Acceptable Mitigating Circumstances for Fannie Mae to Review Loan Mod Wheb Criteria Is Not Met

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D2-3.2-07: Fannie Mae Flex Modification (09/09/2020)

Introduction

This topic contains the following:

• Documentation Requirements
• Determining Eligibility for a Fannie Mae Flex Modification
• Determining Eligibility for a Fannie Mae Flex Modification for a Texas Section 50(a)(6) Loan
• Performing an Escrow Analysis
• Determining the Fannie Mae Flex Modification Terms
• Offering a Trial Period Plan and Completing a Fannie Mae Flex Modification
• Soliciting the Borrower for a Fannie Mae Flex Modification
• Evaluating or Soliciting a Borrower with a Disaster-Related Hardship for a Fannie Mae Flex Modification
• Evaluating a Borrower Who Defaulted After Completing a Disaster Payment Deferral for a Fannie Mae Flex Modification
• Handling a Consummate Borrower Response Package
• Processing a Fannie Mae Flex Modification for a Mortgage Loan with Mortgage Insurance
• Treatment Fees and Late Charges in Connectedness with a Fannie Mae Flex Modification

Documentation Requirements

If the mortgage loan is current or less than 90 days delinquent, the borrower must submit a complete BRP except as described below.

If the borrower submitted a consummate BRP prior to the 90th day of delinquency, the servicer must

• use the data from the Mortgage Assistance Application (Grade 710), or equivalent, to determine the borrower'south hardship, total income and avails, and

• evaluate the borrower for all conditioning options in accordance with  D2-three.1-01, Determining the Appropriate Workout Option.

A complete BRP is non required and the servicer may solicit an eligible borrower as described in Soliciting the Borrower for a Fannie Mae Flex Modification if the mortgage loan

• is 90 or more days delinquent; or

• was previously modified into a mortgage loan with a pace-charge per unit feature, an interest rate adjustment occurred within the last 12 months, and the mortgage loan became lx days runaway later the interest charge per unit adjustment.

Annotation: For purposes of determining the submission engagement in connexion with the borrower's submission of a complete BRP, the servicer must use the date of the postmark or other contained indicator such as appointment and time postage (electronic or otherwise).

Determining Eligibility for a Fannie Mae Flex Modification

In order to be eligible for a Fannie Mae Flex Modification, all of the criteria in the post-obit table must be met.

✓	Eligibility Criteria for a Fannie Mae Flex Modification
	The mortgage loan must be a conventional commencement lien mortgage loan. Note: The holding securing the mortgage loan may be vacant or condemned.
	The mortgage loan must exist at least lx days delinquent or the servicer has determined that the borrower'southward monthly payment is in imminent default in accordance with Evaluating a Borrower for Imminent Default for Conventional Mortgage Loan Modification Eligibility in D2-ane-01, Determining if the Borrower's Mortgage Payment is in Imminent Default.
	The mortgage loan must accept been originated at least 12 months prior to the evaluation engagement for the mortgage loan modification.
	The mortgage loan must non be discipline to a recourse or indemnification arrangement under which Fannie Mae purchased or securitized the mortgage loan or that was imposed by Fannie Mae subsequently the mortgage loan was purchased or securitized; an approved liquidation workout choice; an active and performing forbearance program or repayment plan, unless otherwise directed by Fannie Mae; a electric current offering for some other mortgage loan modification or other workout option; or an active and performing modification Trial Menstruation Plan.
	The mortgage loan must not take been modified iii or more times previously, regardless of the mortgage loan modification program or dates of prior mortgage loan modifications. Note: A payment deferral does not count as a mortgage loan modification when determining the number of times the mortgage loan has previously been modified for purposes of determining eligibility for a Fannie Mae Flex Modification.
	The borrower must not have failed a Fannie Mae Flex Modification Trial Catamenia Program inside 12 months of being evaluated for eligibility for some other Fannie Mae Flex Modification. Note: Converting from a Trial Period Plan to a abstinence plan is not considered a failed Trial Catamenia Plan.
	The mortgage loan must not have received a Fannie Mae Flex Modification and become lx days or more delinquent within the first 12 months of the constructive date of the mortgage loan modification without beingness reinstated.

If the borrower has experienced a disaster-related hardship, the servicer must follow the requirements described in Soliciting a Borrower with a Disaster-Related Hardship for a Fannie Mae Flex Modification and Evaluating a Borrower Who Defaulted Afterwards Completing a Disaster Payment Deferral for a Fannie Mae Flex Modification.

If the eligibility criteria for a Fannie Mae Flex Modification is not satisfied, but the servicer determines there are acceptable mitigating circumstances, the servicer is authorized to offer a mortgage loan modification outside of these requirements by submitting a request through Fannie Mae's servicing solutions arrangement for review and obtaining prior approval from Fannie Mae. Generally, the servicer's decision of acceptable mitigating circumstances is based on a review of the borrower's complete BRP.

If the borrower converts from a Trial Period Plan to a forbearance program, the borrower may subsequently be eligible for a Fannie Mae Flex Modification upon successful completion of the abstinence plan and, if eligible, must exist placed in a new Fannie Mae Flex Modification Trial Period Plan based on the delinquency status at the fourth dimension of the evaluation for the Fannie Mae Flex Modification.

Determining Eligibility for a Fannie Mae Flex Modification for a Texas Section 50(a)(6) Loan

A Texas Section 50(a)(6) loan is eligible for a Fannie Mae Flex Modification if

• the requirements described in Determining Eligibility for a Fannie Mae Flex Modification are satisfied, and

• the mortgage loan is modified in accord with applicable law.

If the servicer receives a notice from the borrower that a mortgage loan modification fails to comply with Texas Constitution Section 50(a)(6) requirements, the servicer must immediately, but no subsequently than seven business days after receipt, accept the actions listed in the post-obit tabular array.

✓	The servicer must...
	Inform Fannie Mae's Legal department past submitting a Non-Routine Litigation Form (Grade twenty) and include the borrower discover in its submission.
	Collaborate with Fannie Mae on the appropriate response, including any cure that may be necessary, within the 60-day fourth dimension frame provided by the requirements of Texas Constitution Section 50(a)(6).

Performing an Escrow Analysis

The servicer must perform an escrow analysis prior to offering a Trial Catamenia Programme. Run across Administering an Escrow Account in Connection With a Mortgage Loan Modification in B-ane-01, Administering an Escrow Account and Paying Expenses for additional information.

Whatsoever escrow account shortage that is identified at the time of the mortgage loan modification must not be capitalized and the servicer is not required to fund any existing escrow business relationship shortage.

If applicable police prohibits the establishment of the escrow account, the servicer must ensure that the T&I payments are paid to date.

Determining the Fannie Mae Flex Modification Terms

The servicer must follow the procedures in Obtaining a Property Valuation in  F-1-27, Processing a Fannie Mae Flex Modification for determining the belongings value. The servicer must determine the mail service-modification MTMLTV ratio, which must include capitalized arrearages. The following tabular array describes the servicer's activity depending on the post-modification MTMLTV ratio and the delinquency of the mortgage loan.

Step	Activity
1	Capitalize arrearages.
ii	Ready the interest rate to a fixed involvement rate that is based on the existing mortgage loan acquittal type and interest rate.
3	Extend the term to 480 months from the mortgage loan modification effective date.
iv through 6	Provide or increment primary abstinence, if applicative as indicated in F-1-27, Processing a Fannie Mae Flex Modification.

The servicer must follow the procedures in Determining the New Modified Mortgage Loan Terms in  F-1-27, Processing a Fannie Mae Flex Modification for determining the borrower's new modified mortgage loan terms. The servicer must request Fannie Mae's prior written approval through Fannie Mae's servicing solutions system to deviate from the prescribed steps for determining the new modified mortgage payment terms, unless a certain pace is prohibited by applicative state law.

The following tabular array lists additional Fannie Mae Flex Modification requirements.

✓	The Fannie Mae Flex Modification must outcome in...
	A fixed rate mortgage loan. Notation: An ARM or involvement-but mortgage loan must be converted to a fully amortizing mortgage loan and may not be a bi-weekly or daily simple interest mortgage loan.
	A monthly P&I payment as described in the following table.
	If, at the time of evaluation, the mortgage loan is...	So the monthly P&I payment must be...
	current or less than 31 days delinquent	less than the borrower's pre-modification P&I payment.
	31 or more days delinquent	less than or equal to the pre-modification P&I payment.

When the servicer submits a asking through Fannie Mae's servicing solutions system for Fannie Mae's approval of a Fannie Mae Flex Modification based on the borrower'south submission of a BRP, in accord with applicable police it must:

• immediately provide the borrower with notice of the right to receive a copy of all appraisals and other valuations developed in connection with the mortgage loan modification, and

• provide the borrower a copy of all appraisals and other valuations developed in connexion with the mortgage loan modification.

Prior to granting a permanent mortgage loan modification, the servicer must identify the borrower in a Trial Period Plan using the new modified mortgage loan terms.

Offering a Trial Flow Plan and Completing a Fannie Mae Flex Modification

For an MBS mortgage loan, the servicer must as well run across Conditions of a Showtime and Second Lien Mortgage Loan Modification for an MBS Mortgage Loan in D2-three.i-02, Atmospheric condition of a First and Second Lien Mortgage Loan Modification for an MBS Mortgage Loan.

The servicer must communicate with the borrower that the mortgage loan modification will not exist binding, enforceable, or effective unless all atmospheric condition of the mortgage loan modification take been satisfied, which is when all of the following have occurred:

• the borrower has satisfied all of the requirements of the Trial Menstruum Plan,

• the borrower has executed and returned a re-create of the Loan Modification Agreement (Form 3179), and

• the servicer or Fannie Mae (depending upon the entity that is the mortgagee of record) executes and dates Class 3179.

The servicer must use the applicable Evaluation Notice to document the borrower'due south Trial Period Plan. Encounter Sending a Find of Conclusion on a Workout Option in  D2-2-05, Receiving a Borrower Response Package for requirements relating to the Evaluation Notice, and the boosted requirements provided in the table below.

If the servicer sends the Evaluation Notice…	Then the servicer must apply...
on or before the 15th day of a calendar month	the offset day of the post-obit month equally the beginning Trial Period Plan payment due date.
after the 15th day of a month	the first 24-hour interval of the month after the next calendar month as the first Trial Period Programme payment due date.

The following table provides the requirements for the length of the Trial Period Programme, which must non modify fifty-fifty if the borrower makes scheduled payments earlier than required.

If the mortgage loan at the time of evaluation is...	And so the Trial Period Plan must be…
electric current or less than 31 days delinquent	iv months long.
31 or more than days delinquent	three months long.

If the borrower fails to make a Trial Flow Plan payment by the concluding day of the calendar month in which it is due, the borrower is considered to have failed the Trial Period Program and the servicer must not grant the borrower a permanent Fannie Mae Flex Modification.

The servicer must meet  E-three.iv-01, Suspending Foreclosure Proceedings for Conditioning Negotiations for the requirements for suspending foreclosure.

The servicer must use the Form Modification Cover Letter to communicate a borrower'south eligibility for a permanent Fannie Mae Flex Modification, which must be accompanied past a completed Form 3179.

The servicer must ensure that the modified mortgage loan retains its outset lien position and is fully enforceable in accord with its terms.

Electronic documents, signatures, and notarizations for Fannie Mae Flex Modifications are acceptable as long every bit the electronic record complies with Fannie Mae'southward requirements. Run across Selling Guide A2-4.1-03, Electronic Records, Signatures, and Transactions for Fannie Mae'due south requirements for electronic records.

The servicer must follow the procedures in Executing and Recording the Loan Modification Agreement and Adjusting the Mortgage Loan Account Mail service-Mortgage Loan Modification in F-one-27, Processing a Fannie Mae Flex Modification for preparing, executing, recording Form 3179 and for adjusting the mortgage loan account upon completion of the mortgage loan modification. The servicer must likewise follow the procedures in Loan Modifications for an eMortgage in  F-i-26, Servicing eMortgages for additional requirements when the modified mortgage loan is an eMortgage.

Soliciting the Borrower for a Fannie Mae Flex Modification

Except every bit specified in the note below, if the mortgage loan is 90 or more days delinquent and the servicer determines that the borrower is eligible for a Fannie Mae Flex Modification and at to the lowest degree i of the post-obit circumstances are met, the servicer must send the borrower the applicable Flex Modification Solicitation Cover Alphabetic character with the Flex Modification Trial Period Programme Solicitation Offer - Not Based on an Evaluation of a BRP Evaluation Notice between the 90th and 105th 24-hour interval of delinquency:

• the borrower did not submit a consummate BRP earlier the 90th twenty-four hours of delinquency;

• prior to soliciting the borrower, the servicer previously conducted an evaluation of the complete BRP and determined that the borrower was not eligible for a workout option in accord with this Guide; or

• the borrower has rejected all other alternatives to foreclosure offered by the servicer.

Note: If the mortgage loan was previously modified into a mortgage loan with a stride-rate feature, an involvement rate adjustment occurred within the final 12 months and the mortgage loan became 60 days delinquent after the involvement charge per unit adjustment, and the servicer determines that the borrower is eligible for a Fannie Mae Flex Modification without having to evaluate a complete BRP, the servicer must ship the solicitation to the borrower between the 60th and 75th day of delinquency.

If for whatsoever reason the servicer fails to send the solicitation within the prescribed time frame, it must send the solicitation as soon equally possible thereafter.

While the borrower remains eligible for a Fannie Mae Flex Modification if a payment is received post-obit the borrower evaluation or solicitation that results in the mortgage loan subsequently becoming less than ninety days runaway (or less than sixty days delinquent if the mortgage loan was previously modified into a mortgage loan with a stride-rate feature and an interest rate adjustment occurred within the last 12 months), the servicer must ensure that the mortgage loan is at least 30 days or more delinquent prior to the get-go of the Fannie Mae Flex Modification Trial Period Plan.

The servicer is authorized to proceed proactive solicitation for a Fannie Mae Flex Modification at its discretion, but must not solicit a borrower if the property has a scheduled foreclosure sale appointment within

• 60 days of the evaluation date if the belongings is in a judicial land, or

• 30 days of the evaluation appointment if the property is in a non-judicial state.

Evaluating a Borrower Who Defaulted After Completing a Disaster Payment Deferral for a Fannie Mae Flex Modification

If a borrower who completes a disaster payment deferral (see  D2-3.2-06, Disaster Payment Deferral for additional information) becomes 60 days delinquent within six months of the disaster payment deferral'due south effective date and the servicer is unable to accomplish QRPC, and so the servicer must evaluate the borrower for a Fannie Mae Flex Modification in accordance with the reduced eligibility criteria in the table below and if eligible, offer the Flex Modification to the borrower no after than the 75th day of delinquency. The servicer is non required to

• receive a consummate BRP from the borrower, or

• accept previously solicited the borrower for a conditioning option.

Notation: The servicer is authorized to continue proactive solicitation for Fannie Mae Flex Modification based on the reduced eligibility criteria in the table below at its discretion. The servicer must not solicit a borrower for a Fannie Mae Flex Modification based on reduced eligibility criteria if the property has a scheduled foreclosure sale engagement within 60 days of the evaluation date if the property is in a judicial state, or within xxx days of the evaluation date if the property is in a non-judicial country.

✓	Reduced Eligibility Criteria When Soliciting a Borrower Who Defaulted afterwards Completing a Disaster Payment Deferral
	The mortgage loan must be a first-lien conventional mortgage loan.
	The mortgage loan must not be discipline to a recourse or indemnification arrangement under which Fannie Mae purchased or securitized the mortgage loan or that was imposed by Fannie Mae after the mortgage loan was purchased or securitized; a current offer for another mortgage loan modification or other workout choice; an canonical liquidation workout option; or an agile and performing repayment plan, abstinence program, or Trial Period Plan.

The servicer must send the borrower the applicable Flex Modification Solicitation Cover Letter of the alphabet with the Flex Modification Trial Period Plan Solicitation Offer - Not Based on an Evaluation of a BRP Evaluation Discover , or the equivalent, and make advisable changes to these documents, including the applicable Oft Asked Questions and as needed to comply with applicative police force.

Treatment a Complete Borrower Response Parcel

The servicer must acknowledge receipt of the BRP in accordance with Acknowledging Receipt of a Borrower Response Package in  D2-2-05, Receiving a Borrower Response Package and provide whatsoever complete or incomplete information notice.

If the borrower submits a complete BRP when the mortgage loan is 90 or more days runaway, the servicer must evaluate the borrower for all conditioning options in accordance with D2-3.1-01, Determining the Appropriate Workout Choice.

If the borrower does non have the Fannie Mae Flex Modification solicitation offer as described higher up, the servicer must resume follow-upwards solicitation for an incomplete BRP in accord with this Guide and applicable law.

The following table provides the servicer'southward requirements if the borrower submitted a complete BRP prior to the 90th day of malversation but the servicer is in the procedure of soliciting the borrower for a Fannie Mae Flex Modification in accordance with Soliciting the Borrower for a Fannie Mae Flex Modification. See Documentation Requirements to determine the submission date of a complete BRP.

If the borrower submitted a complete BRP prior to the 90th day of malversation, and the servicer receives the consummate BRP…	Then the servicer must…
prior to soliciting the borrower for a Fannie Mae Flex Modification	review the BRP in accordance with D2-2-05, Receiving a Borrower Response Parcel, and evaluate the borrower for all conditioning options in accordance with Chapter D2-3 Fannie Mae's Home Retentivity and Liquidation Conditioning Options, including the Fannie Mae Flex Modification based on borrower submission of a consummate BRP.
after soliciting the borrower for a Fannie Mae Flex Modification and prior to sending the Loan Modification Agreement to the borrower for signature	either evaluate the borrower for all workout options in accordance with Affiliate D2-3 Fannie Mae's Abode Retentivity and Liquidation Workout Options, including the Fannie Mae Flex Modification based on borrower submission of a complete BRP, if the borrower has non accepted the Fannie Mae Flex Modification solicitation offer, or re-evaluate the borrower for a Fannie Mae Flex modification based on borrower submission of a complete BRP if the borrower has accepted the Flex Modification solicitation offer. Note: If the P&I payment amount based on the submission of a complete BRP is less than the P&I payment amount reflected in the solicitation Trial Period Plan, inform the borrower that if they make the Trial Menses Plan payments in accordance with the program, the mortgage loan will be permanently modified with the lower P&I payment amount which will be reflected in the Loan Modification Understanding.

Handling Fees and Belatedly Charges in Connection with a Fannie Mae Flex Modification

The servicer must not charge the borrower authoritative fees.

The servicer is authorized to assess late charges during the Trial Period Program. The servicer must waive all belatedly charges, penalties, end payment fees, or similar charges upon the borrower'south conversion to a permanent mortgage loan modification.

The servicer must follow the procedures in Reimbursement for Expenses Associated with Workout Options in  F-1-05, Expense Reimbursement for advancing funds and requesting reimbursement.

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Source: https://servicing-guide.fanniemae.com/THE-SERVICING-GUIDE/Part-D-Providing-Solutions-to-a-Borrower/Subpart-D2-Assisting-a-Borrower-Who-is-Facing-Default-or/Chapter-D2-3-Fannie-Mae-s-Home-Retention-and-Liquidation/Section-D2-3-2-Home-Retention-Workout-Options/D2-3-2-07-Fannie-Mae-Flex-Modification/1042575201/D2-3-2-07-Fannie-Mae-Flex-Modification-09-09-2020.htm

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