Fannie Mae and Freddie Mac provided temporary guidance to lenders due to COVID-19 on various topics related to servicing mortgage loans. On June 30, Fannie Mae updated its COVID-19 Frequently Asked Questions – Servicing on the topics related to retention workout options, reporting and operational processes, and incentive fees, amongst other topics.
Foreclosure Suspension Extended
The CARES Act provided that other than for an abandoned or vacant property, any servicer of a federally-backed mortgage loan could not initiate any judicial or non-judicial foreclosure, move for a foreclosure judgment or order of sale, or execute a foreclosure related eviction during a 60-day period beginning on March 18, 2020. Fannie Mae has now extended the suspension of foreclosure-related activities on its loans through August 31, 2020.
Retention Workout Options
If the borrower has received a COVID-19 deferral, the borrower may make additional principal payments. Specifically, if the payment is less than the interest-bearing unpaid balance, the servicer must apply the payment to the interest-bearing unpaid balance. If the payment is greater than or equal to the interest-bearing unpaid balance, then the servicer must apply the payment first to the non-interest-bearing balance, if any, and then to the interest-bearing unpaid balance.
Reporting and Operation Processes
A 571 claim for escrow and corporate advances may be submitted to Fannie Mae for reimbursement as soon as the expense is incurred.
In Lender Letter LL-2020-09, Incentive Fees for Retention Workout Options, Fannie Mae introduced a $1,000 cumulative incentive fee cap for repayment plans, payment deferrals/COVID-19 payment deferrals, and Fannie Mae Flex Modifications effective July 1, 2020. Fannie Mae clarified that if the previous servicer has received the full $1,000 in incentive fees and the mortgage is transferred to a new servicer, the new servicer is not eligible to receive any incentive. The $1,000 incentive fee is related to the mortgage loan and not the individual servicer. Further, the cap does not apply to the incentive fees for completing a Fannie Mae Extend Modification for Disaster Relief or a Fannie Mae Cap and Extend Modification for Disaster Relief.