F-1-03, Establishing and Implementing Custodial Accounts (07/12/2023)

As described in P&I Custodial Accounts in  A4-1-02, Establishing Custodial Bank AccountsA4-1-02, Establishing Custodial Bank Accounts, the funds in the P&I custodial account must relate to monthly P&I payments due Fannie Mae. The servicer of participation mortgage loans must deposit only Fannie Mae’s percentage shares of the funds into the P&I custodial account. However, the servicer is authorized to transfer the entire P&I payment from its clearing account into the custodial account, as long as it removes its share of the funds no later than the next business day after they are deposited into the custodial account. The servicer must deduct the servicing fees and late charges before the servicer transfers P&I payments from its clearing account to the custodial account.

The following table describes the requirements for the collection and disposition of P&I funds.

As described in P&I Custodial Accounts in  A4-1-02, Establishing Custodial Bank AccountsA4-1-02, Establishing Custodial Bank Accounts, the required draft date will differ based on the type of draft.

The following table describes the schedule for various types of drafts.

The servicer is authorized to withdraw funds from the P&I custodial account only for the following purposes:

• remit the funds due Fannie Mae on the remittance date;

• reimburse itself for delinquency advances for scheduled/actual and scheduled/scheduled remittance types that are recovered from subsequent collections (to the extent that such collections are payments on the related mortgage loan or are not required to be included in the funds due to Fannie Mae on the next remittance date);

• remove amounts that have been deposited in error;

• remove fees, charges, funds due related to servicing transfers, and other amounts that are deposited into the account on a temporary basis;

• remove interest earned on an interest-bearing custodial account; and

• clear and terminate the account.

As described in T&I Custodial Accounts in A4-1-02, Establishing Custodial Bank AccountsA4-1-02, Establishing Custodial Bank Accounts, funds in the T&I custodial account may not be commingled with P&I funds, the servicer’s general corporate funds, or with funds held by the servicer for other investors.

The following table describes requirements the servicer must adhere to when establishing custodial accounts for T&I funds.

As described in T&I Custodial Accounts in A4-1-02, Establishing Custodial Bank AccountsA4-1-02, Establishing Custodial Bank Accounts, a T&I custodial account must be used to

• make escrow-related disbursements, and

• hold unapplied funds pending final disposition.

The servicer is authorized to withdraw T&I funds from the T&I custodial account for these purposes:

• pay taxes, insurance premiums, etc., when they are due;

• apply interest rate buydown funds when due;

• refund escrow account surpluses to the borrower or pay interest to the borrower;

• remove any amounts deposited in error;

• remove funds due to the borrower, such as partial payments or loss draft funds;

• reimburse itself for T&I servicing advances from subsequent payments on the related mortgage loan once the mortgage loan becomes current; and

• clear and terminate the account.

See Establishing Written Policies or Procedures in A4-1-01, Staffing, Training, Procedures, and Quality Control RequirementsA4-1-01, Staffing, Training, Procedures, and Quality Control Requirements for requirements for identifying and monitoring unapplied funds, including unapplied property or flood insurance loss proceeds, held in the T&I custodial account.

As described in A4-1-02, Establishing Custodial Bank AccountsA4-1-02, Establishing Custodial Bank Accounts, the servicer is responsible for the safekeeping of custodial funds at all times. For each custodial account the servicer establishes, the servicer and the depository institution must execute

• a Letter of Authorization for P&I Custodial Account (Form 1013), or

• a Letter of Authorization for T&I Custodial Account (Form 1014).

When a servicer establishes (or changes) a custodial account for a mortgage loan, it must send the original of each executed Form 1013 or Form 1014 electronically to [email protected].

The servicer is authorized to maintain multiple P&I custodial accounts for a single remittance type. The number of custodial accounts established depends on the number of remittance types under which a servicer is reporting and on whether the servicer chooses to commingle its T&I funds for all remittance types. A servicer could establish as many as eight different custodial accounts (although it could reduce the number of accounts to five by commingling the T&I funds for all remittance types), depending on whether it

• has mortgage loans accounted for under all three remittance types (including both portfolio mortgage loans and MBS mortgage loans accounted for as the scheduled/scheduled remittance type), and

• chooses to separate its T&I custodial accounts by each of the remittance types.

On the other hand, a servicer that accounts for portfolio mortgage loans under only one remittance type or that services MBS mortgage loans only would need to establish two custodial accounts.

Custodial accounts established for the deposit of P&I funds must be titled as follows:

”(Name of servicer), as agent, trustee, and/or bailee for the benefit of Fannie Mae and/or payments of various mortgagors and/or various owners of interests in mortgage-backed securities (Custodial Account).”

Custodial accounts established for the deposit of T&I funds must be titled as follows:

”(Name of servicer), as agent and/or trustee for the benefit of Fannie Mae and payments of various mortgagors, respectively (Custodial Account).”

A servicer that uses subservicer(s) must have each subservicer execute a separate Letter of Authorization for each custodial account it establishes. The following table describes the steps the servicer and subservicer must take in order to properly implement custodial accounts.

The servicer must arrange for drafting of custodial funds in a manner consistent with the requirements of the Servicing Guide and Lender Contract. The servicer must designate bank instructions for a custodial account through the CRS from which Fannie Mae will draft funds.

Under the CRS, a servicer is authorized to designate as a drafting account one P&I account for each remittance type it services.

If the servicer maintains multiple P&I accounts for a single remittance type, the servicer must designate only one of these accounts as its drafting account for that remittance type. All monies due Fannie Mae for that remittance type must be moved to the designated drafting account prior to the date Fannie Mae drafts the account.

A servicer with multiple P&I custodial accounts is authorized to use a consolidated drafting account in order to facilitate operational efficiencies. If the servicer uses a consolidated drafting account that includes scheduled/scheduled MBS mortgage loans, the servicer must designate a separate account as its drafting account for that remittance type only and all monies due must be moved from various MBS P&I custodial accounts (if the servicer has chosen to use multiple custodial accounts) to a single designated MBS pool consolidated drafting account prior to the date Fannie Mae drafts the account.

A servicer is authorized to designate a separate consolidated drafting account for scheduled/scheduled portfolio, scheduled/actual, or actual/actual mortgage loans. The servicer is authorized to designate

• any of the portfolio mortgage loan P&I custodial accounts as the consolidated drafting account, or

• a special consolidated account that is used solely for drafting purposes.

The following table describes requirements for implementing bank instructions.

The following table describes the requirements for reconciling custodial bank accounts.