E-3.3-05, Issuing Bidding Instructions (05/10/2023)

The servicer must issue bidding instructions to the law firm for all mortgage loans referred for foreclosure. The servicer must pay particular attention to any bidding requirements issued by FHA, VA, RD, or the mortgage insurer to make sure that Fannie Mae will not be prevented from recovering the full amount due under the insurance or guaranty contract.

The following table provides additional requirements for obtaining a property valuation for the purpose of bidding instructions when required by applicable law, Fannie Mae, or the MI company.

The servicer must not issue bidding instructions to the law firm if its preforeclosure property inspection reveals, or if the servicer otherwise discovers, that the property has incurred significant hazard damage without a claim having been filed with the insurance carrier. Instead, the servicer must contact its Fannie Mae Servicing Representative (see F-4-02, List of ContactsF-4-02, List of Contacts) to determine whether or not a property insurance claim should be filed, and if so, what foreclosure bid should be entered.

The servicer must contact its Fannie Mae Servicing Representative (see F-4-02, List of ContactsF-4-02, List of Contacts) to obtain bidding instructions for all conventional second lien mortgage loans.

For all first lien mortgage loans and co-op share loans that are in a first lien position, the servicer must issue bidding instructions based on the following guidelines, which are designed to ensure that a third party's bidding at the foreclosure sale will not result in Fannie Mae's eventually acquiring the property for more than the total mortgage indebtedness or for less than Fannie Mae's reserve price as described in When to Obtain a Reserve Price.

For Fannie Mae's bidding instructions, the servicer must consider whether or not

• the mortgage loan has MI;

• the property is located in a state (or jurisdiction) that has a redemption period in which the borrower (or a junior lienholder) can redeem the property for the amount of the foreclosure bid;

• the property is located in a state (or jurisdiction) that does not have a redemption period, but that levies transfer taxes and/or other related fees and costs on the winning bidder at the foreclosure sale;

• the property is located in a state (or jurisdiction) that recognizes Fannie Mae's exemption from the payment of real estate transfer taxes; 

• the property has a property or flood insurance claim that has been filed; and

• the property is subject to a recorded resale restriction agreement or a shared equity transaction agreement, in which case the servicer must comply with the terms of any such agreement.

When to Obtain a Reserve Price

The servicer must obtain a reserve price from Fannie Mae in any of the following circumstances:

• when preparing bids for uninsured conventional first lien mortgage loans,

• when applicable laws do not require that an appraisal report be used to set the bid, or

• if the mortgage insurer of a first lien mortgage loan elects not to issue bidding instructions and defers to Fannie Mae.

The following table provides a list of servicer requirements for obtaining and using a reserve price.

Note: The servicer must bid the total indebtedness amount minus any outstanding property or flood insurance claim(s) if the calculated reserve price is not available in sufficient time prior to the foreclosure sale date to enable the law firm to enter a specified bid at the foreclosure sale.

The following tables provide Fannie Mae's requirements for the preparation of bidding instructions for a first lien mortgage loan, depending on whether or not the mortgage loan is insured.

For an Uninsured Conventional First Lien Mortgage Loan:

For an Insured Conventional First Lien Mortgage Loan:

For a first lien mortgage loan covered by MI, the servicer must bid an amount approved by the mortgage insurer. If the mortgage insurer elects not to issue bidding instructions per its guidelines, or defers to Fannie Mae for foreclosure sale bidding instructions, the servicer must follow the policies and requirements for an uninsured conventional first lien mortgage loan.

If the mortgage insurer’s bidding instructions or requirements include preserving deficiency rights, and where permitted by applicable law, the servicer must preserve the mortgage insurer’s right to pursue a deficiency action in accordance with the mortgage insurer’s instructions.

Additional Requirements for a Mortgage Loan Subject to a Resale Restriction or Shared Equity Transaction:

The following table provides Fannie Mae's requirements for the preparation of bidding instructions for a first lien mortgage loan subject to a resale restriction or a shared equity transaction agreement.

The amount the servicer must bid for a FHA-insured mortgage loan depends on when the mortgage loan was endorsed for insurance. The following table provides additional bidding information based on the policy endorsement date.

For VA mortgage loans, the bid must be the amount that VA specified as its “upset price.” If VA does not specify an upset price, then the servicer must determine the bid amount by subtracting the amount the VA will pay under its guaranty from the amount required to satisfy the indebtedness.

For RD mortgage loans, the servicer must bid the full amount of the indebtedness. This amount consists of

• the UPB;

• accrued interest to the date of the sale;

• any advances for T&I; and

• other foreclosure costs, including attorney fees and any reimbursable property inspection fees.