FNMA Servicing Notice: Misc. Clarifications and Reminders

Investor Update: On June 19, Fannie Mae issued a Servicing Notice subtitled Miscellaneous Clarifications and Reminders

Servicing Notice

Miscellaneous Clarifications and Reminders

This Notice describes servicing policy clarifications and reminders for the following:

  • Reporting requirements for major credit repositories
  • Income documentation requirements
  • Standard short sale/HAFA II and Mortgage Release™ (standard deed-in-Lieu of foreclosure) for government loans

Reporting Requirements for Major Credit Repositories
Servicing Guide, Part I, Section 305.10: “Full File” Reporting to Credit Repositories, and Part VII, Section 211: Notifying Credit Repositories

Fannie Mae requires the servicer to provide a “full-file” status report on all of the mortgage loans it services for Fannie Mae to each of the four major credit repositories. “Full-file” reporting requires the servicer to describe the exact status of each mortgage loan it is servicing as of the last business day of each month.

Fannie Mae is clarifying that “full-file” reporting to credit repositories must include all special relief measures and foreclosure prevention alternatives, unless otherwise specifically indicated in the Servicing Guide. Statuses that must be reported for each mortgage loan include the following: new origination, current, delinquent, special relief measure (i.e., forbearance, repayment plan), foreclosure prevention alternative (i.e., modification, short sale, Mortgage Release), and charged off.

Servicers are also reminded to comply with the Fair Credit Reporting Act and credit bureau requirements as provided by the Consumer Data Industry Association (CDIA) for full-file status reporting to the four major credit repositories.

Income Documentation Requirements

Verifying Borrower Income

Servicing Guide
, Part VII, Section 205.04 Borrower Response Package; Chapter 6: Foreclosure Prevention Alternatives; Section 602.02: Modifying Conventional Mortgage Loans; and Section 609.02.05: Verifying Borrower Income and Occupancy Status

Fannie Mae is notifying servicers that the following language from Part VII, Section 609.02.05 will be removed from the 2012 Servicing Guide as these requirements were eliminated in Announcement SVC-2011-08R, Delinquency Management and Default Prevention (Reissued):

“passive and non-wage income, including rental income, part-time employment, bonuses, tips, and investment and benefit income, that constitutes less than 20% of the borrower’s total gross income does not have to documented. With exception of borrowers facing imminent default, servicers may use undocumented income if declared by the borrower to qualify for HAMP. For a borrower facing imminent default, passive and non-wage income that exceeds $100 per month must be documented prior to being deemed eligible for the trail period; however, all passive and non-wage income must be verified based on documentation prior to final mortgage loan modification.”

Also as a result of Announcement SVC-2011-08R, the Uniform Borrower Assistance Form (Form 710) was updated to introduce new income and hardship documentation requirements for all foreclosure prevention alternatives (including HAMP). Fannie Mae is reminding servicers to obtain all required income and hardship documentation as indicated on Form 710. If a borrower indicates an additional source of income on Form 710, the servicer must obtain the required documentation for that additional income source.

Documenting Salary or Hourly Wages

Servicing Guide
, Part VII, Section 205.04: Borrower Response Package

Fannie Mae is clarifying the paystub requirement for income documentation on Form 710. For each borrower who is a salaried employee or who is paid by the hour, the servicer must obtain paystub(s) reflecting the most recent 30 days or four weeks of earnings. The borrower must also provide documentation reflecting year-to-date earnings, if not reported on the paystubs. The number of paystubs required depends on how frequently the borrower is paid. For example, a borrower paid monthly must submit one paystub; a borrower paid weekly must submit four paystubs; a borrower paid every two weeks must submit two paystubs, etc.

Standard Short Sale/HAFA II and Mortgage Release (Standard Deed-in-Lieu of Foreclosure) for Government Loans

Servicing Guide, Part VII, Chapter 6: Foreclosure Prevention Alternatives, Section 604: Preforeclosure Sales, and Section 606: Deeds-in-Lieu of Foreclosure

For government mortgage loans, the servicer must offer the specific foreclosure prevention alternative that the insurer or guarantor makes available. Servicers are reminded that on a delinquent government mortgage loan they must:

  • obtain approval from the guarantor prior to accepting a short sale or Mortgage Release,
  • maintain a copy of the approval in the mortgage loan servicing file,
  • provide a copy to Fannie Mae upon request,
  • comply with all of the guarantor's guidelines, and
  • ensure the foreclosure prevention alternative does not result in a loss to Fannie Mae.

Fannie Mae Approval for Standard Short Sale or Mortgage Release (Standard Deed-in-Lieu of Foreclosure) for Government Mortgage Loans

Fannie Mae approval is not required to accept an offer for a government mortgage loan.

Reporting Liquidation for Standard Short Sale or Mortgage Release (Standard Deed-in-Lieu of Foreclosure) for Government Mortgage Loans

Fannie Mae is clarifying its requirements for reporting liquidations for either a standard short sale/HAFA II or a Mortgage Release for government mortgage loans. The servicer must report the short sale or Mortgage Release delinquency status information to Fannie Mae through the HomeSaver Solutions® Network (HSSN) and the liquidation must be reported through Fannie Mae's investor reporting system to remove the mortgage loan from Fannie Mae's active accounting records.

To view the online notice, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

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