A2-1-01, General Servicer Duties and Responsibilities (11/13/2024)

The servicer services Fannie Mae mortgage loans as an independent contractor and not as an agent, assignee, or representative of Fannie Mae. Most of the policies and standards described in the Selling and Servicing Guides are intended to set forth the broad parameters under which the servicer must exercise sound and professional judgment as a mortgage loan servicer in the performance of its duties. As a result, in most instances Fannie Mae has not set forth absolute requirements because it believes the servicer needs to maintain the discretion to apply appropriate judgment in dealing with borrowers and mortgage loans on a case by case basis, consistent with Fannie Mae’s servicing policies. Further, even where Fannie Mae has set forth a “requirement,” it has not enumerated specifically how the servicer should implement it. Fannie Mae generally will not object to the practices the servicer regularly applies so long as they are carried out in accordance with established written procedures that are consistent with Fannie Mae’s servicing policies. The servicer may apply practices used on its own portfolio of mortgage loans to Fannie Mae mortgage loans as long as the practices are in accordance with the servicer’s established written procedures and are consistent with Fannie Mae’s servicing policies. As a general matter, the servicer must have sufficient staffing levels, technology, and properly trained staff (including third-party providers of its outsourced servicing activities and technology) to

• carry out all aspects of their servicing duties in accordance with the timing requirements of the Servicing Guide,

• maintain acceptable performance standards, and

• provide borrowers with assistance when it is requested.

Furthermore, the servicer (or master servicer) must

• require the subservicer/outsource vendor to have policies and procedures for the contracted servicing activities, including for the orderly transfer of any contracted critical servicing activities upon a termination or expiration of any applicable contract;

• ensure no disruption of service, service levels, or offerings from any subservicer or outsource vendor which may have a material adverse effect on either the borrower or the critical servicing functions for mortgage loans serviced for Fannie Mae;

• conduct audits and QC reviews on subservicer/outsource vendor for contracted servicing activities, including services performed outside the United States, to ensure compliance with Fannie Mae requirements; and

• conduct operational assessments and reviews that measure the subservicer/outsource vendor performance in various departments.

The servicer must have effective processes to promptly address borrower inquiries (relating to both current and delinquent mortgage loans) and provide timely payoff quotes and refunds of escrow deposits after payoff. To the extent consistent with the borrower’s mortgage loan documents and applicable laws and regulations, Fannie Mae encourages the servicer to adopt servicing practices that allow for an appropriate level of discretion to take into account the facts of a particular mortgage loan and the circumstances of the borrower.

In performing the services and duties incident to the servicing of mortgage loans, the servicer must take whatever action necessary to protect the beneficial interest of Fannie Mae and an MBS trust in the security property as long as it is authorized to do so by the terms of the mortgage loan. Among other things, this generally includes, but is not limited to:

• complying with laws (see Selling Guide, A3-2-01, Compliance With Laws);

• monitoring and paying property taxes, HOA assessments, and related expenses to avoid possible tax liens or other liens that may take priority over Fannie Mae’s mortgage lien (see B-1-01, Administering an Escrow Account and Paying ExpensesB-1-01, Administering an Escrow Account and Paying Expenses for additional information);

• maintaining adequate property insurance to cover damage from unforeseen casualty losses;

• establishing and maintaining accounts for the deposit of borrowers’ funds;

• responding to borrowers’ inquiries (relating to both current and delinquent mortgage loans) about the terms of their mortgage loans or the actions the servicer has (or has not) taken in its servicing of the mortgage loans;

• making periodic property inspections to ensure the physical condition of the property is satisfactory, there are no apparent hazardous conditions (such as the presence of hazardous wastes or toxic substances) affecting the property, and there are no apparent violations of applicable law that might result in a seizure or forfeiture of the property, and to determine and initiate the needed responsive actions (see D2-2-10, Requirements for Performing Property InspectionsD2-2-10, Requirements for Performing Property Inspections and E-3.3-03, Inspecting Properties Prior to Foreclosure SaleE-3.3-03, Inspecting Properties Prior to Foreclosure Sale for additional information);

• maintaining accurate mortgage loan servicing and accounting records, including proper coding of mortgage loans to ensure proper MBS mortgage loan servicing guidelines are followed;

• resolving discrepancies identified between the servicer's records and the data attributes submitted to Fannie Mae at the time of mortgage loan delivery by following the post-purchase adjustment process (see Selling Guide C1-2-02, Loan Data and Documentation Delivery Requirements);

• collecting and promptly remitting any and all amounts due Fannie Mae;

• taking prompt and appropriate action to resolve or prevent a delinquency, including any action necessary to liquidate a defaulted mortgage loan (see Parts D and E for additional information);

• performing certain administrative functions related to an acquired property when Fannie Mae so requests (see E-4.3-01, Managing the Property Post-Foreclosure SaleE-4.3-01, Managing the Property Post-Foreclosure Sale for additional information);

• advancing reasonable amounts, if necessary, to cover expenses arising in connection with any of the duties described above; and

• providing timely payoff quotes and refunds of escrow deposits after payoff.

The servicer must use good judgment and take the actions described in the following table.

Fannie Mae’s basic servicing policies do not change on the basis of its lien position.

For mortgage loans originated on or after March 1, 2023, the servicer must maintain the following fair lending data elements in a queryable format for each mortgage loan if obtained during the origination process:

• race of borrower(s),
• ethnicity of borrower(s),
• age of borrower(s),
• gender of borrower(s), and 
• preferred language of borrower(s).

Note: In the event of a future transfer of ownership or assumption of the mortgage loan, the servicer is authorized, but not required, to update these data elements.

The following provisions apply to all master servicers and subservicers that own and/or service a total portfolio size greater than or equal to 20,000 mortgage loans at any time during a calendar year.

To the extent the servicer relies on any third-party technology provider for the performance of critical servicing functions, the servicer must provide:

• not less than 180 days’ prior written notice to Fannie Mae of its intent to change such third-party technology provider, together with, upon Fannie Mae’s written request, the servicer’s transition plan for such change; and
• within 5 business days after its occurrence, written notice to Fannie Mae of any termination, breach, or impairment of rights by servicer or the technology provider of or under such contract.

These obligations are in addition to, not in lieu of, the servicer’s obligations to notify Fannie Mae under Selling Guide A4-1-01, Maintaining Seller/Servicer Eligibility.

Critical servicing functions include services and processes that directly impact the servicing of a mortgage loan (e.g., mortgage loan payment processing, remitting, accounting, and reporting, etc.), providing servicing solutions to a borrower in need, or the timely and accurate reporting to Fannie Mae or other entities.

Such transition plan must describe the steps the servicer is undertaking to ensure an orderly transfer of critical servicing functions to a new technology service provider so there is no interruption to borrowers and Fannie Mae and account for continuity of technology service from the original third-party technology service provider.

In addition, in all contracts with third-party technology providers for critical servicing functions, the servicer must ensure

• Fannie Mae is provided within five business days with copies of any termination, notice of default, breach or non-performance or any notice of impairment of rights, in each case sent to the servicer; and 
• such third-party technology provider acknowledges Fannie Mae’s ownership interest in the Fannie Mae mortgage loans (including all associated files and data) and agrees to reasonably cooperate with any transfer of such mortgage loans to a new servicer, technology service provider or servicing platform, as may be required by or directed by Fannie Mae, upon payment of reasonable and customary transition fees.

The servicer’s authorization to receive, handle, or dispose of funds representing mortgage loan payments (for principal, interest, and tax and insurance escrow deposits) or of other funds or assets related to the mortgage loans it services for Fannie Mae or to the properties secured by those mortgage loans is limited to those servicing actions that are expressly authorized in the Servicing Guide or in the Lender Contract.

Because these funds and assets are owned by Fannie Mae and other parties (such as the borrower, a participating seller/servicer, or an MBS holder, if applicable), the servicer, in its handling of these funds, is acting on behalf of and as a fiduciary for, Fannie Mae and other parties, as their respective interests may appear; the servicer is not acting as a debtor of Fannie Mae.

If the servicer takes any action with respect to these funds or assets that is not expressly authorized, such as the withdrawal or retention of mortgage loan payment funds Fannie Mae is due as an offset against any claim the servicer may have against Fannie Mae, the servicer is not only violating the provisions of the Servicing Guide and the Lender Contract, but also is violating the rights of any and all other parties that have a beneficial interest in the funds. Such action is therefore prohibited and will be considered a breach of the Lender Contract.

Because the servicer of scheduled/actual and scheduled/scheduled remittance type mortgage loans generally must remit funds to Fannie Mae when they are scheduled to be remitted rather than when they are actually collected, there may be times when the funds collected are not sufficient to make the servicer’s required payment. In those cases, the servicer must advance its own funds to cover funds due for delinquent mortgage loans if the funds have not been collected. Funds advanced for this purpose are referred to as “delinquency advances.” See C-3-01, Responsibilities Related to Remitting P&I Funds to Fannie MaeC-3-01, Responsibilities Related to Remitting P&I Funds to Fannie Mae for additional requirements related to delinquency advances including details of when the servicer must advance principal and interest depending on the mortgage loan type and servicing option.

The servicer must make a delinquency advance if the funds on deposit in the servicer’s P&I custodial account on the day the monthly remittance is due to Fannie Mae are less than the amount of the required monthly remittance.  To avoid using its own funds, the servicer is authorized to use funds it has on hand for any prepaid P&I installments, principal curtailments, and payoffs to offset payment (or interest) shortfalls that occur as the result of mortgage loan delinquencies. The servicer must maintain monthly records of all P&I advances for delinquent mortgage loans (including those in the Stop Delinquency Advance process) and perform appropriate monthly reconciliation activities.   

Regardless of the mortgage loan type or applicable servicing option, the servicer may reimburse itself for its delinquency advances from borrower collections that are subsequently deposited to the P&I custodial account.

The servicer must pay all out-of-pocket costs and expenses incurred in performing its servicing obligations, such as those related to the following:

• preservation and protection of the security property (see the Property Preservation Matrix and Reference Guide for additional information),

• enforcement of judicial proceedings, and

• management and disposition of acquired properties.

Funds advanced for this purpose are referred to as “servicing advances.”

Servicing advances may be recovered from the borrower, insurance proceeds, claims settlements, or other available sources, except as described below. Fannie Mae will reimburse the servicer for certain unrecovered losses under the following circumstances:

• when the expense relates to protection of the security or foreclosure costs for a portfolio mortgage loan, or

• for an MBS mortgage loan serviced under the special servicing option.

Fannie Mae will not reimburse the servicer for unrecovered losses for costs, losses, or other items the servicer agreed to hold Fannie Mae harmless against under its warranties or indemnification agreements or for advances made in connection with litigation or proceedings Fannie Mae did not approve (if its approval was specifically required).

In no event may the servicer recover its servicing advances for a specific mortgage loan from the P&I payments for another mortgage loan or from the T&I deposits in another borrower’s account.