Five Brothers

Servicer Repayment Plan Incentive Fee

Announcement 06-08

July 20,2006

Amends These Guides: Servicing

Servicer Repayment Plan Incentive Fee

We are pleased to announce that Fannie Mae will be compensating servicers for the successful completion of repayment plans.  We will now pay a $200 incentive fee to servicers for each repayment plan that meets our criteria and successfully brings a mortgage current.  Our goal is to further encourage early loss mitigation efforts by compensating servicers for the work involved in handling repayment plans.

Servecing Guide Part VII:  Delinquent Mortgages; Chapter 3, Special Relief Measures; Section 303, Repayment Plan

In order for a mortgage to be eligible for the repayment plan fee, the following criteria must be satisfied:

  • The mortgage must be a conventional first or second mortgage for which Fannie Mae bears the risk of loss.
  • The mortgage must be 60 or more days delinquent when first reported with a Delinquency Status Code 12, Repayment Plan, by the servicer.
  • The mortgage must be brought current upon the successful completion of the repayment plan.
  • Once a repayment plan fee has been paid on a mortgage, a 12-month period must elapse from the date the mortgage became current before another repayment plan fee will be paid on that mortgage.

Mortgages that are first reported with a Delinquency Status Code 12 and brought current in the same month are not eligible for a repayment plan fee.  Mortgages that are paid-in-full or repurchased after the Delinquency Status Code 12 is reported and before the mortgage becomes current also are not eligible for the repayment plan fee.  The repayment plan may include any accrued late charges due when the plan is established.

However, servicers are expected to waive late fees accrued during the repayment plan period as long as the borrower continues to meet the terms of the repayment plan.

After a repayment plan is established, the following criteria must be satisfied.

  • A servicer must report the repayment plan using the Home Save Solutions Network (“HSSN”) by the second business day of the month following the month the repayment plan was established.
  • A servicer must continue to report each month that the borrower is on a repayment plan until the mortgage becomes current, the borrower defaults on the terms of the repayment plan, or the mortgage is liquidated.

Fannie Mae will review eligibility for the repayment plan fee and make the final determination based on information provided by the servicer; therefore, servicers need not submit requests for payment of repayment plan fees.  Payments on eligible mortgages will be sent to servicers on a monthly basis.

We will update Section 303 of the Servicing Guide to incorporate the repayment plan fee.  Mortgages reported after August 1, 2006 with a Delinquency Status Code 12, Repayment Plan that meet our criteria will be eligible for the repayment plan fee.

Servicing Guide Part VII: Delinquent Mortgages; Chapter 6, Delinquency Status Reporting; Exhibit 1, “Delinquency Status” Codes

In Lender Announcement 06-06, dated June 21, 2006, we announced that we enhanced HSSN to allow us to accept Delinquency Status Code 12.  Servicers use Delinquency Status Code 12, Repayment Plan, to indicate that the servicer has an agreement with the borrower for the acceptance of regularly schedules monthly mortgage payments plus an additional amount that will, over a certain time period, bring the mortgage current.  Previously, servicers reported repayment plans under Code 09, Forbearance.  With the enhancement, servicers can distinguish between a repayment plan and a forbearance arrangement.

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Servicers should contact their Servicing Consultant if they have any questions about the information in this Announcement or the attachment.

Pamela S. Johnson

Senior Vice President

Attachment


Attachment 1

Servicing Guide Part VII: Delinquent Mortgages; Chapter 3, Special Relief Measures.

Section 303: Repayment Plan (08/01/06)

Under a repayment plan, the borrower must make payments in addition to regular monthly payments to cure the delinquency.  A servicer should consider a repayment plan when the delinquency resulted from a temporary hardship that no longer appears to be a problem.

When the delinquency involves fewer than three monthly payments, repayment plans may be oral agreements; however, the servicer should document the agreement in its mortgage files.  Formal written agreements are required if the delinquency is three months or greater.  Each agreement should clearly set out the amount and due date of each additional payment and the date by which the total delinquency will be cured.  A repayment plan for a second mortgage also must include a provision for automatic termination of the relief plan if the first mortgage goes into foreclosure.

Repayment plans may require

  • Monthly payments that are multiples of the regular installment;
  • A regular payment one month and multiple payments the next month;
  • Payments to be made more often than monthly; or
  • Any other variation in the timing or amount of the payment that will cure the delinquency in the shortest possible time that is appropriate to the particular borrower.

The servicer should report its approval of a repayment plan in the first delinquency status information report it transmits to us after the plan is approved.

Section 303.01; Repayment Plan Incentive Fee (08/01/06)

Fannie Mae will pay a $200 fee to servicers for each repayment plan that meets our criteria and successfully brings a mortgage current.  In order for a mortgage to be eligible for the repayment plan fee, the following eligibility requirements must be met:

  • The mortgage must be a conventional first or second mortgage for which Fannie Mae bears the risk of loss.
  • The mortgage must be 60 or more days delinquent when first reported with a Delinquency Status Code 12, Repayment Plan, by the servicer.
  • The mortgage must be brought current upon the successful completion of the repayment plan.
  • Once a repayment plan fee has been paid on a mortgage, a 12-month period must elapse from the date the mortgage became current before another repayment plan fee will be paid on that mortgage.

The following are instances in which repayment plans are not eligible for the repayment plan fee:

  • Mortgages that are first reported with a Delinquency Status Code 12 and are brought current in the same month are not eligible for the repayment plan fee.
  • Mortgages that are paid in full or repurchased after the Delinquency Status Cod 12 is reported and before the mortgage becomes current are not eligible for the repayment plan fee.

The repayment plan must include accrued late charges due when the plan is established between the servicer and borrower.  Servicers are expected to waive late fees accrued during the repayment plan period as long as the terms of the repayment plan are maintained by the borrower.

After a repayment plan is established, the following criteria must be satisfied:

  • A servicer must report the repayment plan using the Home Saver Solutions® Network (“HSSN”) by the second business day of the month following the month the plan was entered into with the borrower.
  • A servicer must continue to report each month that the borrower is on a repayment plan until the mortgage become current, the borrower defaults on the terms of the repayment plan, or the mortgage is liquidated.

Fannie Mae will validate eligibility for the repayment plan fee and make the final determination based on information provided by the servicer.  Servicer need not submit requests for payment of repayment plan fees.

Source:  http://www.efanniemae.com/sf/guides/ssg/2006annlenltr.jsp