704.01
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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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 Borrower’sBorrower’sPerson who is the obligor per the Note. 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. .