by Nicole Legere, Esq. , Associate Counsel, Bankers Advisory, Inc.*, June 25, 2012
Fannie Mae recently published an announcement intended to update and clarify foreclosure time frames and compensatory fees. These updates apply to all mortgage loans held in the Fannie Mae portfolio as well as mortgage backed security (MBS) loans guaranteed by Fannie Mae.
In order to avoid foreclosure delays, Fannie Mae has implemented the use of compensatory fees which will be assessed against a servicer when the time period from the date the delinquency began through the foreclosure sale date is longer than the maximum number of allowable days. Fannie Mae has established a maximum number of allowable days, which varies by state, and can be anywhere from 270 up to 990 days. The “Foreclosure Timeframes and Compensatory Fee Allowable Delays” document on eFannieMae.com lists the maximum number of allowable days for all states.
First, Fannie Mae will determine the number of days the servicer took to complete the foreclosure process, and if it was fewer than the maximum number of allowable days the loan will be considered “under-standard.” Alternatively, foreclosures which are completed in excess of the maximum number of allowable days will be considered “over-standard.” Loans that are under-standard will receive a credit, and those that are over-standard will be assessed a compensatory fee.
Next, the amount of the credit or fee will be calculated using the unpaid principle balance of the loan, the applicable pass-through rate, and the number of days the loan was either over or under-standard. If the servicer has any credits due to loans being under-standard they can be used to offset compensatory fees. However, credits can only be used within the state in which they were given. For example, a credit from a loan which was under-standard in California cannot be used to offset a compensatory fee charged for a loan which was over-standard in New York. Likewise, credits can only be used in the month which they are earned, and do not transfer from month to month. Finally, Fannie Mae has said that it will not assess a fee if the total monthly compensatory fees for a particular servicer are 1,000 dollars or less.
Importantly, Fannie Mae reserves the right to impose compensatory fees separate from those assessed for timeframe noncompliance for the servicer’s failure to report on an accurate and timely basis.
A servicer may appeal a compensatory fee for delays outside of their control. Some allowable delays include unemployment, bankruptcy, and probate. The appeal, and any supporting documentation, must be submitted via the Fannie Mae File Transfer Portal.
Fannie Mae has also updated the maximum number of allowable days for foreclosures to take place in twelve jurisdictions. The number of allowable days has been increased in Arkansas, Connecticut, Delaware, Florida, Idaho, Maryland, New Jersey, New Mexico, New York, North Dakota and Puerto Rico. Additionally, the preferred method of foreclosure in both Montana and Nebraska has been changed to non-judicial.
These changes apply to all mortgage loans with a foreclosure date on or after January 1, 2012 or to any Fannie Mae mortgage loan referred to an attorney (or trustee) to initiate foreclosure proceedings on or after January 1, 2012.
PDF version »
*Nicole Legere is Associate Counsel at Bankers Advisory. She is a graduate of the University of Massachusetts at Amherst and received her Juris Doctor from Roger Williams School of Law. She is a member of the Bar Association for the states of Massachusetts and New York.
Disclaimer: The information presented in this article represents the opinion of the author and not that of AllRegs. This article is not meant to be nor should it be construed as advice of legal counsel. The applicability of the information contained herein will vary based on the nature of each lending institution's business, under what law it was created, and its loan products and procedures. Readers are strongly urged to consult with their legal counsel and/or contact local counsel as appropriate in the various states and jurisdictions to determine the applicability of the materials contained herein to the specific facts and circumstances of each organization's programs and products and to identify other law applicable to its business operations. The information contained herein was not reviewed or approved by counsel in the respective jurisdictions.