Fannie Mae Releases New Servicing Standards for Delinquent Mortgage Loans

Fannie Mae issued new standards for mortgage servicers regarding the management of delinquent loans, foreclosure time frames and default prevention. The rules, released on Monday, fell under the Federal Housing Finance Agency’s Servicing Alignment Initiative and are meant to improve homeowner communications and modifications surrounding the processes following a delinquency.

Servicers to Follow New Rules Following a Delinquency

In an effort to encourage mortgage servicers to create a stronger connection with their borrowers after a delinquency, Fannie Mae has released a new set of servicing standards.

According the Fannie Mae, the standards will give homeowners facing challenges in paying their mortgage loan a clear, consistent process to follow versus the confusion many have faced over the past few years after falling behind on payments and not knowing who to communicate with.

Jeff Hayward, Senior Vice President of Fannie Mae’s National Servicing Organization, said in a press release, “We want homeowners to be able to understand their options when facing foreclosure, and we want servicers to reach homeowners early in the process, communicate frequently and clearly, and help homeowners avoid foreclosure.”

What Are the New Standards?

The new standards released by Fannie Mae include changes to the following:

• Borrower contact: Servicers will be required to achieve “quality right party contact” with borrowers. This means they will need to build a strong customer-service relationship with homeowners, determine why they have become delinquent, assess their ability to pay and educate them on the availability of foreclosure prevention options. This communication must occur within the first 120 days of delinquency.
• Foreclosure timelines: Servicers will also be required to follow clear timelines for referring loans to foreclosure. They will need to set a date of sale for foreclosed properties and use a designated counsel.

Servicers will be provided incentives for completing loan workouts (modification, other assistance) earlier in a homeowner’s delinquency. But if they don’t follow the new standards, they will face compensatory fees and timeline violations.

To learn more about these standards, take a look at Fannie’s PDF guides regarding Delinquency Management and Default Prevention and Foreclosure Time Frames.