F-1-17, Processing a Transfer of Ownership (11/13/2024)

Continue to report credit information related to a mortgage loan delinquency (including the acceptance of a Mortgage Release or the initiation of foreclosure proceedings) to credit bureaus in the borrower’s name.

Determine that the title to the property is clear and marketable (by obtaining a title bring-down).

File an Acquisition or Abandonment of Secured Property (IRS Form 1099-A) if it accepts a Mortgage Release or acquires title to the property through foreclosure, using the borrower’s name and Social Security number (rather than a third-party company’s name and Tax Identification Number). The servicer should not file a Cancellation of Debt (IRS Form 1099-C) since no debt is being canceled because Fannie Mae will not accept a short payoff from the third-party company and will continue to hold the borrower liable.

An Exempt Transaction

The servicer must process the transfer of ownership as described in the following table.

Note: Fannie Mae does not require an exempt transferee to assume the mortgage loan except in connection with a release of liability or in conjunction with a mortgage loan modification.

Fannie Mae is the owner of record for the mortgage loan

• prepare an assumption or assumption and release agreement, as applicable, and either

  • execute the agreement on Fannie Mae’s behalf if it has an assignment of mortgage, or

  • prepare the assignment of mortgage and send it to Fannie Mae’s SF CPM division (see F-4-02, List of ContactsF-4-02, List of Contacts) for execution.

Note: Once Fannie Mae returns the executed assignment of mortgage to the servicer, the servicer is authorized to execute the assumption or assumption and release agreement, as applicable, must record the agreement if required by applicable law, and must send a copy of the executed agreement (original recorded, if applicable) to its document custodian.

the servicer is the owner of record for the mortgage loan

• execute the assumption or assumption and release agreement, as applicable;

• record the agreement if required by applicable law; and

• send a copy of the executed agreement (original recorded, if applicable) to its document custodian.

The servicer must process the transfer of ownership as described in the following table. The servicer must include a release of liability provision in the transfer instruments if the borrower requested a release of liability and the mortgage insurer agreed to it.

Fannie Mae is the owner of record for the mortgage loan

the servicer must either

• execute the appropriate transfer documents on Fannie Mae’s behalf if it has an assignment of mortgage

  • an assumption or assumption and release agreement, as applicable, if there is no change in the interest rate; or

  • a mortgage loan modification and assumption or assumption and release agreement, as applicable, if the interest rate changes; or

• prepare the assignment of mortgage and send it to Fannie Mae’s SF CPM division (see  F-4-02, List of ContactsF-4-02, List of Contacts) for execution.

Note: Once Fannie Mae returns the executed assignment of mortgage to the servicer, the servicer is authorized to execute the appropriate documents, as applicable, must record the document(s) if required by applicable law, and must send a copy of the executed document(s) (original recorded, as applicable) to its document custodian.

the servicer is the owner of record for the mortgage loan

the servicer

• is authorized to execute the appropriate documents, as applicable;

• must record the document(s) if required by applicable law; and

• must send a copy of the executed document(s) (original recorded, if applicable) to its document custodian.

Regardless of the owner of record for the mortgage loan, if the servicer is required by applicable law to record the executed transfer documents, the servicer should request a title bring-down from the title insurer. The bring-down must

• change the effective date of the mortgage title policy to the date the transfer instruments were recorded, and

• insure the mortgage loan as modified by the recorded agreement.

A Conventional Mortgage Loan With No Due-on-Sale Provision

The servicer must process the transfer of ownership as described in the following table, if the release of liability is approved.

Fannie Mae is the owner of record for the mortgage loan

• prepare an assumption or assumption and release agreement, as applicable, and either

  • execute the agreement on Fannie Mae’s behalf if it has an assignment of mortgage, or

  • prepare the assignment of mortgage and send it to Fannie Mae’s SF CPM division (see F-4-02, List of ContactsF-4-02, List of Contacts) for execution.

Note: Once Fannie Mae returns the executed assignment of mortgage to the servicer, the servicer is authorized to execute the assumption or assumption and release agreement, as applicable, must record the agreement if required by applicable law, and must send a copy of the executed agreement (original recorded, as applicable) to its document custodian.

the servicer is the owner of record for the mortgage loan

• execute the assumption or assumption and release agreement, as applicable;

• record the agreement if required by applicable law; and

• send a copy of the executed agreement (original recorded, if applicable) to its document custodian.

A Non-Exempt Transaction With an Exception due to the Loan Type and Creditworthy Purchaser

The servicer must process the transfer of ownership as described in the following table. The servicer must include a release of liability provision in the agreement if the borrower requested a release of liability and the mortgage insurer agreed to it.

Fannie Mae is the owner of record for the mortgage loan

• prepare an assumption or assumption and release agreement, as applicable, and either

  • execute the agreement on Fannie Mae’s behalf if it has an assignment of mortgage, or

  • prepare the assignment of mortgage and send it to Fannie Mae’s SF CPM division (see F-4-02, List of ContactsF-4-02, List of Contacts) for execution.

Note: Once Fannie Mae returns the executed assignment of mortgage to the servicer, the servicer is authorized to execute the agreement, must record the agreement if required by applicable law, and must send a copy of the executed agreement (original recorded, as applicable) to its document custodian.

the servicer is the owner of record for the mortgage loan

• execute the assumption or assumption and release agreement, as applicable;

• record the agreement if required by applicable law;

• send a copy of the executed agreement (original recorded, if applicable) to its document custodian; and

• instruct its Fannie Mae investor reporting system representative to change Fannie Mae’s accounting records to reflect the addition of this lifetime interest rate change limitation.

Note: When the transfer of ownership involves an ARM that does not include a lifetime interest rate change limitation in its terms, the servicer must include the following language in the assumption or assumption and release agreement, as applicable:

“The interest rate I am required to pay after I assume this mortgage obligation and for the entire term of this mortgage loan will never be greater than __ percent.”

In addition, if the mortgage loan is convertible to a fixed-rate mortgage loan, the servicer also must include the following sentence:

“This limitation also applies if I exercise my option to convert to a fixed-rate mortgage loan.”

To determine the appropriate interest rate to insert in this provision, the servicer should add 6% to the sum of the mortgage margin and the index that is in effect on the date that the assumption statement is prepared. If the transaction has not closed within 30 days, the servicer should establish a new rate based on the latest available index.

An Assumption of a Delinquent Mortgage Loan

The servicer must process the transfer of ownership as described in the following table.

Fannie Mae is the mortgagee of record and the servicer does not have an assignment of mortgage

• prepare the assignment of mortgage, and

• send the assignment of mortgage to Fannie Mae’s SF CPM division (see F-4-02, List of ContactsF-4-02, List of Contacts) for execution.

Note: Once Fannie Mae returns the executed assignment of mortgage to the servicer, the servicer is authorized to execute the assumption or assumption and release agreement, as applicable, must record the agreement if required by applicable law, and must send a copy of the executed agreement (original recorded, if applicable) to its document custodian.

the servicer (or MERS) is the mortgagee of record, or if Fannie Mae is the mortgagee of record and the servicer has an assignment of mortgage

• execute the assumption or assumption and release agreement, as applicable;

• record the agreement if required by applicable law; and

• send a copy of the executed agreement (original recorded, if applicable) to its document custodian.

Regardless of the owner of record for the mortgage loan, if the servicer is required by applicable law to record the executed transfer documents, the servicer should request a title bring-down from the title insurer. The bring-down must

• change the effective date of the mortgage title policy to the date the transfer instruments were recorded, and

• insure the mortgage loan as modified by the recorded agreement.

An FHA or VA Mortgage Loan

The servicer must process the transfer of ownership as described in the following table.

Fannie Mae is the owner of record for the mortgage loan

• prepare an assumption or assumption and release agreement, as applicable, and either

  • execute the agreement on Fannie Mae’s behalf if it has an assignment of mortgage; or

  • prepare the assignment of mortgage and send it, along with proof that FHA or VA, as applicable, approved the release of liability, if applicable, to Fannie Mae’s SF CPM division (see F-4-02, List of ContactsF-4-02, List of Contacts) for execution.

Note: Once Fannie Mae returns the executed assignment of mortgage to the servicer, the servicer is authorized to execute the assumption or assumption and release agreement, as applicable, must record the agreement if required by applicable law or applicable FHA/VA program requirements, and must send a copy of the executed agreement (original recorded, if applicable) to its document custodian.

the servicer is the owner of record for the mortgage loan

• execute the assumption or assumption and release agreement, as applicable; 

• record the agreement if required by applicable law or applicable FHA/VA program requirements; and

• send a copy of the executed agreement (original recorded, if applicable) to its document custodian.