| Fannie Mae LL01-06: Hurricane-Related Special Relief Measures |
| Wednesday, 15 February 2006 | |
|
Subject: LL01-06: Hurricane-Related Special Relief Measures Due to the magnitude of the damage and the uncertainties that continue to exist, many homeowners are understandably not yet in a position to make final decisions about rebuilding and returning to their homes. Given the additional time it is taking for some borrowers and servicers to determine the best solution, Fannie Mae expects servicers to continue to defer any legal action until they have the information to complete the review of any effect the disaster may have had on the condition of the property or the borrower's employment or income status. Servicers are reminded that foreclosure proceedings may begin (or continue) only when foreclosure is the only alternative. This Letter updates Fannie Mae's guidance on various servicing and underwriting issues.
Fannie Mae urges servicers to continue
proactive attempts at contacting borrowers using all means and
available information. When, despite these efforts, a servicer is
still unable to locate a borrower, especially a borrower who owns
one of the properties identified by Fannie Mae as likely to have
incurred damage, the servicer should submit a request to Fannie Mae
for assistance in contacting the borrower. In some cases, Fannie
Mae will work with commercial search service providers to perform a
comprehensive multi-state search in an attempt to locate the
borrower. Servicers should submit all requests via e-mail to
hurricane_assistance@fanniemae.com.
The continuation of a forbearance plan may be appropriate when the borrower has expressed a desire to retain the property but is not yet able to resume making payments. Other circumstances that may warrant a forbearance plan include, when the borrower; * has a pending insurance claim. * is in the process of rebuilding. * is in the process of finding a new job. * is in the process of relocation. Servicers are reminded to reference the Fannie Mae Servicing Guide for guidance regarding forbearance terms in natural disaster situations.
Fannie Mae establishes a moratorium on any foreclosure action of mortgages secured by properties in the following counties or parishes through the end of May 2006. Alabama - Baldwin, Clarke, Mobile, and Washington; Louisiana - Cameron, Jefferson, Orleans, Plaquemines, St. Bernard, St. Tammany, and Calcasieu; Mississippi - George, Hancock, Harrison, Jackson, Pearl River, and Stone; and Texas – Jasper, Jefferson, Newton, and Orange To view the associated zip codes please click on the following Excel Spreadsheet link (4 tabs).
For mortgages in these counties and parishes that are
in special servicing MBS pools, servicers are to follow
the standard reclassification process as stated in Part VI Chapter
3, of the Servicing Guide. The result is that any seriously
delinquent MBS pool mortgage has to be removed from the MBS pool
under this moratorium. During the moratorium, servicers should continue their efforts to contact or to maintain contact with borrowers to determine what additional steps can be taken to tailor loss mitigation solutions that address the particular circumstances faced by each borrower. Foreclosure alternatives such as deed-in-lieu and pre-foreclosure sales should be encouraged if the homeowner is not in a position to cure the mortgage delinquency using Fannie Mae's other loss mitigation options.
Fannie revises the requirement established in Lender Letter 03-05 that servicers obtain written approval from Fannie Mae before beginning or continuing any foreclosure action with respect to a mortgage secured by a property located in the counties and parishes that were designated by the FEMA as eligible for Individual Assistance. All mortgages not secured by properties in the
counties and parishes under the moratorium should be handled in one
of two ways: 1) If the property sustained significant damage or
the servicer has been unable to contact the borrower, the servicer
must obtain prior approval from Fannie Mae before beginning or
continuing a foreclosure action. 2) In all other cases, the servicer should follow established foreclosure policies.
Decisions to begin, continue, or recommend a foreclosure action should be made only after the servicer’s investigation and analysis supports a conclusion that foreclosure is appropriate and is the only alternative under the circumstances. If after the review and evaluation, a servicer is in doubt about beginning or continuing a foreclosure action, the servicer should contact Fannie Mae. The following guidance is provided to assist servicers in determining whether to begin, continue, or recommend a foreclosure: 1) The servicer should first determine whether the mortgage is secured by one of the properties in the counties and parishes under the moratorium. Those mortgages are excluded from foreclosure action. 2) If the mortgage is secured by a property that is not in the counties and parishes under the moratorium, the servicer must conduct a property inspection, and determine; * the extent of any damage, * if any damage adversely impacts the property value and makes foreclosure impractical, and * if the property is affected by environmental hazards. Fannie Mae should be contacted when a servicer determines that the property is affected by environmental hazards. 3) When the servicer has been unable to contact the borrower, the servicer should be able to demonstrate that all reasonable means of contacting the borrower have been exhausted. This information may be requested to be submitted to Fannie Mae in order to minimize duplication of efforts if Fannie Mae decides to conduct a comprehensive search in an attempt to locate a borrower. If the servicer has been unable to contact the borrower, the servicer must obtain Fannie Mae approval to pursue foreclosure 4) When the borrower has been contacted, the servicer should be able to demonstrate that all reasonable efforts to cure the delinquency, using Fannie Mae special relief provisions or loss mitigation alternatives, have been exhausted. Additionally, the servicer ; * should maintain all relevant information in support of its efforts to cure the delinquency. * must document the borrower’s intent regarding the property, including the borrower’s desire and ability to cure the delinquency. * should document the effect of the disaster on the borrower’s income and/or employment. 5) For bankruptcy cases, the determining factors for foreclosure are whether; * relief from the automatic stay has been obtained, or * the property was surrendered in a Chapter 7 bankruptcy case. 6) The servicer should ensure that hazard and/or flood insurance claims, including claims on flood insurance that the borrower may have voluntarily obtained, have been filed and proceeds received. If, after the investigation and analysis the servicer concludes that foreclosure is appropriate and is the only alternative under the circumstances, the servicer should begin, continue, or recommend a foreclosure action. For those mortgages requiring Fannie Mae approval to foreclose, a servicer must submit a request via e-mail to hurricane_assistance@fanniemae.com. Fannie Mae requests that servicers provide additional information when submitting a request for approval to foreclose. This information is provided in "Attachment 1" of the Lender Letter. Servicers are required to provide the information in a format (preferably in Microsoft Excel) that is consistent with the order in which the data elements are presented in Attachment 1.
Servicers should not seek relief from the automatic stay at this time to foreclose on properties in the counties and parishes under the moratorium. Moreover, before seeking relief from the automatic stay in order to foreclose upon a property that is not in the counties and parishes under the moratorium and is significantly damaged, or is owned by a borrower whom the servicer has not been able to contact, the servicer must obtain Fannie Mae’s written approval to foreclose. In situations where there may be a reason to seek relief from the automatic stay aside from a desire to foreclose, such as to deal with insurance proceeds, the servicer may file a motion for relief from the automatic stay without having received Fannie Mae’s written approval to foreclose. If Fannie Mae has approved foreclosing on a property and the borrower subsequently files a bankruptcy case, no additional approval is needed from Fannie Mae for a servicer to seek relief from the automatic stay.
Advises procedures for submission of requests for the approval of excess fees. In addition Servicers are reminded that; * when a foreclosure action is put on hold, the fee that the attorney (or trustee) charges in connection with the foreclosure proceedings must be prorated to the amount of work actually performed before the foreclosure action was stopped, and consistent with Fannie Mae's standard reimbursable fee. * before requesting reimbursement for fees paid to an attorney (or trustee), a servicer must review and approve the fees and costs to ensure that they are in compliance with Fannie Mae guidelines.
Fannie Mae will not delegate authority to approve short payoffs on disaster-affected mortgages.
Fannie Mae's Servicing Guide requirements for property preservation and protection provide that servicers must pay all "out of pocket" costs and expenses incurred when performing servicing obligations in preserving and protecting the security property. Generally, these servicing advances may be recovered from the borrower, insurance proceeds, or other available sources. When the cost or expense relates to protection of the security or foreclosure costs for a whole mortgage or a participation pool mortgage held in Fannie Mae's portfolio, or for an MBS pool mortgage serviced under the special servicing option, Fannie Mae will reimburse the servicer for such unrecovered costs or expenses.
Fannie mae encourages servicers to waive the prepayment premium for those Hurricane impacted borrowers who choose to prepay their mortgage obligations.
Servicers are reminded that Announcement 05-06 provided streamlined procedures for disbursing insurance claim proceeds as a result of natural disasters.
Fannie Mae reminds servicers of their obligation to report the appropriate "delinquency status" and "reason for delinquency" codes as part of their next scheduled delinquency status report as described in the Servicing Guide, Part VII, Chapter 6: Delinquency Status Reporting. The servicer must report the specific "delinquency status" code that best describes the latest action it has taken to cure a delinquency or, if that failed, to liquidate the mortgage. The servicer also must report the specific "reason for delinquency" code that best describes the primary reason for a delinquency. There may be multiple reasons for any given delinquency, however, the servicer should report the delinquency code that most specifically describes the circumstance that appears to be the primary contributing factor to the delinquency.
Attachment 2 contains additional servicing related questions and answers based on questions we have received from servicers since the Hurricanes. Servicers must adhere to Fannie Mae’s published servicing guidelines relating to natural disasters as well as the Lender Letters issued in the aftermath of the Hurricanes. These questions and answers supplement those guidelines by using examples and providing suggestions.
In Lender Letter 02-05, Fannie Mae issued property valuation guidance on appraisals for properties that have been impacted by the Hurricanes. Since then, lenders have requested policy interpretations concerning property valuation issues. Attachment 3 contains questions and answers to clarify the application of Fannie Mae property valuation policies. To view the full Lender Letter along with the three (3) attachments ("Additional Information to be Provided when Submitting Requests to Seek Fannie Mae’s Approval for a Foreclosure", "Servicing Questions and Answers" and "Property Valuation Questions and Answers") please click on the following link. Fannie Mae LL01-06: Hurricane-Related Special Relief Measures |
