Fannie Mae Updates Property Transfer Policies for Exempt Transactions

Fannie Mae Mortgage Servicing

On February 27, Fannie Mae issued Lender Letter LL-2013-04, clarifying servicers’ obligations in connection with the transfer of ownership of a property securing a mortgage loan when the due-on-sale or due-on-transfer provision is not enforceable because the transfer is considered an exempt transaction. For such exempt transactions, servicers must implement policies and procedures to promptly identify and communicate with the new owner, and must allow the new owner to continue making mortgage payments and pursue an assumption of the mortgage loan as well as a foreclosure prevention alternative, if applicable. In addition, for delinquent mortgage loans that are exempt transactions, if the new owner is unable to bring the mortgage loan current but may be able to resolve the delinquency with a foreclosure prevention alternative and assume the mortgage loan, the servicer must collect a Borrower Response Package from the new owner, evaluate the request as if it were a borrower, and submit a recommendation to Fannie Mae if the servicer determines a foreclosure prevention alternative is appropriate. Finally, servicers are reminded that, in the case of an exempt transaction, before finalizing any permanent modification entered into in conjunction with an assumption for an MBS Pool mortgage loan, the mortgage loan must be (i) in a continuous state of delinquency for at least four consecutive monthly payment dates (or at least eight consecutive payment dates in the case of a biweekly mortgage loan) without a full cure of the delinquency, and (ii) removed from the MBS pool.