Chapter 7
| Section 701 | |
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This Chapter sets forth the policies, procedures and standards for servicing Non-Performing Mortgage LoansNon-Performing Mortgage LoansMortgage Loan that is subject to an uncured default. through the default resolution process. The provisions of this Chapter apply, unless otherwise noted, to both Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. and Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. .
Fannie Mae requires that, at a minimum, each ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. offer the same standard of care to its Fannie Mae portfolio as it would its own portfolio. Subject to this Chapter, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must aggressively pursue collection of all amounts due from BorrowersBorrowersPerson who is the obligor per the Note. under the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. to minimize losses. To that end, this Chapter sets forth the roles, duties and responsibilities of the various groups within Fannie Mae, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. , and, if applicable, the 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. charged with resolving delinquencies and defaults in the most efficient and expeditious manner.
The party performing the loss mitigation actions, as outlined in this Chapter 7, is referred to as the "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. ". The 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. will either be the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. , Fannie Mae, or a contract 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. for the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. or Fannie Mae, as permitted by this GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. . In this Chapter, any reference to the respective rights or duties of the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. or Fannie Mae, as the 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. , shall also apply to any approved contract 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. for the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. or Fannie Mae; however, it is the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. responsibility to ensure that any actions taken in its behalf by a contract 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. fully comply with the requirements of this GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. .
The requirements set forth in this Chapter represent only the minimum requirements that Fannie Mae expects from the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. . Unusual circumstances may require the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. to perform additional servicing duties as directed by Fannie Mae. Fannie Mae requires a high standard of delinquent 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. servicing. Failure to service in accordance with that standard may result in Fannie Mae's exercise of its remedies as set forth in the GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. and the Lender’s ContractLender’s ContractProgram Documents per the Multifamily Selling and Servicing Agreement. .
| In the event of a conflict between this Chapter, the Lender’s Contract, the Transaction Documents, and the Loan Documents, the following is the order of priority regarding governing provisions: (1) Loan Documents, (2) Transaction Documents, (3) Lender’s Contract, and (4) this Chapter. To the extent not in contradiction with the Loan Documents, the Lender’s Contract or the Transaction Documents, the requirements of this Chapter must be satisfied. |
| 702.01 | |
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For certain LendersLendersPerson Fannie Mae approved to sell or service Mortgage Loans. , the Lender’s ContractLender’s ContractProgram Documents per the Multifamily Selling and Servicing Agreement. with Fannie Mae will specify which party has all of the risk of loss on 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. , or if the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. and Fannie Mae share the loss. In some Lender ContractsLender ContractsProgram Documents per the Multifamily Selling and Servicing Agreement. , the 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. may be Secondary RiskSecondary RiskMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. until the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. recourse obligation is deemed exhausted after which the 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. will become Primary RiskPrimary RiskMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. .
| 702.02A | |
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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. is considered a Secondary Risk Mortgage LoanSecondary Risk Mortgage LoanMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. when all losses incurred on such 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. are contractually borne by the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. until the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. specified recourse obligation is deemed exhausted. This obligation to bear all losses is sometimes referred to as a "Top Loss" obligation. Because Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. will convert to Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. upon the deemed exhaustion of the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. obligation, Fannie Mae and the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must work together to accurately track amounts for any losses that may have occurred.
| 702.02B | |
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For all Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. , the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. , or its approved contract servicer, will be the 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. . The 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. will be required to submit to Fannie Mae a Servicer Workout Action Template (“SWAT”) (Form 4810) for all Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. as more particularly provided in Part V, Chapter 7: Non-Performing Mortgage Loans, Section 708.02: Servicer Workout Action Template (“SWAT”).
When the cumulative approved realized losses plus Potential Losses under a Secondary RiskSecondary RiskMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. Lender ContractLender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. equal or exceed 90% of the Lender'sLender'sPerson Fannie Mae approved to sell or service Mortgage Loans. recourse obligation under that ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. , the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. ’s recourse obligation under the ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. will be deemed to be exhausted and the remaining 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. serviced under that ContractContractProgram Documents per the Multifamily Selling and Servicing Agreement. will be deemed to be Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. . Fannie Mae will provide notice in writing to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. at the time of such re-designation. Re-designation 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. from Secondary RiskSecondary RiskMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. to Primary RiskPrimary RiskMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. does not relieve the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. of its remaining recourse obligation.
Fannie Mae's estimate of Potential Losses will be calculated as follows:
- the value of each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). (as provided below) securing all then-delinquent 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. , less
- the UPBUPBUnpaid Principal Balance of all then-delinquent 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. , plus
- estimated expenses to pursue a foreclosure Course of ActionCourse of ActionFor Non-Performing Mortgage Loans, loss mitigation activities per per Part V, Chapter 7: Non-Performing Mortgage Loans. for all then-delinquent 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. .
The value of 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). shall be calculated as follows:
- 90% of 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). value of each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing each such delinquent 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. if the value is established by an appraisal or broker’s opinion of value dated six (6) months or less prior to incurring the Potential Loss, or
- 60% of the most recent PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). value of each PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing each such delinquent 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. if the value is established by an appraisal or broker’s opinion of value dated more than six (6) months prior to incurring the Potential Loss.
| 702.03A | |
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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. is considered a Primary Risk Mortgage LoanPrimary Risk Mortgage LoanMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. when Fannie Mae bears all losses on 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. or when the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. and Fannie Mae share the losses on 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. . All 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. delivered under the DUSDUSDelegated Underwriting and Servicing and Aggregation product lines and certain other 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. where Fannie Mae either bears all the risk of loss or shares in a portion of the risk of loss are Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. .
| 702.03B | |
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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. , Fannie Mae, or its contract servicer, will be the 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. .
| Section 703 | |
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| 703.01 | |
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When a BorrowerBorrowerPerson who is the obligor per the Note. indicates to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. that it is no longer willing or able to continue to make its debt service or other payment obligations as required by the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. or to perform acts that are required by the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must notify its Fannie Mae RepresentativeFannie Mae RepresentativeFannie Mae personnel who assist you with various business matters (e.g., Fannie Mae Deal Team, pricing, delivery, servicing, asset management, etc.). immediately. The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. and Fannie Mae will determine whether such future non-performance is inevitable and whether to treat such a potential breach as immediate and, if repudiatory, to seek immediate relief.
| 703.02 | |
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| 703.02A | |
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The Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. will provide acts of the BorrowerBorrowerPerson who is the obligor per the Note. that are required to be performed, the failure of which may be designated as an event of default. There may be grace periods for curing such a default. The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must provide written notice of the default to Fannie Mae and to the BorrowerBorrowerPerson who is the obligor per the Note. as required in the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. . The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must diligently pursue the BorrowerBorrowerPerson who is the obligor per the Note. ’s cure thereof within the time permitted. If the BorrowerBorrowerPerson who is the obligor per the Note. fails to cure the default within the time provided in the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. to effect such a cure, a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. has occurred. Depending on the severity of the Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. , Fannie Mae may permit the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. to monitor the default per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 703.02C: Lender Tenders for Minor or Immaterial Defaults.
| 703.02B | |
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Often, the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. , ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. , or Fannie Mae become aware of a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. through receipt of a complaint, petition, or similar legal document in connection with a lawsuit. While the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. has the duty to provide notices of default to the BorrowerBorrowerPerson who is the obligor per the Note. , neither the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. nor the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is authorized to accept service of process on behalf of Fannie Mae. Fannie Mae's Legal Department in Washington, DC must accept service of process for Fannie Mae related to any 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. or PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). .
1. Primary Risk Mortgage Loans
In some instances, for minor or relatively immaterial defaults (like materialmen and mechanics' liens) on Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , Fannie Mae will elect to tender the Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. to monitor, engage legal counsel as necessary, and otherwise protect Fannie Mae's security interest in 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). . These "Lender Tenders" will be monitored and special serviced by the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. using its customary standard of care for similar Performance DefaultsPerformance DefaultsFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. in its own portfolio.
2. Secondary Risk Mortgage Loans
For Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. , all of the monitoring and special servicing activities for minor or relatively immaterial defaults will be performed by the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. .
3. Lender Tenders Not Subject to Requirements of this Chapter
Lender Tenders are not subject to the terms of this Chapter.
| 703.03 | |
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Payments under the NoteNoteInstrument evidencing a Mortgage Loan obligation, including Form 6010 series, any other Fannie Mae-approved note, and all applicable addenda, schedules, and exhibits. evidencing 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. are due on the first day of the month or such other date as may be specified in the NoteNoteInstrument evidencing a Mortgage Loan obligation, including Form 6010 series, any other Fannie Mae-approved note, and all applicable addenda, schedules, and exhibits. . Typically, there is no grace period for making payments and payments made after the scheduled due date are past due even if late charges do not attach until some days later. If the BorrowerBorrowerPerson who is the obligor per the Note. fails to pay monies when due, whether the obligation arises under the NoteNoteInstrument evidencing a Mortgage Loan obligation, including Form 6010 series, any other Fannie Mae-approved note, and all applicable addenda, schedules, and exhibits. or other Loan DocumentLoan DocumentAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , a Monetary or Payment DefaultPayment DefaultFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other… has occurred.
| 703.04 | |
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| 703.04A | |
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The Date of DefaultDate of DefaultDate of the initial Payment Default or Performance Default, per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 703: Mortgage Loan Defaults. is the date of the initial Payment DefaultPayment DefaultFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other… or Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. .
After the Date of DefaultDate of DefaultDate of the initial Payment Default or Performance Default, per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 703: Mortgage Loan Defaults. and until the default is cured, 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. is considered a "Non-Performing Mortgage LoanNon-Performing Mortgage LoanMortgage Loan that is subject to an uncured default. ."
For purposes of computing the time period for initiating the Dual Track Approach and electing a Course of ActionCourse of ActionFor Non-Performing Mortgage Loans, loss mitigation activities per per Part V, Chapter 7: Non-Performing Mortgage Loans. as described in this Chapter, partial payments made by the BorrowerBorrowerPerson who is the obligor per the Note. for monies due under the NoteNoteInstrument evidencing a Mortgage Loan obligation, including Form 6010 series, any other Fannie Mae-approved note, and all applicable addenda, schedules, and exhibits. or other Loan DocumentLoan DocumentAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. does not advance forward the Date of DefaultDate of DefaultDate of the initial Payment Default or Performance Default, per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 703: Mortgage Loan Defaults. . The last paid installment ("LPILPIDue date of the last payment received. ") is the accounting term for indicating the due date of the last payment received. Partial payments may be received over time that advance the LPILPIDue date of the last payment received. date, but the Date of DefaultDate of DefaultDate of the initial Payment Default or Performance Default, per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 703: Mortgage Loan Defaults. of the initial Payment DefaultPayment DefaultFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other… or Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. will not change.
Per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 704.02: Partial Payments; Late Payments, before the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is permitted to apply any partial payment to advance the LPILPIDue date of the last payment received. date, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must first obtain direction from Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam performing Fannie Mae’s Special Servicing that can be contacted at [email protected] . Fannie Mae may, at its option, require the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. to hold all such partial payments in suspense and not advance the LPILPIDue date of the last payment received. date until the BorrowerBorrowerPerson who is the obligor per the Note. has paid all amounts necessary to cure all Payment DefaultsPayment DefaultsFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other….
The imposition of late charges and default interest must be made in accordance with the amounts and at such time as specified in the NoteNoteInstrument evidencing a Mortgage Loan obligation, including Form 6010 series, any other Fannie Mae-approved note, and all applicable addenda, schedules, and exhibits. or other Loan DocumentLoan DocumentAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
1. Late Charges
Unless otherwise provided in the Lender ContractLender ContractProgram Documents per the Multifamily Selling and Servicing Agreement. , all late charges are wholly retained by the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. . Any decision to waive the collection of late charges payable to the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. rests with the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. .
2. Default Interest
Unless the Lender’s ContractLender’s ContractProgram Documents per the Multifamily Selling and Servicing Agreement. specifies otherwise, so long as the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is making Delinquency AdvancesDelinquency AdvancesFor Primary Risk Mortgage Loans and Secondary Risk Mortgage Loans, an amount advanced by a primary servicer in respect of regularly scheduled monthly interest or principal due on 1 or more Mortgage Loans, to the extent required under its Lender Contract. For Secondary Risk Mortgage Loans only, in…, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is entitled to retain that portion of 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. interest rate charged to the BorrowerBorrowerPerson who is the obligor per the Note. that is attributable to the default and intended to be added to the stated 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. interest rate. If the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is not making Delinquency AdvancesDelinquency AdvancesFor Primary Risk Mortgage Loans and Secondary Risk Mortgage Loans, an amount advanced by a primary servicer in respect of regularly scheduled monthly interest or principal due on 1 or more Mortgage Loans, to the extent required under its Lender Contract. For Secondary Risk Mortgage Loans only, in…, no amount of the default interest component may be retained by the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. . Without regard to whether the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is making Delinquency AdvancesDelinquency AdvancesFor Primary Risk Mortgage Loans and Secondary Risk Mortgage Loans, an amount advanced by a primary servicer in respect of regularly scheduled monthly interest or principal due on 1 or more Mortgage Loans, to the extent required under its Lender Contract. For Secondary Risk Mortgage Loans only, in…, Fannie Mae is always entitled to the interest that accrues at the stated 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. interest rate.
Late charges and default interest may not be deducted by the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. from the Borrower'sBorrower'sPerson who is the obligor per the Note. P&IP&IPrincipal and interest payments, T&IT&ITaxes or assessments that may become a Lien on the Property and insurance premiums. deposits, or Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. deposits.
The enforceability of late charges and default interest may depend on the law in 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). jurisdiction. The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must determine, based on the facts and circumstances of any transaction and their legal counsel's advice, whether any such charges are enforceable in 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). jurisdiction prior to making demand.
| Section 704 | |
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| 704.01 | |
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Using the Multifamily Delinquency System, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must advise Fannie Mae of a Payment DefaultPayment DefaultFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other… or a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. on or before the 17th day of the month (or on the next Business DayBusiness DayAny 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. if the 17th is not a Business DayBusiness DayAny 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. ) in which the Payment DefaultPayment DefaultFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other… occurs or is discovered.
By written notice to its Fannie Mae RepresentativeFannie Mae RepresentativeFannie Mae personnel who assist you with various business matters (e.g., Fannie Mae Deal Team, pricing, delivery, servicing, asset management, etc.). (Multifamily Loss MitigationMultifamily Loss MitigationTeam that can be contacted at [email protected] for Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , and Maturity Management Top LossMaturity Management Top LossTeam that can be contacted at [email protected] for Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. ), the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must advise Fannie Mae of certain Performance DefaultsPerformance DefaultsFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. as provided in this Section. Notice of a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. must be given to Fannie Mae:
- within five (5) days after the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. becomes aware of the Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. ; or
- if the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. permit a cure period after the BorrowerBorrowerPerson who is the obligor per the Note. receives written notice of its default or failure to perform any act under the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. , then within five (5) days after the BorrowerBorrowerPerson who is the obligor per the Note. ’s cure period has expired and a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. has occurred. The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. shall provide any such notice of the Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. to the BorrowerBorrowerPerson who is the obligor per the Note. per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 703.02: Performance Defaults.
If the BorrowerBorrowerPerson who is the obligor per the Note. ’s default or failure to perform any act under the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. has been excused by a waiver given by the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. (if permitted pursuant to this GuideGuideMultifamily Selling and Servicing Guide controlling all Lender and Servicer requirements unless a Lender Contract specifies otherwise. ) or by Fannie Mae, such default or non-performance is not considered a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. .
After having given Fannie Mae notice of a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. , the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. should provide updates at least monthly to its Fannie Mae RepresentativeFannie Mae RepresentativeFannie Mae personnel who assist you with various business matters (e.g., Fannie Mae Deal Team, pricing, delivery, servicing, asset management, etc.). , to advise of status of the default and the steps being taken by the borrower to cure the Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. .
| 704.01C | |
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The following Performance DefaultsPerformance DefaultsFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. must be reported by the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. , as provided in this Section; however, to the extent the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. believes that a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. not listed below is material to the BorrowerBorrowerPerson who is the obligor per the Note. ’s ability to perform under 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. , or the value of 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. or 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). , the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. should report that Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. as well:
1. Unauthorized Transfers
To the extent not approved in accordance with Part V, Chapter 4: Asset Management: Loan Document Administration, Section 418: Credit Enhancement Mortgage Loans and Multifamily Affordable Housing Properties, any transfers identified as a Transfer/AssumptionTransfer/AssumptionTransaction resulting in a change in the ownership of the Borrower or Property. in Part V, Chapter 4: Asset Management: Loan Document Administration, Section 418: Credit Enhancement Mortgage Loans and Multifamily Affordable Housing Properties, unless such type of transfer is permitted under the applicable Loan Agreement or Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. for 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. .
2. Completion/Repair Defaults
The BorrowerBorrowerPerson who is the obligor per the Note. ’s failure to complete required repairs in the aggregate in excess of the lesser of $50,000 or 10% of current UPBUPBUnpaid Principal Balance under a Loan Agreement, a Completion/Repair AgreementCompletion/Repair AgreementThe 4000 series Completion/Repair Security Agreement (Form 4505), or other agreement approved by Fannie Mae, that evidences the: Borrower’s agreement to perform Completion/Repairs and other identified capital improvements; terms for funding the repairs, maintenance, or capital items; and …, a Replacement Reserve and Security Agreement, or any other Loan DocumentLoan DocumentAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. or agreement binding upon the BorrowerBorrowerPerson who is the obligor per the Note. .
3. Mechanics', Materialman’s or Judgment Liens
The BorrowerBorrowerPerson who is the obligor per the Note. ’s failure to release or bond off a mechanics', materialman’s or judgment lien that has been filed against 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). .
4. Failure to Maintain Insurance
The BorrowerBorrowerPerson who is the obligor per the Note. ’s failure to maintain all insurance coverages as required by Part II, Chapter 5: Property and Liability Insurance and the applicable Loan Agreement or Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. for 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. .
5. Failure to Maintain the Property
The BorrowerBorrowerPerson who is the obligor per the Note. ’s failure to maintain 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). as required by the applicable Loan Agreement or Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. for 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. , as evidenced by outstanding code violations or municipal code enforcement actions pending against 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). for immediately hazardous conditions (such as inadequate fire exits, rodents, lead-based paint, lack of heat, hot water, electricity, or gas, etc.), uninhabitable units on 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). , the failure to promptly make repairs to 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). following a casualty loss, demolition of ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now constructed or hereafter constructed or placed on the land upon which the Property is located, together with all fixtures (as defined in the Uniform Commercial Code). on 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). , or waste or abandonment of 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). or its ImprovementsImprovementsBuildings, structures, improvements, and alterations, including the multifamily housing dwellings, now constructed or hereafter constructed or placed on the land upon which the Property is located, together with all fixtures (as defined in the Uniform Commercial Code). . For purposes of reporting under Part V, Chapter 7: Non-Performing Mortgage Loans, Section 704.01: Notice of Default, “uninhabitable units” do not include a unit where a tenant has vacated and the unit is being made ready, so long as the BorrowerBorrowerPerson who is the obligor per the Note. is promptly addressing the condition of the vacated unit and in the process of making it ready for leasing.
6. Change in Use
The BorrowerBorrowerPerson who is the obligor per the Note. ’s alteration of 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). or change in use, unit mix or other characteristics of 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). , or converting any individual dwelling unit to commercial use, or initiating or acquiescing to a change in the zoning classification of 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). , or establishing any condominium or cooperative regime with respect to 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). , or subdividing 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). , without Fannie Mae approval as required by the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
7. Environmental Conditions
The BorrowerBorrowerPerson who is the obligor per the Note. ’s failure to comply with its Operations and Maintenance (“O&MO&MWritten plan, document, or agreement containing ongoing operating, maintenance, or monitoring actions for the Property or its Improvements. ”) Agreement for 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). , or the existence of any environmentally hazardous materials that would constitute a Prohibited Activity or Condition under the Loan Agreement, Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the obligations under the Loan Documents. , or other Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
8. Noncompliance with Laws
Any violation of laws, ordinances or regulations by the BorrowerBorrowerPerson who is the obligor per the Note. and/or 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). , as required by Part V, Chapter 3: Custodial Accounts, Section 301.04: Investments and Interest.
| 704.01D | |
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The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must contact the BorrowerBorrowerPerson who is the obligor per the Note. as provided in this Chapter to determine why the payment has not been made and whether the payment will be made before the end of the month. The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must continue to update the Multifamily Delinquency System on its discussions with the BorrowerBorrowerPerson who is the obligor per the Note. until 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. has been transferred to the 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. (either Fannie Mae for Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , or the Servicer'sServicer'sPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. special servicing area for Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. ).
| 704.01E | |
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1. Execution
Prior to entering into any discussions with a BorrowerBorrowerPerson who is the obligor per the Note. regarding an anticipatory default (per Part V, Chapter 7: Non-Performing Mortgage Loans, Section 703.01: Anticipatory Defaults) or after 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. has been transferred to the 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. and prior to any further discussions with the BorrowerBorrowerPerson who is the obligor per the Note. regarding the Non-Performing Mortgage LoanNon-Performing Mortgage LoanMortgage Loan that is subject to an uncured default. and possible resolution of the default, the BorrowerBorrowerPerson who is the obligor per the Note. , Fannie Mae (if a Primary Risk Mortgage LoanPrimary Risk Mortgage LoanMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. ), the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. (if a Secondary Risk Mortgage LoanSecondary Risk Mortgage LoanMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. ) or the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. (if the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. has loss sharing and is not also the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. ) must execute and send to the BorrowerBorrowerPerson who is the obligor per the Note. a written Pre-Negotiation Form Letter (NOI and Loan Document Provisions) (Form 4811) or Pre-Negotiation Form Letter (Form 4812).
2. Purpose of Pre-Negotiation Letter
The purpose of the Pre-Negotiation Letter is for all parties to acknowledge in writing that any discussions relating to resolution of the default are not binding on any party until the discussions are documented in a written agreement executed by all parties. Use of the Pre-Negotiation Letter minimizes the risk of a liability claim against Fannie Mae or the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. that the BorrowerBorrowerPerson who is the obligor per the Note. acted in reliance on a verbal representation by Fannie Mae or the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. .
| 704.02A | |
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If the BorrowerBorrowerPerson who is the obligor per the Note. makes a partial payment, within five (5) business days after receipt of the partial payment the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must send a letter to the BorrowerBorrowerPerson who is the obligor per the Note. , under the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. ’s letterhead, the Multifamily Partial Payment Letter – Fees (Optional) Assessed (Form 4806).
| 704.02B | |
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If the BorrowerBorrowerPerson who is the obligor per the Note. makes a late and partial payment, within five (5) business days after receipt of the late and partial payment the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must send to the BorrowerBorrowerPerson who is the obligor per the Note. , under the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. ’s letterhead, the Multifamily Partial Payment Letter – Fees (Optional) Assessed (Form 4806).
If the BorrowerBorrowerPerson who is the obligor per the Note. makes a full payment after the date late charges are assessed, upon receipt of such payment the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must send within five (5) business days the BorrowerBorrowerPerson who is the obligor per the Note. , under its letterhead, the Multifamily Late Payment Letter – Fees (Optional) Assessed (Form 4805).
If the amount of the payment received from the BorrowerBorrowerPerson who is the obligor per the Note. is not sufficient to cure all Monetary Defaults, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. shall obtain direction from Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam performing Fannie Mae’s Special Servicing that can be contacted at [email protected] prior to applying the amount to past-due payments and advancing the LPILPIDue date of the last payment received. date. Fannie Mae may, at its option, require the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. to hold any such payments received in suspense until the BorrowerBorrowerPerson who is the obligor per the Note. has paid all amounts necessary to cure all Monetary Defaults.
| 704.02D | |
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If the amount of the payment received from the BorrowerBorrowerPerson who is the obligor per the Note. is not sufficient to cure all Monetary Defaults, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. shall obtain direction from Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam performing Fannie Mae’s Special Servicing that can be contacted at [email protected] prior to applying the amount to past-due payments and advancing the LPILPIDue date of the last payment received. date. Fannie Mae may, at its option, require the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. to hold any such payments received in suspense until the BorrowerBorrowerPerson who is the obligor per the Note. has paid all amounts necessary to cure all Monetary Defaults.
| 704.02E | |
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If the BorrowerBorrowerPerson who is the obligor per the Note. fails to make any payment at all, within five (5) business days following the date late charges are incurred the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must send to the BorrowerBorrowerPerson who is the obligor per the Note. , under the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. ’s letterhead, the Multifamily No Payment Received Letter – Fees (Optional) Assessed (Form 4807).
The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must send to its Fannie Mae RepresentativeFannie Mae RepresentativeFannie Mae personnel who assist you with various business matters (e.g., Fannie Mae Deal Team, pricing, delivery, servicing, asset management, etc.). a copy of any letter sent to the BorrowerBorrowerPerson who is the obligor per the Note. pursuant to this Chapter at the same time as it sends such letter to the BorrowerBorrowerPerson who is the obligor per the Note. . After outside counsel is engaged, any correspondence with the BorrowerBorrowerPerson who is the obligor per the Note. related to the Payment DefaultPayment DefaultFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other… or Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. , or the Course of ActionCourse of ActionFor Non-Performing Mortgage Loans, loss mitigation activities per per Part V, Chapter 7: Non-Performing Mortgage Loans. , must be made by or through the outside counsel.
| 705.01A | |
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It is not unusual for a PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing a Non-Performing Mortgage LoanNon-Performing Mortgage LoanMortgage Loan that is subject to an uncured default. to be in need of repairs during the default resolution process. Generally, a Payment DefaultPayment DefaultFailure of a Borrower to pay when due and in full any payment required for the Mortgage Loan, including, but not limited to, principal, interest, late charges, default interest, fees, prepayment premium, escrows, or other collateral accounts for taxes, insurance premiums, and assessments, other… or a Performance DefaultPerformance DefaultFailure of a Borrower to perform any promise or covenant within any applicable grace periods under the related Mortgage Loan other than a failure that constitutes a Payment Default. will result in a default under the Collateral AgreementsCollateral AgreementsAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. for Replacement ReservesReplacement ReservesCustodial Account funded during the Mortgage Loan term for major maintenance and replacing capital items per the Loan Documents. , Operating Deficit, Completion/RepairsCompletion/RepairsImmediate Repairs identified by the Property Condition Assessment and required by the Lender to be included in the Completion/Repair Schedule or Completion/Repair Agreement (or a Certificate of Borrower, if applicable). , or other Collateral AgreementsCollateral AgreementsAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. . When the BorrowerBorrowerPerson who is the obligor per the Note. is in default under a Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. , the 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. has discretion in applying the reserves or Letter of CreditLetter of CreditLetter of Credit approved by Fannie Mae per Part I, Chapter 2: Mortgage Loan, Section 204: Letters of Credit. proceeds either to repairs or replacements or to the payment of amounts due and owing to Fannie Mae under the Loan DocumentsLoan DocumentsAll executed Fannie Mae-approved documents evidencing, securing, or guaranteeing the Mortgage Loan. .
1. Primary Risk Mortgage Loans
As part of its Asset Review for Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. , as provided in this Chapter, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must advise Fannie Mae Special Asset ManagementSpecial Asset ManagementTeam performing Fannie Mae’s Special Servicing that can be contacted at [email protected] of the type of repairs or replacements that are necessary and recommend whether the repairs should be funded from the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. funds. It is Fannie Mae's decision whether or not to accept the recommendation and use the funds for repairs or replacements for Primary Risk Mortgage LoansPrimary Risk Mortgage LoansMortgage Loan where Fannie Mae bears all losses or where the Lender and Fannie Mae share losses. .
2. Secondary Risk Mortgage Loans
For Secondary Risk Mortgage LoansSecondary Risk Mortgage LoansMortgage Loan where the Lender bears all losses until the Lender’s recourse obligations are exhausted. , the LenderLenderPerson Fannie Mae approved to sell or service Mortgage Loans. must provide a SWAT describing the actions it intends to take to ensure the repair of 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 to prevent further PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). deterioration. The decision whether or not to use Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. funds for repairs or replacements is the 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. 's. When making the decision whether to use the Collateral AgreementCollateral AgreementAgreement under which collateral (other than the Property) may be pledged, transferred, or otherwise provided to secure the Borrower’s obligations under a Mortgage Loan. funds for repairs or replacements, the level of cooperation from the BorrowerBorrowerPerson who is the obligor per the Note. and remitting the monthly net operating income must be a factor to consider.
| 705.01B | |
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If in inspecting 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). securing the Non-Performing Mortgage LoanNon-Performing Mortgage LoanMortgage Loan that is subject to an uncured default. , it is apparent that the BorrowerBorrowerPerson who is the obligor per the Note. is not making repairs related to the health and safety of the tenants or is allowing the physical condition of the Property