Guidance Provided by Fannie Mae to Shorten Preforeclosure Time Lines

by Amy Swaney on May 1, 2012

While I was in Washington, DC in April, the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to develop enhanced and coordinated strategies to facilitate short sales, deeds-in-lieu and deeds-for-lease in order to help more homeowners avoid foreclosure. On Thursday, April 26, Fannie Mae introduced its policies to expedite this process.

Image of Fannie Mae Headquarters

Creative Commons photo courtesy of Flickr user

Per FNMA’s announcement, servicers must follow the policies for all conventional mortgage loans held in Fannie Mae’s portfolio, those securitized into Fannie Mae MBS pools, and those originally sold as a part of an MBS pool. These policies require Fannie Mae to establish maximum required response times for short sale offers submitted, require servicers to provide borrowers with status updates during this evaluation process, and allow servicers to respond to short sale offers without the requirement to evaluate a HAMP modification.

In March, Fannie also announced that in an effort to maintain a streamlined and efficient process, servicers must receive a complete “Borrower Response Package” to evaluate the borrower for foreclosure prevention alternatives. Fannie warns that the servicer should not request other documentation from the borrower, except in specific limited situations. This package consists of:

• A completed Uniform Borrower Assistance Form (Form 710),
• Income documentation as outlined in Form 710 based on income type,
• Hardship documentation as outlined in Form 710 based on hardship type, and
• A Short Form Request for Individual Tax Return Transcript (IRS Form 4506T-EZ) or a Request for Transcript of Tax Return (IRS Form 4506-T) signed by the borrower.

Additionally, Fannie Mae reminded servicers that federal income tax returns must not be requested from the borrower unless the borrower is self-employed or the borrower has rental income, as outlined in Form 710.

Fannie now states that when a servicer receives a “Borrower Response Package,” it must adhere to the following response timelines:

• If the servicer is unable to fully evaluate the borrower for a Fannie Mae HAFA short sale within 30 calendar days of receipt of a complete Borrower Response Package, the servicer must notify the borrower that the request is under review.
• Each week, the servicer must provide the borrower a status update indicating the reason(s) why the Evaluation Notice is pending. Status updates may verbal or in writing and must be documented.
• The servicer must send the Evaluation Notice no later than 60 days after receipt of the complete Borrower Response Package.
• If a revised offer is received in response to a counteroffer, the servicer must provide a response within 10 business days.
• If the offer does not meet or exceed the Minimum Acceptable Net Proceeds (MANP), the servicer must provide a counteroffer with the denial. The MANP must not be disclosed to interested parties to the transaction.
• The servicer must request a response to the counteroffer within five business days.
• If the revised offer does not meet the MANP but merits further consideration, the servicer must submit a request to Fannie Mae for review and decision within 10 business days after receipt.

But what happens if the servicer does not comply? Fannie Mae may pursue any of its available remedies, which include repurchase, “make whole,” or indemnification. You can read more about the specifics to these changes HERE. To see exactly what is required in the Borrower Response Package CLICK HERE.

This post was reprinted with permission from Amy Swaney’s blog.

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Amy Swaney

Amy Swaney's mortgage career started over 20 years ago. She moved to Scottsdale in 1998 to open a branch of a mortgage company and fell in love with the Valley. In 2006 she served as President of the Arizona Mortgage Lenders Association. Amy is actively involved in legislative issues and visits DC annually to lobby for industry reform. She is also a frequent presenter to real estate, title and legal groups on topics from education-based production, legislation and regulatory changes. Amy is one of only 11 mortgage professionals in Arizona with the Certified Mortgage Banker (CMB) designation and one of 1,100 nationwide. She has a multi-million dollar production pipeline within the Swaney ~ Geenen Group at Citywide Home Loans and loves getting to know her customers. They are the ultimate reason she stays so involved in our industry.

To see more posts by this author, click here.

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