Fannie Mae Updates Guidance on Limiting Advance Service Obligations | Ballard Spahr LLP


in a advance alert, we report that in light of the ability of home loan borrowers to obtain payment forbearances under the CARES Act, the Federal Housing Finance Agency (FHFA) limited the anticipated obligation of Fannie Mae servicers so that once a If the mortgage servicer has advanced four months of loan payments, he will no longer be required to advance scheduled loan payments. in a later alert, we addressed Fannie Mae’s initial guidance on limiting, and noted that Fannie Mae would follow up with additional guidance. On June 10, 2020, in Lender Letter 2020-08, Fannie Mae provides additional guidance. Policy changes are effective for August 2020 remittance activity based on July 2020 reporting activity.

Fannie Mae developed a new investor reporting process for the discontinuation of servicer delinquency advances on eligible scheduled / scheduled remittance-type mortgages. The process is known as the “delinquency arrest advance process.” The letter from the lender includes a chart detailing the eligibility criteria for the advance process to stop delinquency.

In the Loan Reporting Cycle where an eligible loan is 120 days past due, Fannie Mae will place the loan in an advanced delinquency stop status and place an early loan stop status type and an early start date of loan stop on the loan. The loan suspension advance start date reflects the start date of the delinquency suspension advance process and is the date from which Fannie Mae will suspend the preparation of servicers’ delinquency advances. Fannie Mae notes that for the initial implementation of the Arrest Delinquency Advance Process, there may be eligible loans that are more than 120 days past due and for which servicers have already made more than four months of delinquent advances. Fannie Mae cautions that it will not reach an agreement with the servicers of such loans upon initial implementation. Rather, Fannie Mae will repay previous advances, whichever occurs first of (1) when the mortgage loan undergoes reclassification (Swap S / S only) or (2) in accordance with existing repayment policies for renegotiation options , including deferral of payment.

For loans in Loan Stop Advance status, servicers must continue to report mortgage loan activity in accordance with section C-4.3-01 of the Administration Guide. Administrators should continue to calculate and report scheduled principal and interest, the date of the last installment paid, and the actual balance of principal pending payment each month. Fannie Mae notes that scheduled principal and interest reflect progress in delinquencies.

Fannie Mae also provides guidance regarding receiving a loan payment in the Stop Delinquency Advance Process and exiting the Stop Delinquency Advance Process.

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