Fannie and Freddie Insured Loss Event Servicing Guides Updates
In efforts to support the expeditious repair of properties, reduce servicer responsibilities, and more appropriately manage risk, Fannie Mae and Freddie Mac have revised requirements pertaining to insured loss events.
Mortgage Loan Status
Fannie Mae is updating requirements related to determining the mortgage loan status when disbursing insurance loss proceeds. For borrowers impacted by COVID-19, servicers must consider a loan current or less than 31 days delinquent for purposes of disbursing loss proceeds, if:
- The borrower experienced a COVID-19 related hardship;
- The mortgage loan was current or less than two months delinquent as of March 1, 2020, the effective date of the National Emergency declaration related to COVID-19; and
- At the time of the loss event, the borrower is performing on a COVID-19 related forbearance plan, repayment plan, or Trial Period Plan.
Freddie Mac revised its guidelines similarly, however, the criteria slightly differs. For example, where Fannie permits the mortgage loan to be current or less than two months delinquent as of March 1, 2020, Freddie requires the borrower to be current or less than 31 days delinquent.
The servicer is required to document in the loan-servicing file the date that the COVID-related hardship began and the date of the insured loss event.
Contractors
Servicers are no longer required to determine when a licensed contractor is necessary, or verify whether a contractor is licensed, bonded and/or insured.
Additionally, servicers do not need to disburse insurance proceeds via check payable jointly to both the borrower and contractor.
Inspections
Servicers are permitted to use servicer-directed video calls with the borrower or photos and/or video submitted by the borrower to document the status of property repairs for loans that are current or less than 31 days delinquent at the time of the loss event, provided the following conditions are met.
The photo(s) and/or video must:
- Allow the servicer to determine the repairs are from the location of the property;
- Authenticate when taken and that such photos or video were not altered in any way; and
- Clearly identify the repairs that are being documented and confirm the repairs were completed in accordance with the insurance adjuster’s itemized estimate and the repair plan, and do not affect the safety, soundness or structural integrity of the property or the ability to obtain an occupancy permit.
Where remote inspections are conducted via video call with the borrower, the servicer must retain video and/or photo records of the call that clearly document the servicer’s compliance with the requirements.
Use of remote inspections is not permissible for loans that are more than 31 days delinquent at the time of the loss, to confirm the status of the property after a disaster or in lieu of inspections triggered by the delinquency of the mortgage.
A final inspection to verify repair completion is no longer necessary for mortgage loans that were current or less than 31 days delinquent at the time the loss event occurred.
Please refer to the following links to review Fannie and Freddie’s recent announcements on these topics:
- Fannie Mae SVC 2020-03 and LL 2020-02
- Freddie Mac Servicing Bulletins 2020-28 and 2020-29
Proctor will continue to monitor these topics and provide updates as they occur.