Fannie Mae to Update Servicer Advance Obligations for Single-Family Mortgage Loans; Reminds Market Participants of Treatment of Forbearance Loans in MBS Trusts

As the situation around COVID-19 evolves, Fannie Mae continues to support our customers and our mission by remaining focused on providing liquidity to the market and helping our customers serve their borrowers who may be experiencing financial hardship. Fannie Mae's Servicing Guide offers existing policies to assist borrowers experiencing financial hardship, whether temporary (short-term) or permanent (long-term) in nature.

We are committed to providing transparency to investors regarding COVID-19. At the direction of the Federal Housing Finance Agency (FHFA) and in alignment with Freddie Mac, with this announcement we are: 

• Notifying the market that we will update our practice regarding servicer obligations to advance scheduled payments for single-family mortgage loans.
• Reminding the market of our practice to keep loans in temporary payment forbearance in the MBS trust, even if the loan is reported as being four or more months delinquent.
• Reminding the market that while a loan is in temporary payment forbearance or delinquent in a Fannie Mae MBS, investors continue to receive scheduled principal and interest, under Fannie Mae’s guaranty to the MBS trust.

Servicer Advance Obligations

• Once implemented, servicers of scheduled/scheduled remittance loans will only be required to advance principal and interest payments on delinquent loans, including loans in temporary payment forbearance until the loan is four months delinquent.
• Currently, servicers of scheduled/scheduled remittance loans are required to advance principal and interest payments on delinquent loans, including loans in temporary payment forbearance, until such loans are purchased from the MBS trust, or the loan becomes current.
• The effective date of this change is to be determined and will be provided to servicers once confirmed.

Forbearance Treatment in MBS

• We will continue our current practice to keep a loan in temporary payment forbearance in the MBS even if the loan is reported as being four or more months delinquent.
• Loans in COVID-19 payment forbearance plans generally will remain in the MBS trust for at least the duration of the forbearance plan.
• A loan in forbearance generally is required to be removed from the MBS trust if such loan is 24 payments delinquent.

Treatment in MBS upon completion of a Forbearance Period

Delinquency Status in Disclosures

For loans in MBS issued on or after November 1, 2018 that are in temporary payment forbearance plans and not making scheduled payments, market participants will see in our monthly MBS disclosures the percentage of loans reported as delinquent at the pool level increase to reflect those loans in temporary payment forbearance, although principal and interest payments are being advanced to the certificate holder. For re-performing loan (RPL) pools, we provide delinquency information at the loan level in our monthly loan-level disclosure file, in addition to the pool level file. For these populations:

• if a loan is in a temporary payment forbearance plan in which the borrower is not making payments, it will be reported as delinquent
• if the loan is brought current through a reinstatement (full single lump sum payment) it will be reported as current
• if the loan is in a repayment plan post the temporary payment forbearance plan, it will be reported as delinquent until the repayment plan is complete
• if the loan is in a payment deferral plan, it will be reported as current

Loss mitigation options resulting in a modification will generally require the loan to be removed from the MBS. However, during any modification trial period, the loan will remain in the MBS and reported as delinquent until the trial period ends and the loan is removed from the trust in order to enter into a permanent modification.

Learn more about what Fannie Mae is doing in response to the COVID-19 emergency on the Our Approach page.

Related Links
FHFA press release
Lender Letter 2020-02