As of April 8, 2020, Fannie Mae has issued an update to Lender Letter (LL-2020-02) regarding the impact of COVID-19 on servicing. Servicers were reminded they must remain compliant with the Servicing Guide A2-1-08, Compliance with Requirements and Laws relating to forbearance plans, achieving quality right party contact (QRPC), credit bureau reporting, and suspension of foreclosure activities and certain bankruptcy requirements. A summary of the changes are outlined in more detail below.

Attempting to Establish QRPC

QRPC, as described in the Servicing Guide D2-2-01, Achieving Quality Right Party Contact with a Borrower, is a uniform standard for communicating with the borrower, co-borrower or trusted advisor in an effort to resolve loan delinquency. Fannie Mae has now reaffirmed the applicability of QRPC when working with a borrower impacted by COVID-19. The servicer is authorized to use various outreach methods to contact the borrower in accordance with the Servicing Guide A4-2.1-04, Establishing Contact with the Borrower. Contact methods include, but are not limited to:

  • Mail
  • Email
  • Texting
  • Voice response unit technology

Forbearance Plan Terms

The initial issued Lender Letter communicated only property securing the mortgage must be either a principal residence, second home or an investment property and the servicer must otherwise follow the rules in the Servicing Guide D2-3.2-01, Forbearance Plan, however a servicer must approve forbearance plans for all borrowers impacted by COVID-19 in accordance with the CARES Act.

The CARES Act states a forbearance plan must be provided to any borrower who requests a forbearance with an attestation of the financial hardship caused by the COVID-19 emergency; no additional documentation other than the borrower’s attestation to a financial hardship caused by the COVID-19 emergency is required.

There have been many questions regarding accrued interest and escrow payments during the active forbearance plan. Servicers must inform the borrower the payments subject to a forbearance plan have only been delayed or reduced, not forgiven, and that once the forbearance plan is complete, one of the following will occur:

  • The mortgage loan must be brought current through a reinstatement
  • The borrower is approved for another workout
  • The mortgage loan is paid in full
  • The servicer refers the mortgage loan to foreclosure in accordance with applicable law

The servicer must also make the borrower aware they may shorten the forbearance plan term at any time to reduce the number of payments being delayed or reduced.

Evaluating the Borrower for a Payment Deferral or Mortgage Loan Modification After a Forbearance Plan

No later than 30 days prior to the expiration of the forbearance plan term, the servicer must begin attempts to contact the borrower and continue outreach attempts until either QRPC is achieved or the forbearance plan term has expired. Flexibility is being permitted regarding achieving QRPC. The requirement that the servicer determines the occupancy status of the property is being eliminated.

While COVID-19 is not a disaster as defined in the Servicing Guide, Fannie Mae has extended the availability of these post-disaster forbearance mortgage loan modifications to borrowers impacted by COVID-19 with this Lender Letter. Please reference LL-2017-09R, Fannie Mae Extend Modification for Disaster Relief (Extend Mod), for information on temporary post-disaster forbearance mortgage loan modifications.

Credit Bureau Reporting

In response to the CARES Act, Fannie Mae acknowledges the servicer must report the status of the mortgage loan to the credit bureaus in accordance with the Families First Coronavirus Response Act for borrowers affected by the COVID-19 emergency.

Suspension of Foreclosure Activities and Certain Bankruptcy Requirements

Fannie Mae acknowledges the servicer must now suspend foreclosure-related activities in accordance with the requirements of the CARES Act. Except with respect to a vacant or abandoned property, a servicer of a federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for not less than the 60-day period beginning on March 18, 2020.

In light of the CARES Act and other impacts resulting from the COVID-19 national emergency, Fannie Mae is temporarily relieving servicers of the obligation to meet timelines to file motions for relief from the automatic stay in bankruptcy cases upon certain milestones. This temporary suspension shall be in effect for not less than the 60-day period beginning on March 18, 2020.

Should you have any questions related to this guidance, contact one of our specialists in our Financial Institutions Group below:

Heather Feltner | Lending and Compliance Specialist | feltner@doeren.com 

Lindsey Becker | Internal Audit and Compliance Manager | becker@doeren.com

Jeni Butler | Senior Compliance Specialist | butler@doeren.com

Marcia Baker | Senior Compliance Specialist | baker3@doeren.com

Debbie Rodriguez | Senior Compliance Specialist | drodriguez@doeren.com

Joe Zito | Shareholder | zito@doeren.com

Author

Heather Feltner, Lending and Compliance Specialist