In an All-Participants Memorandum (APM), Ginnie Mae issued streamlined documentation requirements for Federal Housing Administration (FHA) advance loan modifications (ALMs). The change is due in part to the expansion of digital signature usage on documents in November and the expansion of mortgage-backed securities (MBS) pools of extended-term mortgages.

“In support of the goal of achieving broad economic recovery following the pandemic, the Federal Housing Administration established the advance loan modification (ALM) which is proactively offered to eligible delinquent borrowers (Mortgagee Letter 2021-15),” Ginnie Mae stated. “The proactive nature of the ALM, and the timeline associated with it, make it difficult for issuers to comply both with FHA’s requirements to offer the ALM, and Ginnie Mae’s requirements for recordation and title insurance.

“Therefore, Ginnie Mae is streamlining its documentation requirements for FHA’s ALM loans to eliminate the requirement for recordation and title insurance except as provided below. This guidance is applicable only to ALMs, but also applies to all ALMs, even if executed prior to the publication of this APM. All other loan modifications must meet Ginnie Mae’s existing requirements in Chapter 24, Part 2, Section A (2), which includes recordation.”

According to the APM, the issuers remain responsible for ensuring the ALM loan retains its first lien position and remains enforceable in accordance with its terms at the time of modification.

The issuer is required to provide the following documentation to the document custodian:

• Original fully executed loan modification agreement, signed by all borrowers, and in recordable form.
• If the issuer determines recordation is necessary to maintain an enforceable first lien position, or if the loan modification agreement contains assignments of leases or rents provisions, the modification must be recorded for final certification.
• If the modification is recorded, the issuer must also comply with the title insurance requirements in Chapter 24, Part 2, §A (2), as well as obtain the necessary title policy or endorsement, and subordination(s) as indicated on title.
• The modified loan file must clearly identify for the document custodian that it is an ALM.

Unless the loan modification agreement contains provisions for assignments of leases or rents, or title insurance is present, document custodians will not be required to verify the ALM is recorded. If recorded, title insurance that meets the requirements of Chapter 24, Section 2 is required. Copies of an ALM agreement are acceptable, but only if it contains clear evidence of recordation.

These requirements will sunset with June 1, 2023, pool issuances. ALMs in pool issuances on or after July 1, 2023, must meet Ginnie Mae’s standard requirements for recording and title insurance