Chapter 6

Watchlist Management

Section 601

Servicer Watchlist
601.01

Submission

Requirements

You must:

  • Maintain a ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. for your Portfolio Mortgage LoansPortfolio Mortgage LoansMortgage Loan purchased by Fannie Mae and held as of a certain date regardless of whether it is a Cash Mortgage Loan or an MBS Mortgage Loan. that
    • reflects your loan rating methodology, and
    • identifies Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. with heightened credit risk.
  • Submit your ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. for all
    • Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , and
    • Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. .

Operating Procedures

Submit your ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. :

  • using the CSV upload template located under “Guides and Templates” in the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. ; and
  • within 45 days after each calendar quarter end, but no later than the due date shown in the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .

For each Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , you must:

  • Respond “Yes” or “No” to the following 2 questions:
    • Will the BorrowerBorrowerPerson who is the obligor per the Note. likely not be able to make timely debt service payments?
    • Will the BorrowerBorrowerPerson who is the obligor per the Note. likely not meet the contractual obligations to timely pay off the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. UPBUPBUnpaid Principal Balance ?
  • Explain
    • why it is being reported, and
    • the rationale for its rating.
  • Describe the current status of the issues.
601.02

Actions

Requirements

If a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. has heightened credit risk, you must:

  • act to mitigate the risk of loss or default;
  • explain the nature and severity of the issues; and
  • contact Fannie Mae:
Contact For...
Watchlist Management Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. with deteriorating PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). performance near or below breakeven.
Top Loss Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. with deteriorating PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). performance near or below breakeven.
Special Credits

PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). condition concerns per

 
Special Asset Management Monetary default.
Maturity Management Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. maturing within the next 24 months.

Operating Procedures

Your mitigating actions must include 1 or more of the following:

  • monitoring the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). (and any other collateral)
    • management and operations, and
    • physical condition (e.g., more frequent inspections);
  • implementing or enforcing Loan DocumentLoan DocumentAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. provisions such as
    • rescinding Loan DocumentLoan DocumentAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. waivers, or
    • reinstating Replacement ReserveReplacement ReserveCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. funding; and
  • communicating with all appropriate parties (e.g., BorrowerBorrowerPerson who is the obligor per the Note. , Key PrincipalsKey PrincipalsAny Person who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and who may be required to provide a Guaranty. , SponsorSponsorPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). , and PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). manager).
Section 602

Fannie Mae's Watchlist

Guidance

Fannie Mae’s WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. identifies Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. with increased credit risk based on Fannie Mae’s proprietary 

  • rating system, and
  • Risk Rating Classifications.

Requirements

You must regularly monitor Fannie Mae’s WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. for your Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. in the MAMP'sMAMP'sMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. “My Portfolio” module.

Section 603

Action Plans
603.01

Primary Risk Mortgage Loans

Requirements

You must submit an Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. for any Primary Risk Mortgage LoanPrimary Risk Mortgage LoanMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses.

  • identified as a Substandard Asset on Fannie Mae’s WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. , and
  • with an Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. work item in the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .

The Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. must explain

  • all areas of concern,
  • the Sponsor'sSponsor'sPrincipal equity owner and/or primary decision maker of the Borrower (often the Key Principal or the Person Controlling the Key Principal). strategy and timing,
  • your actions to resolve the issues, and
  • any results.

Operating Procedures

For a Small Mortgage LoanSmall Mortgage LoanMortgage Loan with an original loan amount less than or equal to $6 million and underwritten per Part III, Chapter 9: Small Mortgage Loans. , do not create an Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. unless Fannie Mae requires it.

For each Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. :

  • Review the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. module.
  • Review the Action Plan Submission Process Guide under ”Guides and Templates” in the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. .
  • Create a new one or update an existing one twice a year to:
    • document material changes and/or updates since the previous Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. ;
    • identify causes of the issues and additional actions you and the BorrowerBorrowerPerson who is the obligor per the Note. took;
    • explain how the actions will reduce or mitigate risk and loss; and
    • report the results of previous actions.
  • Use the prescribed format to submit it in the MAMPMAMPMultifamily Asset Management Portal used to submit Property inspections, operating statements, requested modifications, asset management reports, and data corrections for loan or property attributes. by the “Submission Due Date”.
603.02

Secondary Risk Mortgage Loans

Guidance

For a Secondary Risk Mortgage LoanSecondary Risk Mortgage LoanMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. on your ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. , Fannie Mae may request additional information, including an Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. .

Requirements

You must provide all information and Action PlansAction PlansYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. within 5 Business DaysBusiness DaysAny day other than a Saturday, Sunday, day when Fannie Mae is closed, day when the Federal Reserve Bank of New York is closed, or for any MBS and required remittance withdrawal, day when the Federal Reserve Bank is closed in the district where any of the MBS funds are held. after Fannie Mae’s request.

603.03

Defaulted Mortgage Loans

Requirements

For any defaulted Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. , until servicing is transferred to a Special ServicerSpecial ServicerServicer (which may be Fannie Mae, the Servicer, or a third-party special servicer contracted by Fannie Mae) responsible for implementing the loss mitigation actions for a Non-Performing Mortgage Loan. , you must continue taking all actions

  • noted in the Action PlanAction PlanYour report analyzing the Mortgage Loan and Property issues, your resolution strategy, and related actions and outcomes. , or
  • otherwise communicated to Fannie Mae.

Guidance

For your defaulted Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. obligations, see Part V, Chapter 7: Non-Performing Mortgage Loans.

Section 604

Servicer Fees

Requirements

For any workout, modification, or reinstatement of a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. on your ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. or Fannie Mae’s WatchlistWatchlistThe risk rating classification if you or Fannie Mae determine the Mortgage Loan has heightened credit risk. , without Fannie Mae’s prior written approval, you must not

  • charge the BorrowerBorrowerPerson who is the obligor per the Note. any fee for your own account, or
  • ask the BorrowerBorrowerPerson who is the obligor per the Note. to reimburse you for any costs or expenses.
Section 605

Fannie Mae Contractors

Requirements

You must interact with any Fannie Mae contractor engaged to provide asset management or other services as you would with Fannie Mae directly.