Building off of the Federal Housing Finance Agency's previously announced initiative to align Fannie Mae's and Freddie Mac's servicing guidelines, Fannie Mae issued two wide-reaching announcements to its servicers on Monday. The guidance covers new foreclosure time frames and a glut of borrower-outreach and delinquency-management protocols. A separate announcement from the company alters servicing fees for modified loans.
Announcement 2011-07 updates the maximum number of days that routine foreclosures can proceed before compensatory fees are imposed. The specific time frames, by jurisdiction, will soon be available on eFannieMae.com, according to the announcement, which also lists Jan. 1, 2011, as the effective date for loan referrals to comply with the revised time frames.
The time frame begins when a servicer refers a loan to an attorney or trustee for foreclosure and ends when a foreclosure sale is completed.
‘The maximum allowable time lapse represents the time typically required for routine, uncontested foreclosure proceedings, given the legal requirements of the applicable jurisdiction, and takes into consideration delays that may occur outside of the control of the servicer,’ the announcement says.
If a foreclosure proceeding exceeds the allowable time, servicers must give a reasonable explanation to Fannie Mae. Examples of such an explanation include a bankrupcty action, military indulgence, a contested foreclosure and cases where loans are in review for modification.
According to a Fannie Mae statement issued Monday, once 120 days of delinquency have passed, the foreclosure process will begin.
‘We hope this step will encourage any homeowner who has not yet acted to work with the servicer to pursue all options to avoid foreclosure,’ said Jeff Hayward, senior vice president of Fannie Mae's National Servicing Organization. ‘But even in situations where foreclosure can't be avoided, we believe this process and this timetable will help motivate all participants toward resolutions that will ultimately stabilize neighborhoods as quickly as possible.’
Announcement 2011-08 outlines default-prevention rules, including a definition for quality right party contact (QRPC), call-center benchmarks, property-inspection timelines, specific guidance for loans secured by Florida properties that are subject to pre-filing mediation, as well as instructions on how to handle borrower inquiries and escalate cases. Fannie Mae servicers have until Sept. 1 to implement the new processes.
One of the requirements calls on servicers to initiate collection calls on the third day of delinquency for borrowers who are deemed to be high-risk (e.g., borrowers who have a prior delinquency or low credit score). For non-high-risk borrowers, calls are to begin on the 16th day of delinquency. All call attempts between the third and 36th day of delinquency must continue at least every third day, until certain qualifications – e.g., a QRPC is achieved and the servicer has received a promise to pay, the delinquency is resolved – are met.
Fannie Mae additionally issued Announcement 2011-09, which the company says simplifies the fees for modified mortgages. For cases closed in Fannie Mae's HomeSaver Solutions Network on or after June 18, servicers will receive the fee they were receiving before the modification or 0.25% – whichever is lower.
Announcement 2011-09 also clarifies previous instructions regarding loans registered with MERS.
[CORRECTION: The original version of this report incorrectly stated that all three announcements were tied to the FHFA's servicing alignment initiative.]
