Fannie Mae and Freddie Mac Insurance – Related Updates (Nov 18, 2019)
Fannie Mae Servicer Requirements Regarding Acquired Property
In efforts to simplify the servicer’s process, Fannie Mae issued Bulletin 2019-07, announcing Guide updates pertaining to servicer responsibilities in situations where Fannie acquires the property.
Presently, for conventional first- and second-lien mortgage loans, the required timeframe during which the servicer must cancel an applicable property insurance and/or flood insurance policy differs depending on the individual circumstances related to the liquated mortgage loan. Going forward, Servicers must cancel any existing hazard or flood insurance policy within 14 days after the foreclosure sale or acceptance of an executed Mortgage Release.
Additionally, Fannie is eliminating the servicer’s duty to obtain a property inspection within 15 days after the foreclosure sale and to file a flood insurance claim, where applicable. Instead, Fannie will ensure its vendors perform these property preservation activities after Fannie has acquired the collateral. In these instances, when contacted by the property recovery firm, the servicer is required to provide all requested information or documentation to the property recovery firm within three business days.
Servicers are permitted to implement the changes immediately, but must do so by February 1, 2020.
To review the impacted Guide sections and associated revisions, see Fannie Mae Servicing Guide Sections:
E-4.4-01 Continuing or Canceling Property Insurance Coverage
E-4.4-03 Canceling Flood Insurance Coverage for Acquired Properties
E-4.3-02, Inspecting Properties Post-Foreclosure Sale
Freddie Mac Clarifies Requirements for Continuous Monitoring of Coverage
According to Bulletin 2019-23, Freddie Mac is making updates to the Guide to reflect that servicers are required to have policies and procedures in place to satisfy the requirements for continuous monitoring of the flood insurance policy and the flood zone of a property securing a Freddie Mac mortgage loan.
Where applicable, the servicer must ensure that a flood insurance policy was obtained at origination and must ensure adequate coverage is maintained throughout the life of the loan. Furthermore, the servicer must also have processes in place to detect any flood map changes and determine when flood insurance is required based on the updated map.
Guide impacts: Section 8202.3 and 8202.10
Proctor will continue to monitor these topics and provide updates as they develop.