D2-3.1-04, Offering a Workout Option When Also Servicing a Subordinate Lien Mortgage Loan (09/09/2020)

If the servicer of a first lien mortgage loan owned or securitized by Fannie Mae also services a subordinate lien mortgage loan for the same property, either for themselves or another investor, and the servicer determines that the borrower is eligible for a workout option relating to the first lien mortgage loan, the offer to accept the workout option must not be contingent upon the borrower making payments on or bringing current the subordinate lien mortgage loan.

Fannie Mae recognizes that it may be necessary for the servicer to make a payment to a subordinate lienholder in certain instances. The servicer must obtain Fannie Mae’s prior written approval to make payment to a subordinate lienholder when the servicer determines that a payment deferral or a mortgage loan modification is the appropriate workout option for a borrower. See Allowable Payments to Subordinate Lienholders in  D2-3.3-01, Fannie Mae Short SaleD2-3.3-01, Fannie Mae Short Sale and in D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure)D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure) for additional information on payments to subordinate lienholders for short sales and Mortgage Releases.