014 as follows: The Fannie Mae address for submission of the forms has been updated. The addition of Reverse Mortgage as a remittance category. Servicers of reverse mortgages should select the remittance category Reverse Mortgage instead of Actual/Actual. (Note: All previously submitted forms designating Actual/Actual do not need to be updated.) The addition of Consolidated Drafting Account as a remittance category (Form 1013 only). The deletion of Special Drafting Account as a remittance category (Form 1013 only). The addition of a phone number field of the servicer representative submitting the form. Revision of the instructions to help lenders more accurately fill out the forms. Announcement Page 4

5 This Announcement does not revise the submission requirements for the forms. A servicer must submit Forms 1013 and 1014 once it is approved as a Fannie Mae servicer, if the servicer has established a new remittance category, or the servicer has changed the financial institution or bank account which serves as the custodial depository. A servicer need not submit a revised Form 1013 or 1014 when it has established a new signatory for the servicer or the bank account representative, or the address of the bank account has changed. The updated forms are available as interactive forms on efanniemae.com (Form 1013 and Form 1014). Lenders may begin using the revised forms immediately. Prior versions of the forms will no longer be accepted after January 1, Fannie Mae Address for Instruments of Record Servicing Guide, Part I, Section 202: Servicer's Basic Duties and Responsibilities, and Part VIII, Section 202: Conveyance Documents When an instrument of record relating to a single-family property requires the use of an address for Fannie Mae, including assignments of mortgages, foreclosure deeds, REO deeds, and lien releases, the following address must be used: Fannie Mae P. O. Box Dallas, TX The use of this address is effective with the date of this Announcement. ******* Servicers should contact their Servicing Consultant, Portfolio Manager, or Fannie Mae s National Servicing Organization's Servicing Solutions Center at if they have questions about this Announcement Michael A. Quinn Senior Vice President Single-Family Risk Officer Announcement Page 5