D1-1-01, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan (07/12/2023)

This topic provides information related to evaluating a request for the release, or partial release of property securing a mortgage loan. The evaluation requirements for each of the various types of requests are described in this topic.

To request a review for a release, or partial release, of property securing a mortgage loan, the borrower must submit an Application for Release of Security (Form 236) to the servicer. An application is considered complete when all required documentation and information, as outlined within this Servicing Guide and Form 236, has been obtained. When the servicer receives a complete application, the servicer must counsel the borrower to consider the costs and benefits of any action covered by this policy prior to evaluating the request. The servicer must then evaluate each request in accordance with this Guide. 

If the complete application meets all the applicable requirements as outlined within this topic, then the servicer is authorized to approve the request. If upon the evaluation of the borrower's request the servicer determines that it does not meet all of the applicable requirements as outlined within this topic, but the servicer determines that extenuating circumstances exist, the servicer must submit the request to Fannie Mae for a non-delegated review. Additionally, with the exception of eminent domain actions that fall within the policies in this Guide, all requests related to Texas Section 50(a)(6) loans must be escalated to Fannie Mae for review and decisioning. To submit a request for a non-delegated review, the servicer must submit the complete application and all required documentation to Fannie Mae’s SF CPM division (see  F-4-02, List of ContactsF-4-02, List of Contacts). The servicer must also follow the processing requirements found in Processing a Request for the Release of Property Securing a Mortgage Loan in F-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage LoanF-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan.

When a borrower requests a release or grant of an easement, the servicer must ensure that the borrower submits a completed Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

Request for the Release of a Beneficial Easement: The servicer must evaluate the request for the release of a beneficial easement to determine whether or not the release will adversely affect the value of the property securing a mortgage loan by considering the following:

• the convenience, access, or other benefits provided by the easement, which will be lost upon release, and

• the value of the property with the easement in place compared with the value of the property without the easement.

The servicer must assess the effect a release of the easement may have on the use or value of the property.

The following table describes the servicer's action based upon the impact to the property securing a mortgage loan.

Request for the Grant of a Burdensome Easement: The servicer must evaluate the request for the granting of a burdensome easement to determine the extent to which granting a burdensome easement adversely affects the use, value or future marketability of the property securing a mortgage loan, which depends on the following:

• the degree and quantity of rights that are released with the easement;

• the community’s customs, attitudes, and prevalent practices regarding such easements;

• the value of the property without the easement in place compared with the value of the property with the easement in place; and

• the manner and extent of the use of the easement.

The servicer is authorized to approve any request for a customary public utility easement as long as

• A subsurface utility easement does not extend under the house or other improvements to the property.

• An above-surface utility easement for distribution purposes that runs along any of the property lines or easements for drainage purposes that run along the rear property line if the easements do not extend more than 12 feet from the property line, do not interfere with any of the improvements or use of the property, and do not present a health or safety hazard.

The servicer must evaluate requests for other types of easements based on the specific circumstance of the request, as described in the following table.

Any request to grant a burdensome easement on a limited basis (e.g., granting access to specific persons as opposed to all current and future owners of the property) must be denied.

If a request to grant a burdensome easement includes subordinating the mortgage lien to the easement, the servicer is authorized to agree on Fannie Mae's behalf to subordinate the mortgage lien to the easement if

• the easement is the type that is customary in the area and does not interfere with the property owner’s use or enjoyment of the property, and

• any cash consideration is applied to the outstanding mortgage loan debt in accordance with the mortgage loan documents.

When a borrower requests to lease oil, gas, or mineral rights to the property, the servicer must ensure that the borrower submits a completed Form 236. A complete application must include all information and documentation required per the form.

Before agreeing to a lease of oil, gas, or mineral rights, the servicer must consider the extent to which the subject property and neighboring properties may be affected by the exercise of the rights covered in the lease. The servicer must take the following into consideration:

• The extent to which the rights granted by the lease infringe on the property owner’s rights. For example, if the lease permits removal of deposits by directional exploration from an area outside of the property, there may be little or no adverse effect, depending on the location of the exploration area and the attitude of the community. On the other hand, if the lease allows for complete ingress and egress to explore any part of the property or to store or install equipment on it, the property may no longer have any real value as a residential property.

• Any hazards, nuisances, or damages that may result from the exercise of the rights granted by the lease. In mineral areas where subsidence from directional mining may be a problem, the potential extent of a hazard or nuisance can be determined by reviewing the past history of such operations in the locality and taking into consideration the property’s subsurface soil structure and the extent and depth of the proposed mining. In oil-producing areas, hazards, nuisances, and damages can result from drilling operation, ingress and egress, storage, pipeline transportation, fire, explosion, or gusher wells. The effect of these potential hazards or nuisances on the value of the property would depend on their intensity and closeness and the community’s attitude toward such hazards or nuisances. For example, in areas in which oil exploration is a major part of the economy, the risk may be considered acceptable, whereas it might be unacceptable in areas in which such exploration has a minor effect on the economy.

The servicer must determine whether the leasing of oil, gas or mineral rights meets the conditions in the following table.

The servicer must evaluate requests for the leasing of oil, gas, and mineral rights based on the specific circumstances of the request, as described in the following table.

When a borrower requests a partial release of real property securing Fannie Mae’s mortgage loan, the servicer must ensure that the borrower submits a completed Form 236. A complete application must include all information and documentation required per the form.

The servicer must determine whether the release of a portion of the real property meets the conditions in the following table.

The servicer must evaluate requests to release a portion of the real property securing the mortgage loan based on the specific circumstance of the request, as described in the following table.

If the request to release a portion of the real property securing the mortgage loan includes a concurrent request to add land, the requirements for each request type must be met.

When a borrower requests to add land to the real property securing the mortgage loan, the servicer must ensure that the borrower submits a complete Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

The servicer must determine whether the request to add the land to the real property securing the mortgage loan meets the conditions in the following table.

The servicer must evaluate requests to add land to the real property securing the mortgage loan based on the specific circumstances of the request, as described in the following table.

If the request to add a portion of the real property securing the mortgage loan includes a concurrent request to release land, the requirements for each request type must be met.

When a borrower requests a partition of the property, the servicer must ensure that the borrower submits a complete Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

The servicer must evaluate requests to partition real property based on the specific circumstance of the request, as described in the following table.

The servicer must evaluate requests to partition real property based on the specific circumstance of the request, as described in the following table.

If the request for the partition of real property includes a request to release a borrower from liability under the mortgage loan, the servicer is authorized to approve the request if the borrower who retains possession of the property securing a mortgage loan has the financial ability to make the mortgage loan payments. To evaluate a borrower’s financial ability to make the mortgage payments the servicer should follow the procedures in F-1-28, Reviewing a Transfer of Ownership for Credit and Financial CapacityF-1-28, Reviewing a Transfer of Ownership for Credit and Financial Capacity.

The servicer must submit all requests for the substitution of property securing a mortgage loan, along with its recommendation, to Fannie Mae’s SF CPM division (see  F-4-02, List of ContactsF-4-02, List of Contacts). Prior to submitting the request to Fannie Mae, the servicer must ensure that the substitution of property securing the mortgage loan satisfies the subdivision requirements of the applicable jurisdiction(s) and complies with all applicable zoning requirements and building codes. A complete application must include all information and documentation required per the form.

If Fannie Mae approves the substitution of property securing a mortgage loan, the servicer must take the actions described in the following table.

The servicer must do and pay for whatever is necessary to protect Fannie Mae’s interest in the property securing the mortgage loan when there is a legal proceeding that may significantly impact Fannie Mae’s interest. In the instance of eminent domain action, the servicer must also pursue any available legal remedies if it appears the compensation award offer does not accurately reflect the value of the property.

The servicer must follow the procedures in Protecting Fannie Mae’s Rights Regarding Taking of Property by Condemnation or Eminent Domain in F-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage LoanF-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan to protect Fannie Mae’s interest in the property and Fannie Mae’s rights under the security instrument.

When a government takes eminent domain action against a property securing Fannie Mae’s mortgage loan, the servicer must ensure that an Application for Release of Security (Form 236) is completed to adequately document the government action, and its impact to the property. A complete application must include all information and documentation required per the form.

The servicer must refer to the terms of the security instrument to determine how compensation awards are to be distributed in the event of either a partial taking or total taking of a property securing a mortgage loan. However, the terms of the security instrument permit some flexibility in determining how the proceeds should be applied if the borrower has abandoned the property or does not acknowledge a specific offer to award compensation or settle a claim.

The servicer is authorized to agree to Form 236 related to a partial or full taking of the property if

• all required documentation has been received,

• the compensation award is sufficient to fully satisfy the mortgage debt, and

• the compensation award is determined to be an accurate representation of the property’s value based on the servicer’s assessment of the provided property valuation.

If the amount of the compensation award applied to the mortgage loan balance will not be sufficient to fully satisfy the mortgage debt, the servicer is authorized to agree for Form 236 if

• the provided valuation document indicates the current value of the property prior to the seizure, the value of the property to be seized, and the value of the remaining property;

• the provided valuation document was produced within six months of the date of the request;

• the compensation offer is determined to be an accurate representation of the property’s value based on the servicer’s assessment of the provided property valuation; and

• the LTV is less than or equal to the LTV ratio of the loan immediately prior to the eminent domain action.

If the value was not produced within six months of the date of the request, is determined to be inaccurate, or is missing one or more of the required values (current value of the property prior to the seizure, the value of the property to be seized, and the value of the remaining property) but all of the other conditions have been met, the servicer may evaluate the accuracy of the value or establish a value for the property for the purpose of assessing the compensation award by obtaining a value from one of the following sources:

• Fannie Mae’s servicing solutions system;

• Freddie Mac’s AVM;

• a third-party AVM; or

• the servicer’s own internal AVM, provided that

  • the servicer is subject to supervision by a federal regulatory agency, and

  • other servicer’s primary federal regulatory agency has reviewed the model.

If Fannie Mae’s servicing solutions system, Freddie Mac’s AVM, the third-party AVM, or the servicer’s internal AVM does not render a reliable confidence score, or if the value provided by the government agency lies outside of a 10% threshold in comparison to the value provided by an approved valuation model, the servicer must submit the application to Fannie Mae for review.

If the servicer disagrees that the compensation award is an accurate representation of the property’s value, the documentation provided is incomplete, or the provided value is missing one of more of the required values and cannot be confirmed via an alternative value, the servicer should contact Fannie Mae’s SF CPM division (see  F-4-02, List of ContactsF-4-02, List of Contacts) to determine the action Fannie Mae wants it to take.

If the borrower has abandoned the property or fails to respond within 30 days to the servicer’s notification that the government has offered to pay a compensation award or settle a claim for damages in connection with a condemnation or taking by eminent domain, the servicer may disburse the proceeds without contacting the borrower. Generally, the servicer must apply the proceeds to reduce the mortgage loan debt unless there is only a partial taking of the property securing a mortgage loan and foreclosure proceedings have been initiated. In such cases, the servicer must contact Fannie Mae’s SF CPM division (see  F-4-02, List of ContactsF-4-02, List of Contacts) to determine how to apply the proceeds, as Fannie Mae may prefer to use the proceeds to restore or repair the property.

When a borrower requests to lease a portion of the property for the installation of any semi-permanent structure such as a wind turbine, cellular base station or other similar structure, the servicer must ensure that the borrower submits a complete Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

Before approving any agreement related to the placement of a semi-permanent structure on the security property, the servicer must consider the extent to which the subject property and neighboring properties may be affected by the exercise of the rights covered in the lease. The servicer must take the following into consideration:

• The extent to which the rights granted by the agreement infringe on the property owner’s rights.

• Any hazards, nuisances, or damages that may result from the exercise of the rights granted by the lease.

The servicer must determine whether the request to lease real property for the installation of a semi-permanent structure meets the conditions in the following table.

The servicer must evaluate requests to lease real property for the installation of a semi-permanent structure based on the specific circumstance of the request, as described in the following table.

When a borrower requests a subdivision of the property, the servicer must ensure that the borrower submits a complete Application for Release of Security (Form 236). A complete application must include all information and documentation required per the form.

The servicer must determine whether the request to subdivide real property meets the conditions in the following table.

The servicer must evaluate requests to subdivide real property based on the specific circumstance of the request, as described in the following table.