Use of Automated Valuation Models (AVMs) to Support the Cancellation of Mortgage Insurance (MI) Coverage

Fannie Mae has received several inquiries related to the use of an Automated Valuation Model (AVM) to establish the current property value to support cancellation of mortgage insurance (MI) coverage. As stated in the Guide, a borrower is allowed to request cancellation of borrower-purchased MI coverage for any conventional mortgage, regardless of closing date, when that loan reaches a specified loan-to-value ratio. But the Guide requires that value be established by a current appraisal based on an interior/exterior property inspection.

For certain mortgage loans, Fannie Mae allows cancellation of MI coverage based on the current appraised value if the mortgage loan and the borrower meet stated conditions. The use of an appraisal provides a real time analysis of market activity, including a physical inspection of the subject property, to arrive at an accurate valuation. However, an AVM, relies on public record information to determine estimated value without any assessment of the current condition of the property. As such, Fannie Mae will not permit the cancellation of MI coverage based on the estimated value provided by an AVM, since a real estate appraisal completed by a qualified appraiser is the most appropriate standard and most reliable indicator for determining property value.

Delinquency Status Reporting for Regular Servicing Option Loans

Currently the reporting of delinquency status information for regular servicing option MBS pool mortgage loans is optional for servicers. Delinquency status information is needed, however, to adequately track delinquency data, as well as assist in compliance with our MBS Trust Agreements.

Effective March 1, 2008, servicers are required to report delinquency status information on any regular servicing option MBS pool mortgage loan that was three or more full payments (90 or more days) past due as of the last day of the preceding month until the loan becomes current. By the second business day of each month, a servicer must report

• the specific "delinquency status" code that best describes the latest action it has taken to cure a delinquency or liquidate the mortgage,
• the effective date of the delinquency status that is being reported to us, and
• the specific "reason for delinquency" code that best describes the primary reason for a delinquency as part of its next scheduled delinquency status report.

Descriptions of the available "delinquency status" codes and "reason for delinquency" codes appear in  Servicing Guide Part VII, Chapter 6, Exhibits 1 and 2. Each month, a servicer must electronically transmit a file extract of its delinquent mortgages to Fannie Mae which will then use it to update its delinquency tracking system. For details of the flat file layout, refer to Announcement 07-03(R)2, Introduction of the Fannie Mae Single-Family MBS Master Trust Agreement (Supersedes Announcement 06-27), (Attachment 4) issued on August 17, 2007.

To view the Announcement in its entirety, including the Selling related amendments, please click here.

Any general questions or comments regarding this Announcement should be directed to the respective Customer Account Team. Questions pertaining to any of the servicing-related topics should be directed to the National Servicing Organization's Customer Care Support Center at 1-888-326-6438 (option 2 – Servicing, then option 3 – General Servicing).

About Safeguard
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 450 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.