E-3.2-09, Conducting Foreclosure Proceedings (10/13/2021)

The servicer must conduct the foreclosure in Fannie Mae’s name when Fannie Mae is the mortgagee of record for all mortgage loans except those for which:

• the servicer has the entire foreclosure loss risk, or 
• Fannie Mae and the service share the foreclosure loss risk, with the servicer having the responsibility for marketing the acquired property.

For these excepted mortgage loans, the servicer must request that Fannie Mae reassign the mortgage loan to it so the foreclosure can be completed in the servicer's name.

Note: For requirements on removing a regular servicing option delinquent MBS mortgage loan from an MBS pool prior to foreclosure refer to A1-3-02, Fannie Mae-Initiated Repurchases, Indemnifications, Make Whole Payment Requests and Deferred Payment ObligationsA1-3-02, Fannie Mae-Initiated Repurchases, Indemnifications, Make Whole Payment Requests and Deferred Payment Obligations. See also A1-3-01, Requirements for Voluntary RepurchaseA1-3-01, Requirements for Voluntary Repurchase.

The servicer must execute any required substitutions of trustees when Fannie Mae has granted the servicer its LPOA to do so on Fannie Mae's behalf. However, if state law or customary practice prohibits an attorney-in-fact from executing substitutions of trustees, the servicer must submit the substitution of trustee documents to Fannie Mae for execution before the foreclosure proceedings begin.

When the servicer is the mortgagee of record for a mortgage loan, the jurisdiction in which the security property is located will affect how the foreclosure proceedings are conducted or initiated.

In most states, the law firm must initiate the proceedings in the servicer's name when the servicer is the mortgagee of record or in the participating lender's name when the servicer is not the mortgagee of record for a participation pool mortgage loan. For mortgage loans for which Fannie Mae has the entire foreclosure loss risk, and those for which Fannie Mae and the servicer share the foreclosure loss risk, with Fannie Mae having the responsibility of marketing the acquired property, the law firm must subsequently have title vested in Fannie Mae's name in a manner that will not result in the imposition of  a transfer tax. For mortgage loans for which the servicer has the entire foreclosure loss risk, and those for which Fannie Mae and the servicer share the foreclosure loss risk, with the servicer having the responsibility of marketing the acquired property, the law firm must have title vested in the servicer’s name in accordance with the servicer’s requirements.

The servicer and the law firm must determine the most appropriate method to use in each jurisdiction.

In any state or jurisdiction in which the foreclosure proceedings must be conducted in Fannie Mae’s name to prevent the imposition of a transfer tax (such as Rhode Island; New Hampshire; Maine; or Orleans Parish, Louisiana), an assignment of the mortgage or deed of trust to Fannie Mae must be prepared and recorded in a timely manner to avoid any delays in the initiation of the foreclosure proceedings. If the servicer believes that a foreclosure proceeding must be conducted in Fannie Mae’s name in any other jurisdiction to prevent the imposition of a transfer tax, the servicer must contact Fannie Mae’s Legal department (see  F-4-02, List of ContactsF-4-02, List of Contacts) for permission to do so.

When a document custodian has custody of an original unrecorded assignment of the mortgage to Fannie Mae, the servicer may either

• request return of that document so it can be recorded, or

• prepare a new assignment if doing so will expedite the process.

Once the assignment to Fannie Mae has been recorded, the foreclosure proceedings must be conducted in Fannie Mae’s name.

The servicer must not name MERS as a plaintiff or foreclosing party in any foreclosure action on a Fannie Mae mortgage loan. When MERS is the mortgagee of record, the servicer must prepare an assignment from MERS to the servicer and bring the foreclosure in its own name unless Fannie Mae specifically allows the foreclosure to be brought in the name of Fannie Mae. In that event, the assignment must be from MERS to Fannie Mae, in care of the servicer at the servicer's address for receipt of notices. The assignment must be prepared and provided to the law firm in the referral package.

Fannie Mae will not reimburse the servicer for any expense incurred in preparing or recording an assignment of the mortgage loan from MERS to the servicer or to Fannie Mae. If the borrower reinstates the mortgage loan prior to completion of the foreclosure proceedings, re-assigning and re-registering the mortgage loan with MERS will be at the discretion and expense of the servicer.

The servicer must consult with the law firm to determine if any other legal requirements apply when conducting foreclosures of mortgage loans in which MERS is the prior mortgagee of record. See Additional Required Foreclosure Referral Documents in  E-1.1-02, Required Referral DocumentsE-1.1-02, Required Referral Documents for additional information regarding MERS and proper assignments.