Bankruptcy Referrals
Effective July 31, 2007, Fannie Mae is discontinuing its bankruptcy attorney network. With respect to loans referred to Fannie Mae-retained foreclosure attorneys, upon the filing of a bankruptcy case, the servicer may leave the bankruptcy case with the Fannie Mae-retained attorney handling the foreclosure (if it believes such attorney has the required qualifications and necessary experience to properly manage the bankruptcy case) or retain a qualified an experienced bankruptcy attorney of its choice.

The attorney the servicer retains should be able to

• process bankruptcies in a timely and efficient manner (by quickly obtaining relief from the bankruptcy, when appropriate, so that foreclosure proceedings may be initiated or resumed)
• handle special circumstances bankruptcies (such as those involving “cramdowns,” lien stripping or multiple bankruptcy filings involving the same security property)
• recognize and facilitate loss mitigation opportunities whenever possible.

Bankruptcy Management Process
Beginning August 1, 2007, servicers must actively monitor all bankruptcy cases involving Fannie Mae loans, regardless of loan type or servicing option – including loans previously referred as “Fannie Mae Referrals,” to the previously designated Fannie Mae-retained bankruptcy attorneys. At a minimum, the servicer should monitor the attorney’s performance in the following areas: 

• the ability to promptly negotiate appropriate repayment plans with the borrower
• the pursuit of loss mitigation opportunities where appropriate
• compliance with our requirements regarding fees and expenses; and 
• the length of time it takes to obtain relief from an automatic stay or the dismissal of a case.

For bankruptcy cases referred as “Fannie Mae Referrals” prior to August 1, 2007, Fannie Mae will not require servicers to reimburse them for any losses incurred because the Fannie Mae-retained attorney failed to meet his or her responsibilities. However, Fannie Mae will require reimbursement for losses incurred relating to the servicer’s failure to provide required or requested documents, information, or signatures to the attorney.

For all bankruptcy cases referred on or after August 1, 2007, servicers will be responsible for reimbursing Fannie Mae for any losses incurred because the servicer or the attorney who handles the bankruptcy case (whether a Fannie Mae-retained foreclosure attorney or another attorney chosen by the servicer) fails to meet its responsibilities.

Fannie Mae will review a servicer’s bankruptcy management performance on a loan-level basis, as well as the servicer’s overall performance for all of the mortgages it is servicing that are in bankruptcy status. A servicer should be able to provide documentation that demonstrates evidence that all required actions were taken to mitigate a specific bankruptcy in a timely and appropriate manner. If the servicer is unable to document that it took appropriate actions for a specific bankruptcy and Fannie Mae incurs a loss that is directly attributable to the servicer’s failure to properly handle the bankruptcy, the servicer may be asked to “make whole” or to indemnify Fannie Mae for the amount of the loss.

Any questions should be directed to the respective Servicing Consultant, Portfolio Manager, or the National Servicing Organization’s Customer Care Center at 1-888-326-6438.

To view the full Announcement, please click here.

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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.