Fannie Mae Servicing Guide
Fannie Mae, otherwise known as the Federal National Mortgage Association (FNMA), seeks to provide potential homeowners and renters the financial tools for success. The association works for potential homebuyers by working with private mortgage companies. Fannie Mae has created an in-depth guide to inform prospective servicers on how to begin providing home mortgage-backed securities in the secondary mortgage market.
This Fannie Mae Servicing Guide is organized into six parts with multiple subparts, chapters, sections and topics to ensure effective organization of the complex material. The multi-section guide also equips servicers with instructions on managing borrowers, law firms, insurance companies, taxes, accounting and all other responsibilities and rules. The guide seeks to be a comprehensive resource for prospective lending companies to gain an understanding of all that is involved in working with Fannie Mae. It includes specific steps, timelines, procedures and forms to ensure that lenders seeking to apply know exactly what is expected of them.
How to Start a Partnership With Fannie Mae
The first portion of the guide instructs interested lenders about how to begin working with Fannie Mae (sometimes misspelled as Fanny May). Lenders and their mortgage and loan rates must qualify under strict FNMA guidelines pertaining to the servicer’s financial condition, lending experience and licensing and organization policies.
Interested servicers must apply to offer Fannie Mae home loans to their customers and pay the required application and review fees. All prospective lenders are subject to an examination of their organization and review process conducted by Fannie Mae.
A large portion of this section outlines the procedures and responsibilities of all lenders that are approved to provide Fannie Mae loans. This information includes:
- All the responsibilities of a Fannie Mae lender.
- Subservicing instructions.
- Working with liens.
- The Mortgage Electronic Registration System.
- How to refinance and lend according to Fannie Mae protocol.
- Ensuring consistent quality control.
Servicers must maintain warranty requirements for all Fannie Mae mortgage loans and failure to do so is considered a breach of the lender contract. This portion of the contract is meant to ensure the integrity of the program and reduce fraud and other dishonest or criminal acts. All Fannie Mae lenders and servicers are subject to contract termination without cause.
Escrow Accounts and Insurance
Even with Fannie Mae homes, homebuyers typically must process their initial home payment by way of an escrow account. This kind of account essentially holds the buyer’s initial deposit and other important documents while the sale is negotiated and processed. Servicers also offer escrow accounts that last for the lifetime of the Fannie Mae mortgage. This escrow account is involved in homeowner’s insurance policies so that borrowers do not have to pay separate costs.
This section of the FNMA guide also details the various types of home insurance policies that homeowners can purchase such as property, flood, liability and mortgage insurance. The Fannie Mae Servicing Guide includes reminders to lenders that policies and decisions made in regards to home insurance should always protect Fannie Mae’s interests.
For more information on how Fannie Mae works, download our comprehensive guide.
Accounting Processes of Fannie Mae Lenders
To be an authorized Fannie Mae lender, servicers must follow certain accounting routines and standards as defined the FNMA. The accounting of Fannie Mae mortgages involves processing loan payments, lending loans, making corrections, refunding or remitting payments, making conversions and reporting. Accounting processes and guidelines can be complex but Fannie Mae summarizes the most important and pertinent ones that servicers must include in their partnership with the FNMA.
FNMA Borrower Solutions
With any house purchase, borrowers are likely to experience challenges at some point in the home buying and owning experience but the FNMA has solutions. Some issues that arise are:
- The need to request a charge-off of a mortgage loan.
- Need for assistance after a disaster event.
- Transfer of ownership.
- Property seizures or forfeitures.
These issues arise from varying sources but most often involve legal or financial grievances. This section outlines all of the property, legal and financial issues that are likely to result at some point from owning a home. Thus, the section is divided into two subsections. One subsection focuses on legal and property issues that arise. The other subsection focuses in depth on financial issues involving defaulting. The Fannie Mae Servicing Guide thus includes detailed instructions for handling various topics that impact the interests and livelihood of borrowers while keeping the FNMA interests in mind.
Procedures for Fannie Mae Mortgage Defaulting
This section of the Servicing Guide describes the proceeding and services of the Fannie Mae mortgage lender’s acquired properties. Under Fannie Mae guidelines, servicers are required to accept certain higher-risk customers. While many of these risks reap consistent rewards, sometimes renters and homebuyers are unable to remain financially healthy. As a result, these homeowners default on their mortgage, become bankrupt and/or endure a home foreclosure. Therefore, this section of the guide details the appropriate steps to take and responsibilities of servicers when these situations arise.
One of the primary goals of Fannie Mae is to provide affordable house purchasing options through mortgage-backed loans. Therefore, the association has outlined procedures and financial responsibilities when lenders experience these types of challenges with borrowers. Often, default-related matters must be referred to legal firms. This is necessary for Fannie Mae loan defaults, bankruptcies and foreclosures alike. There are many complex factors, forms, jurisdictions and documents involved in default-related proceedings so this is why a law firm typically needs to be involved to mediate between the lender and borrower. A lawyer is well equipped to manage all of the interests of all parties involved including Fannie Mae.
Fannie Mae Servicing Reference Material
The final section of the Fannie Mae Servicing Guide provides specific steps for various processes mentioned in previous sections. This section includes links, forms, Fannie Mae mortgage policy updates and detailed outlines of steps for many lender services. In addition, this section includes resources, definitions and in-depth examples and specifications for topics like timelines, fees and certain requirements. This section essentially provides specific resources and instructions for proceeding and forms outlined in earlier sections.
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What is Fannie Mae?
The Federal National Mortgage Association (Fannie Mae) provides affordable housing finance options for homebuyers and renters. Fannie Mae does not provide original mortgages. Rather, the organization purchases existing mortgages and guarantees them with government sponsorship. Fannie Mae mortgages have a fixed rate and can have a lifespan as long as 30 years.
Who is eligible for Fannie Mae?
Fannie Mae guarantees multi-family and single-family mortgages and loans. To qualify for either type of loan, an applicant must have an income lower than the local average, and the property he or she wants to buy must be worth less than the federal maximum. Further, applicants must have a credit score above 620. However, the minimum required credit score may change depending on how many properties the applicant plans to purchase.