Fannie Mae has issued Lender Letter 02-07 titled, "The Road Home Program and Hurricane-Related Underwriting Policies" addressing changes to The Road Home program’s disbursement requirements and modifying  existing underwriting guidelines for borrowers affected by hurricanes Katrina and/or Rita.

In April 2007 significant policy changes were made to the Road Home Program. This Lender Letter provides direction to Fannie Mae servicers to assist borrowers participating in The Road Home program.

Lump-sum Disbursements

Changes include;

• Eligible homeowners may now directly receive lump-sum grant payments.
• Disbursement accounts are no longer necessary.
• There will be no co-issued payment to the homeowner applicants and their servicers, and therefore, no incremental payments made from the servicer to the homeowner applicant as repair progresses on the damaged property.
• Beginning with grant closings after April 11, 2007, a homeowner with a mortgage who chooses to retain his/her existing property in Louisiana will be notified by the State of Louisiana ("the State") of the availability of a lump-sum grant payment. Upon execution of the revised Covenant and Grant Agreement, the homeowner will receive the grant funds.
• The State of Louisiana will not notify servicers when lump-sum payments are made to applicants.

When a servicer is made aware through borrower contact that a grant award has been received or is expected, the borrower should be encouraged to utilize the expertise and resources of the servicer to make sure home repairs are successfully completed.

Servicers should also remind borrowers that acceptance of The Road Home program grant does not relieve them of their mortgage loan obligations.

Lump-sum disbursements are not available for homeowners who choose to relocate (either in or out of Louisiana) and decide to sell their properties to the State. A homeowner who has decided to sell and relocate is required by the LRA to obtain approval from his/her lender. When a homeowner contacts the servicer to obtain such an approval, the servicer should contact Fannie Mae.

Revised Program Covenant, Grant Agreement and Memo of Understanding

As a result of the policy changes implemented by the LRA, the Covenant and the Grant Agreement have been modified. The most significant changes are: 

• The three year occupancy requirement has been modified to require borrowers to establish occupancy at some point within three years from the date of closing on the grant. 
• The previous requirement that the repaired house must comply with local building codes prior to the final disbursement of LRA grant funds has been eliminated. 
• The requirement that hazard insurance must be maintained for three years from the date of closing has been modified. Hazard insurance must be maintained from the date of occupancy until three years from the grant closing date. 
• The previous LRA policy required the servicers to execute a Memorandum of Understanding whereby the servicer agreed to allow the homeowner applicant to use the LRA grant funds to rebuild and repair the property through a disbursement account. Under the new LRA policy, these Memoranda of Understanding are terminated. Lenders holding grant fund balances disbursed under the old grant agreement and held by the lender in disbursement accounts must immediately release these funds to the homeowners.

Subordination Agreement

The Road Home program no longer requires the mortgage lien holder to execute a subordination agreement in order to subordinate the mortgage lien to the Covenant. A blanket revocation of all previously recorded subordination agreements related to the covenants will be recorded by the Office of Community Development in each Louisiana parish. Servicers should be aware and advise title agents of the existence of this blanket cancellation, as necessary.

Any servicing-related questions about this Lender Letter should be directed to the respective Customer Account Manager, Portfolio Manager, Servicing Consultant or to Fannie Mae's National Servicing Organization’s Customer Care Center at 1-888-326-6438 (enter special code 7222 for Hurricane-related questions).

To view the Lender Letter in its entirety, including the underwriting modifications, please click here.

####

Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, OH  and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 425 employees.  Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.