Fannie Mae Extends Timeframe for Single-Family MBS Delinquent Loan Buyout Policy

September 30, 2020


Effective January 1, 2021, Fannie Mae, in alignment with Freddie Mac, will extend the timeframe for its delinquent loan buyout policy for Single-Family Uniform Mortgage-Backed Securities (UMBS) and Mortgage-Backed Securities (MBS) from four consecutively missed monthly payments to twenty-four consecutively missed monthly payments (i.e., 24 months past due). This new timeframe will apply to outstanding single-family pools and newly issued single-family pools and will first be reflected when January 2021 factors are released on the fourth business day in February 2021.

We currently anticipate, however, that delinquent loans will be repurchased in most cases before the 24-month deadline under one of the exceptions listed below. Exceptions include:

  • A loan that is paid in full, or where the related lien is released and/or the note debt is satisfied or forgiven
  • A loan repurchased by a seller/servicer under applicable selling and servicing requirements
  • A loan entering a permanent modification, which generally requires it to be removed from the MBS. During any modification trial period, the loan will remain in the MBS until the trial period ends.
  • A loan subject to a short sale or deed-in-lieu of foreclosure
  • A loan referred to foreclosure

Because of these exceptions, we currently believe based on prevailing assumptions and market conditions this change will have only a marginal impact on prepayment speeds, in aggregate. Cohort level impacts may vary. For example, more than half of loans referred to foreclosure are historically referred within six months of delinquency. The degree to which speeds are affected depends on delinquency levels, borrower response, and referral to foreclosure timelines.

As a result of this change, investors may see a marginal increase in the "Days Delinquent" stratification for loans 120+ days delinquent, as the loans will remain in the MBS pool.

The extended delinquent buyout policy does not change Fannie Mae’s requirement that servicers only need to advance four consecutive scheduled principal and interest payments in the event of borrower delinquency. We are also examining updating our requirements on guarantee fee advances and reimbursement of principal and interest advances such that, immediately after the loan is four consecutive months delinquent, servicers will no longer be required to advance guarantee fees and will be reimbursed for any principal and interest advances. Additional details and effective dates for these changes will be communicated in the future.

This new buyout timeframe will be in effect for at least two years from the January 1, 2021 effective date. Market participants will be provided at least six months' advance public notice prior to any change to this new buyout timeframe. Any future policy change will be applicable only to loans in MBS that are current as of the effective date of such future change. Any loans in MBS that are delinquent at the effective date of a future policy change would remain subject to the 24-month loan buy-out policy, unless they subsequently cure.

For questions, please contact the Fannie Mae Investor Help Line at 1-800-232-6643, Option 3 or by e-mail