A4-2.2-02, Law Firm Management and Oversight (11/12/2014)

The servicer is fully responsible for managing and overseeing all aspects of the performance and compliance of any law firm to which it makes a referral, including foreclosure prevention activities and timeline performance. The servicer must interact with the law firm as necessary throughout the course of the foreclosure or bankruptcy proceedings in order to ensure that the matters are completed in a timely manner, in accordance with applicable law, and in accordance with the requirements of the Servicing Guide, including the requirement that the servicer timely deliver good and marketable title to Fannie Mae following a foreclosure. The servicer must obtain, review, and analyze data and reports from the law firms and take appropriate action as necessary. The servicer is accountable and responsible to Fannie Mae for any delays or losses resulting from deficiencies in the law firm’s performance. The servicer must reimburse Fannie Mae for any losses suffered because a law firm did not meet its responsibilities.

The following table lists the servicer's ongoing responsibilities following referral to a law firm.

The servicer must also ensure that the law firm is able to

• process foreclosures and bankruptcies in a timely and efficient manner,

• recognize and facilitate foreclosure prevention whenever possible, and

• quickly obtain relief from the bankruptcy so that foreclosure proceedings may be initiated or continued, when appropriate.

The servicer must develop and have in place policies and procedures regarding oversight and compliance relating to law firms handling Fannie Mae default-related matters. The servicer must have policies and procedures reasonably designed to ensure that the law firms handling of Fannie Mae default-related matters are in compliance with the Mortgage Default Counsel Retention Agreement with Fannie Mae, the applicable provisions of the Servicing Guide, and applicable law.

The servicer must conduct periodic law firm compliance reviews and training as appropriate. In determining the frequency of firm compliance reviews, the servicer must consider the overall risk posed by the firm (legal, reputational, and financial), firm volume, performance, any changes in staffing ratios or levels, any litigation against the firm alleging systemic issues, any media coverage regarding the firm, and the prior results of any firm compliance reviews.

Compliance Reviews: The servicer's ongoing compliance monitoring must address the following minimum elements.

The servicer must make available to Fannie Mae upon request the materials relating to its performance and compliance monitoring of law firms providing default-related legal services, including

• information regarding the servicer's compliance monitoring, including scope and methodology,

• the schedule of law firm compliance reviews conducted,

• the identity of any vendors used in the law firm compliance reviews,

• any documentation from the law firm compliance reviews, and

• any findings, reports or remediation plans resulting from the law firm compliance reviews.

Fannie Mae reserves the right to review and require changes to the servicer's compliance process, as well as to require the servicer to conduct additional compliance activities related to law firms handling its default matters. In addition, Fannie Mae may require the servicer to change the scope of its compliance process in connection with Fannie Mae mortgage loans. Fannie Mae also reserves the right to directly conduct law firm audits and law firm on-site visits as deemed necessary.

Ongoing Training: The servicer must ensure that law firms receive any necessary training, including information regarding Fannie Mae requirements, such as Servicing Guide Announcements that may affect the law firms. Although Fannie Mae may conduct mandatory law firm training from time to time, the servicer is responsible for ensuring that law firms are aware of Fannie Mae’s requirements.

The servicer must generate and provide in a timely manner data and reports requested by Fannie Mae related to, among other things, servicer performance in managing the foreclosure and bankruptcy processes and oversight of law firm performance and compliance. The servicer must provide Fannie Mae access, as requested, to data in its servicing systems regarding Fannie Mae mortgage loans. Fannie Mae will periodically specify the required data and reports on Fannie Mae’s website.

Within two business days of discovery, or sooner if circumstances warrant, the servicer must notify Fannie Mae of matters requiring Fannie Mae's attention, including the following:

• any information regarding a law firm that might warrant a suspension of referrals, the transfer of matters to another law firm, and/or termination of the law firm;

• information suggesting legal or reputational risk posed by a law firm, e.g., bar complaints, sanction proceedings, or litigation asserting systemic issues with the law firm or its practices;

• any actual or suspected data security breach involving the law firm;

• any actual or alleged fraud on the part of a law firm;

• federal, state, or local governmental inquiries, including Congressional inquiries, that involve a significant legal or reputational risk issue related to a law firm selected and retained to perform default-related legal services on Fannie Mae mortgage loans or that involve a significant legal or reputational risk issue related to default-related practices of the servicer on Fannie Mae mortgage loans;

• media inquiries related to a law firm selected and retained to perform default-related legal services on Fannie Mae mortgage loans or default-related practices of the servicer on Fannie Mae mortgage loans;

• volume or capacity issues with a law firm;

• a breach of the limited retention agreement between Fannie Mae and a law firm;

• any systemic issues with a law firm;

• significant issues with the servicer's process for handling delinquent mortgage loans, e.g., an issue that causes widespread foreclosure delays or an issue that requires remediation efforts be taken with respect to mortgage loans in one or more jurisdictions; or

• any material change in the ownership, partnership, or organization of the law firm after executing the limited retention agreement, including instances where a named partner leaves the law firm or a practice group separates from the law firm.

Fannie Mae reserves the right to issue direction to servicers and law firms regarding escalated matters.

Escalation Process: Escalated matters must be reported to Fannie Mae’s Legal department via email (see F-4-02, List of ContactsF-4-02, List of Contacts).

The following table provides additional instructions for escalating matters to Fannie Mae.