Fannie Mae updated its lender letters that addressed borrower assistance in light of the COVID-19 pandemic. Its letters to its single-family servicers on the flex modification for COVID-19 impacted borrowers and the impact of COVID-19 on servicing contained policy changes that must be implemented no later than Aug. 31, 2021.
“In an effort to provide an interest rate reduction to borrowers who have experienced a COVID-19-related hardship, we are removing the post-modification MTMLTV [market-to-market loan-to-value] threshold, regardless of the mortgage loan’s MTMLTV, related to setting the modification interest rate when determining the new modified terms for a Fannie Mae flex modification that satisfies the reduced eligibility criteria,” Fannie Mae stated.
The letter regarding Fannie Mae’s flex modification contained two new sections, one on performing an escrow analysis, and the other on determining the new modified mortgage loan terms.
Servicers are required to conduct an escrow analysis prior to offering a trial period plan to impacted borrowers. If a borrower is eligible for a Fannie Mae flex modification in accordance with the reduced eligibility criteria and the servicer was not collecting escrows on the existing mortgage loan, the borrower is not required to establish an escrow deposit account as a condition of the modification unless otherwise required by applicable law, or the servicer confirms the taxes and insurance (T&I) premiums have not been paid and are past due.
“Any escrow account shortage that is identified at the time of the mortgage loan modification must not be capitalized and the servicer is not required to fund any existing escrow account shortage,” the letter stated. “If applicable law prohibits the establishment of the escrow account, the servicer must ensure that the T&I premiums are paid to date.”
The other update to the letter on determining the new modified mortgage loan terms states the servicer must determine the borrower’s new modified mortgage loan terms in accordance with Fannie Mae’s flex modification, and in accordance with requirements provided in the current letter as opposed to those provided in Determining the New Modified Mortgage Loan Terms in its publication number F-1-27 on processing a Fannie Mae flex modification.
In its second letter on the impact of COVID-19 on servicing, the organization reiterated servicers must not take any action that would violate the Consumer Financial Protection Bureau’s (CFPB) recent rule protecting borrowers affected by COVID-19 from foreclosure prior to the rule’s effective date.
Fannie Mae’s suspension of foreclosure-related activities is set to expire July 31, 2021, while the CFPB’s rule does not go into effect until Aug. 31, 2021. The prohibition on actions violating the final rule between these two dates will provide protection for Fannie Mae borrowers.
The letter also reinstated a timeline for servicers for filing a motion for relief from the automatic stay in bankruptcy cases, to go into effect July 31, 2021. Prior to this, servicers were temporarily relieved from the obligation to meet the required timelines because of the pandemic.