June 8, 2011 (Chris Moore)
Fannie Mae has issued new rules for mortgage servicers as a first step in the implementation of the Aligned Servicing Requirement announced by the Federal Housing Finance Agency (FHFA) in April of 2011. Mortgage servicers will now have to achieve new standards in managing delinquent loans, default prevention, and foreclosure time frames.
Mortgage servicers will be required to take a more consistent approach with home owner communications, loan modifications and other workouts, and foreclosures which will be reinforced with new incentives and compensatory fees.
To increase effectiveness, mortgage servicers will now be required to contact home owners verbally and in writing during the first 120 days after a loan first becomes delinquent. Servicers will need to first try to complete a loan modification or other option that keeps the borrower in their home or helps the borrower avoid the foreclosure process.
To bring greater consistency, fairness and efficiency to the foreclosure process, servicers must follow clear timelines for referring loans to foreclosure, setting a date of sale for foreclosed properties, and use a designated council during the process. Once a property is 120 days delinquent, the foreclosure process must begin.
Fannie Mae will also provide incentives for mortgage servicers to complete loan modifications or other workouts earlier on in the homeowners delinquency and fine those who do not meet the benchmarks and do not process foreclosures in a timely manner.
“These new standards give homeowners facing difficulty making their mortgage payments a clear, consistent process,” said Jeff Hayward, Senior Vice President of Fannie Mae’s National Servicing Organization. “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.”
Tags: Fannie Mae, mortgage servicers, FHFA, delinquent loans, default prevention, foreclosures, loan modifications, workouts