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Financial Services Law Insights and Observations

Fannie Mae and Freddie Mac release updates to servicing guides

Federal Issues Fannie Mae Freddie Mac Servicing Guide Mortgages Mortgage Modification Mortgage Servicing Reverse Mortgages Mortgage Insurance

Federal Issues

On April 11, Fannie Mae updated its Servicing Guide, regarding servicing transfer welcome calls. Pursuant to Fannie Mae SVC-2018-03, transferee servicers are no longer required to, among other things, initiate welcome calls within five days of the transfer of servicing. Transferee servicers may now implement their own processes for borrower contact as long as the servicer remains in compliance with applicable laws. Fannie Mae also updated the Servicing Guide to add flexibility in connection with the collection of escrow shortages during a mortgage modification.  Under the amendment to the Servicing Guide, servicers may spread repayment of the shortage amount over a term of up to 60 months, unless the borrower decides to pay up-front. Additionally, Fannie Mae released a revised Reverse Mortgage Loan Servicing Manual, which includes updates to expense reimbursement claim submissions and mortgage loan status codes.

On the same day, Freddie Mac released Guide Bulletin 2018-6, which, among other things, updates servicer requirements on Subsequent Transfers of Servicing (STOS) and borrower-paid mortgage insurance. Effective July 23, transferor servicers must use the automated STOS request system and new transfer requests must be submitted at least 45 days and no more than 60 days prior to the effective date of the transfer. The Bulletin also provides additional details on initiating the electronic STOS and executing the STOS agreement. There will be a temporary moratorium on STOS requests and modifications to existing requests from July 9 through July 20, in order for Freddie Mac to implement the new process.

Separately, the Bulletin includes various changes to streamline servicer responsibilities in canceling borrower-paid mortgage insurance, such as now allowing servicers to process a borrower’s verbal request to cancel mortgage insurance and simplifying the process to determine current value.  

Consistent with the Fannie updates, Freddie Mac also modified its escrow shortage collection requirements to allow repayment to be spread over up to 60 months.

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