Fannie Mae and Freddie Mac Update COVID-19 Servicing Guidance

On July 15, 2020, Fannie Mae in an update to Lender Letter 2020-02 and Freddie Mac in Bulletin 2020-29 updated their COVID-19 servicing guidance to address insurance loss requirements and other matters. Fannie Mae also issued updates to Lender Letters 2020-07 and 2020-08 addressing the COVID-19 payment deferral and Stop Delinquency Advance Process.

The Fannie Mae guidance on insurance losses focuses on the disbursement of insurance loss proceeds, and the Freddie Mac guidance more broadly addresses the insurance loss settlement process. In each case, the guidance is intended to speed the repair of properties.

Fannie Mae also addresses Home Affordable Mortgage Program (HAMP) pay for performance incentives. Previously in an update to Lender Letter 2020-07, Fannie Mae advised that if a mortgage loan had been modified pursuant to a HAMP modification under which the borrower remains in “good standing,” then the mortgage loan will not lose good standing and the borrower will not lose any “pay for performance” incentives if the borrower was on a COVID-19 related forbearance plan immediately preceding the COVID-19 payment deferral. Fannie Mae is now clarifying that, additionally, the mortgage loan will not lose good standing and the borrower will not lose any “pay for performance” incentives if the borrower:

• Immediately reinstates the mortgage loan upon expiration of the COVID-19 related forbearance plan; or
• Transitions directly from a COVID-19 related forbearance plan to a repayment plan.

Freddie Mac also addresses document custody and certain other matters.

With regard to the COVID-19 payment deferral, in the update to Lender Letter 2020-07 Fannie Mae addresses the performance of an escrow analysis and any escrow shortage that is revealed, the terms of the payment deferral, servicing fees, and when a borrower becomes 60 days delinquent after completing a payment deferral.

As previously reported, based on a directive from the Federal Housing Finance Agency, Fannie Mae is implementing the Stop Delinquency Advance Process to limit the obligations of servicers to make advances commencing with August 2020 remittance activity based on July 2020 reporting activity. In the update to Lender Letter 2020-08, Fannie Mae addresses the one-time transition to the Stop Delinquency Advance Process, reporting and remitting for eligible Scheduled/Scheduled remittance type mortgage loans under the Process, contractual payments received from borrowers under the Process, and monthly reports that Fannie Mae will provide to servicers to aid in the reconciliation of their cash position.

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