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Understanding the Assignment of Mortgages: What You Need To Know

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A mortgage is a legally binding agreement between a home buyer and a lender that dictates a borrower's ability to pay off a loan. Every mortgage has an interest rate, a term length, and specific fees attached to it.

Written by Attorney Todd Carney .  Updated November 26, 2021

If you’re like most people who want to purchase a home, you’ll start by going to a bank or other lender to get a mortgage loan. Though you can choose your lender, after the mortgage loan is processed, your mortgage may be transferred to a different mortgage servicer . A transfer is also called an assignment of the mortgage. 

No matter what it’s called, this change of hands may also change who you’re supposed to make your house payments to and how the foreclosure process works if you default on your loan. That’s why if you’re a homeowner, it’s important to know how this process works. This article will provide an in-depth look at what an assignment of a mortgage entails and what impact it can have on homeownership.

Assignment of Mortgage – The Basics

When your original lender transfers your mortgage account and their interests in it to a new lender, that’s called an assignment of mortgage. To do this, your lender must use an assignment of mortgage document. This document ensures the loan is legally transferred to the new owner. It’s common for mortgage lenders to sell the mortgages to other lenders. Most lenders assign the mortgages they originate to other lenders or mortgage buyers.

Home Loan Documents

When you get a loan for a home or real estate, there will usually be two mortgage documents. The first is a mortgage or, less commonly, a deed of trust . The other is a promissory note. The mortgage or deed of trust will state that the mortgaged property provides the security interest for the loan. This basically means that your home is serving as collateral for the loan. It also gives the loan servicer the right to foreclose if you don’t make your monthly payments. The promissory note provides proof of the debt and your promise to pay it.

When a lender assigns your mortgage, your interests as the mortgagor are given to another mortgagee or servicer. Mortgages and deeds of trust are usually recorded in the county recorder’s office. This office also keeps a record of any transfers. When a mortgage is transferred so is the promissory note. The note will be endorsed or signed over to the loan’s new owner. In some situations, a note will be endorsed in blank, which turns it into a bearer instrument. This means whoever holds the note is the presumed owner.

Using MERS To Track Transfers

Banks have collectively established the Mortgage Electronic Registration System , Inc. (MERS), which keeps track of who owns which loans. With MERS, lenders are no longer required to do a separate assignment every time a loan is transferred. That’s because MERS keeps track of the transfers. It’s crucial for MERS to maintain a record of assignments and endorsements because these land records can tell who actually owns the debt and has a legal right to start the foreclosure process.

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Assignment of Mortgage Requirements and Effects

The assignment of mortgage needs to include the following:

The original information regarding the mortgage. Alternatively, it can include the county recorder office’s identification numbers. 

The borrower’s name.

The mortgage loan’s original amount.

The date of the mortgage and when it was recorded.

Usually, there will also need to be a legal description of the real property the mortgage secures, but this is determined by state law and differs by state.

Notice Requirements

The original lender doesn’t need to provide notice to or get permission from the homeowner prior to assigning the mortgage. But the new lender (sometimes called the assignee) has to send the homeowner some form of notice of the loan assignment. The document will typically provide a disclaimer about who the new lender is, the lender’s contact information, and information about how to make your mortgage payment. You should make sure you have this information so you can avoid foreclosure.

Mortgage Terms

When an assignment occurs your loan is transferred, but the initial terms of your mortgage will stay the same. This means you’ll have the same interest rate, overall loan amount, monthly payment, and payment due date. If there are changes or adjustments to the escrow account, the new lender must do them under the terms of the original escrow agreement. The new lender can make some changes if you request them and the lender approves. For example, you may request your new lender to provide more payment methods.

Taxes and Insurance

If you have an escrow account and your mortgage is transferred, you may be worried about making sure your property taxes and homeowners insurance get paid. Though you can always verify the information, the original loan servicer is responsible for giving your local tax authority the new loan servicer’s address for tax billing purposes. The original lender is required to do this after the assignment is recorded. The servicer will also reach out to your property insurance company for this reason.  

If you’ve received notice that your mortgage loan has been assigned, it’s a good idea to reach out to your loan servicer and verify this information. Verifying that all your mortgage information is correct, that you know who to contact if you have questions about your mortgage, and that you know how to make payments to the new servicer will help you avoid being scammed or making payments incorrectly.

Let's Summarize…

In a mortgage assignment, your original lender or servicer transfers your mortgage account to another loan servicer. When this occurs, the original mortgagee or lender’s interests go to the next lender. Even if your mortgage gets transferred or assigned, your mortgage’s terms should remain the same. Your interest rate, loan amount, monthly payment, and payment schedule shouldn’t change. 

Your original lender isn’t required to notify you or get your permission prior to assigning your mortgage. But you should receive correspondence from the new lender after the assignment. It’s important to verify any change in assignment with your original loan servicer before you make your next mortgage payment, so you don’t fall victim to a scam.

Attorney Todd Carney

Attorney Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such... read more about Attorney Todd Carney

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24 CFR § 203.350 - Assignment of mortgage.

• Table of Popular Names

(a) Assignment of modified mortgages pursuant to section 230, National Housing Act . HUD may accept an assignment of any mortgage covering a one-to-four family residence if the following requirements are met:

(1) The mortgage was in default ;

(2) The mortgagee has modified the mortgage under § 203.616 to cure the default and to provide for mortgage payments within the reasonable ability of the mortgagor to pay, at an interest rate not exceeding current market interest rates; and

(3) Such other conditions that HUD may prescribe, which may include the requirement that the mortgagee continue to be responsible for servicing the mortgage .

(b) Assignments pursuant to section 248, National Housing Act . Notwithstanding the provisions of paragraph (a), the Commissioner shall, upon application by the mortgagee , approve the assignment to the Commissioner of any mortgage insured pursuant to section 248 of the National Housing Act (see § 203.43h ) where the mortgagor has been in default for more than 90 days. The mortgagee may not request the Commissioner to accept an assignment until the mortgagee has submitted documents to the Commissioner showing that the requirements of § 203.604 have been met. HUD shall then notify the mortgagee of its approval of the mortgagee 's actions under § 203.604 and that the mortgagee may assign the mortgage to the Secretary , or HUD will specify what further action the mortgagee must take to meet the requirements of § 203.604 .

(c) Assignment of mortgages insured pursuant to section 247, National Housing Act . Notwithstanding the provisions of paragraph (a) of this section, the Secretary will, upon application by the mortgagee , agree to accept an assignment of any mortgage insured pursuant to section 247 of the National Housing Act (§ 203.43i of this part) where the mortgagor has been in default for more than 180 days, provided that the requirements of § 203.665 are satisfied.

(d) Assignment of mortgages authorized by section 203(q), National Housing Act . Notwithstanding the provisions of paragraph (a) of this section, the Secretary will, upon application by the mortgagee , agree to accept assignment of any mortgage authorized by section 203(q) of the National Housing Act (§ 203.43j of this part) if

(1) The mortgagor has been in default for more than 90 days for failure to make a monthly payment,

(2) The requirements of § 203.666 are satisfied, and

(3) The date of default occurs before the mortgagor and the lessor execute a lease renewal or a new lease with a term of not less than five years beyond the maturity date of the mortgage , or with a term established by an arbitration award.

(e) Filing assignment for record. Within 30 days of the Secretary 's written agreement to accept assignment of a defaulted mortgage , or within such additional time as the Secretary authorizes in writing, the mortgagee must file the assignment for record.

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Servicing: Assignments to HUD, Part I: Reasons, Processes and Purpose

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Whether you are involved in reverse mortgage loan servicing, origination or any aspect in between, no doubt you understand and strongly believe in the benefits a reverse mortgage provides to our borrowers. I’m not sure, however, that the industry as a whole understands or appreciates the important role HUD serves with the HECM product. In this two-part piece, the detailed process and aspects of the HUD assignment process will be explored.

Those on the servicing side understand the importance of HUD insurance through its second mortgage and the twofold purpose it serves:

ONE || This second mortgage insures borrowers in the exceptionally unlikely and rare event a lender goes out of business, and

TWO || HUD provides insurance for servicers in the event a loan is not paid back in full. This remedy is essentially handled like any insurance claim, and like traditional insurance, there are different types of claims.

With traditional insurance (auto, home), the most common claims are made when something negative (accidents, injury) happens. I categorize these types of claims in the HECM insurance world as those that are filed for reasons of default. Examples would be when a loan is called due and payable or the loan has been satisfied in any way other than full payment to the lender. These are HUD Claim Type 21 (Foreclosure/Deed in Lieu) and Claim Type 23 (Mortgagor’s Short Sale) processes. Insurance companies also offer incentives for positive records (that is, spotless driving records with no accidents or injuries). In the HECM insurance world, these would include the Assignment to HUD or HUD Claim Type 22 process.

Let’s walk through the complicated territory servicers navigate when a loan reaches 98 percent of its Maximum Claim Amount (MCA), determined by the current loan balance as a percentage of the MCA. The MCA is determined at closing and is defined by HUD as “the lesser of a home’s appraised value or the maximum loan limit that can be insured by FHA.”

When a loan becomes eligible for assignment to HUD at 98 percent of MCA, it must meet certain criteria for

HUD to accept it, take over the servicing and then pay the claim to the lender. To ensure that a loan is ready for this assignment, this criterion is triple-checked well before the balance reaches 98 percent (typically this happens when it approaches 85 to 90 percent). Loans move (slowly) to MCA through the monthly accumulation of interest, mortgage insurance premiums and servicing fees. During this initial review, the servicer is seeking to confirm that the loan is in “active” status.

HUD will not accept a loan for assignment if it is in default or is due and payable. The review focuses on origination documents and ensures that there are no errors on the mortgage, that assignments (if applicable) are in place, and that the servicer has all of the documents required for submission to HUD. If anything is incorrect or out of place in the servicing file, we work aggressively to correct it. As a subservicer, Celink reaches out to its clients involved in the origination process. Rare cases arise when a client (or its subservicer) is unable to fix a document error, which makes the loan’s assignment to HUD impossible.

There may be other reviews of a loan, especially if work is required to complete or fix errors. In short, a final review process follows and this happens much closer to eligibility, around 96-97 percent of MCA. Loans can take years to move to this assignment process.

A majority of loans are paid off or will have moved to default/due and payable status before reaching HUD assignment eligibility. A loan that is eligible at 95 or 96 percent may not be eligible at 97.5 or 98 percent. Additionally, a loan that has lender/force-placed insurance (FPI) or delinquent property taxes is not eligible for assignment. This is true even when the FPI or delinquent property taxes do not create a default status on the loan.

Part II will focus on eligible loans for assignment to HUD and the process of assignment within HUD’s servicing software, HERMIT.

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Chapter B8-6, Mortgage Assignments

Mortgage assignments table of contents.

• B8-6-01, Authorized Use of Intervening and Blanket Assignments

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• Copyright and Preface
• A1-1-01, Application and Approval of Seller/Servicer
• A2-1-01, Contractual Obligations for Sellers/Servicers
• A2-1-02, Nature of Mortgage Transaction
• A2-1-03, Indemnification for Losses
• A2-2-01, Representations and Warranties Overview
• A2-2-02, Delivery Information and Delivery-Option Specific Representations and Warranties
• A2-2-03, Document Warranties
• A2-2-04, Limited Waiver and Enforcement Relief of Representations and Warranties
• A2-2-05, Invalidation of Limited Waiver of Representations and Warranties
• A2-2-06, Representations and Warranties on Property Value
• A2-2-07, Life-of-Loan Representations and Warranties
• A2-3.1-01, Lender Breach of Contract
• A2-3.1-02, Sanctions, Suspensions, and Terminations
• A2-3.2-01, Loan Repurchases and Make Whole Payments Requested by Fannie Mae
• A2-3.2-02, Enforcement Relief for Breaches of Certain Representations and Warranties Related to Underwriting and Eligibility
• A2-3.2-03, Remedies Framework
• A2-3.3-01, Compensatory Fees
• A2-4.1-01, Establishing Loan Files
• A2-4.1-02, Ownership and Retention of Loan Files and Records
• A2-4.1-03, Electronic Records, Signatures, and Transactions
• A2-4.1-04, Notarization Standards
• A2-5-01, Fannie Mae Trade Name and Trademarks
• A3-1-01, Fannie Mae’s Technology Products
• A3-2-01, Compliance With Laws
• A3-2-02, Responsible Lending Practices
• A3-3-01, Outsourcing of Mortgage Processing and Third-Party Originations
• A3-3-02, Concurrent Servicing Transfers
• A3-3-03, Other Servicing Arrangements
• A3-3-04, Document Custodians
• A3-3-05, Custody of Mortgage Documents
• A3-4-01, Confidentiality of Information
• A3-4-02, Data Quality and Integrity
• A3-4-03, Preventing, Detecting, and Reporting Mortgage Fraud
• A3-5-01, Fidelity Bond and Errors and Omissions Coverage Provisions
• A3-5-02, Fidelity Bond Policy Requirements
• A3-5-03, Errors and Omissions Policy Requirements
• A3-5-04, Reporting Fidelity Bond and Errors and Omissions Events
• A4-1-01, Maintaining Seller/Servicer Eligibility
• A4-1-02, Submission of Financial Statements and Reports
• A4-1-03, Report of Changes in the Seller/Servicer’s Organization
• A4-1-04, Submission of Irrevocable Limited Powers of Attorney
• B1-1-01, Contents of the Application Package
• B1-1-02, Blanket Authorization Form
• B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns
• B2-1.1-01, Occupancy Types
• B2-1.2-01, Loan-to-Value (LTV) Ratios
• B2-1.2-02, Combined Loan-to-Value (CLTV) Ratios
• B2-1.2-03, Home Equity Combined Loan-to-Value (HCLTV) Ratios
• B2-1.2-04, Subordinate Financing
• B2-1.3-01, Purchase Transactions
• B2-1.3-02, Limited Cash-Out Refinance Transactions
• B2-1.3-03, Cash-Out Refinance Transactions
• B2-1.3-04, Prohibited Refinancing Practices
• B2-1.3-05, Payoff of Installment Land Contract Requirements
• B2-1.4-01, Fixed-Rate Loans
• B2-1.4-02, Adjustable-Rate Mortgages (ARMs)
• B2-1.4-03, Convertible ARMs
• B2-1.4-04, Temporary Interest Rate Buydowns
• B2-1.5-01, Loan Limits
• B2-1.5-02, Loan Eligibility
• B2-1.5-03, Legal Requirements
• B2-1.5-04, Escrow Accounts
• B2-1.5-05, Principal Curtailments
• B2-2-01, General Borrower Eligibility Requirements
• B2-2-02, Non–U.S. Citizen Borrower Eligibility Requirements
• B2-2-03, Multiple Financed Properties for the Same Borrower
• B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction
• B2-2-05, Inter Vivos Revocable Trusts
• B2-2-06, Homeownership Education and Housing Counseling
• B2-2-07, First-Generation Homebuyer Loans
• B2-3-01, General Property Eligibility
• B2-3-02, Special Property Eligibility and Underwriting Considerations: Factory-Built Housing
• B2-3-03, Special Property Eligibility and Underwriting Considerations: Leasehold Estates
• B2-3-04, Special Property Eligibility Considerations
• B2-3-05, Properties Affected by a Disaster
• B3-1-01, Comprehensive Risk Assessment
• B3-2-01, General Information on DU
• B3-2-02, DU Validation Service
• B3-2-03, Risk Factors Evaluated by DU
• B3-2-04, DU Documentation Requirements
• B3-2-05, Approve/Eligible Recommendations
• B3-2-06, Approve/Ineligible Recommendations
• B3-2-07, Refer with Caution Recommendations
• B3-2-08, Out of Scope Recommendations
• B3-2-09, Erroneous Credit Report Data
• B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report
• B3-2-11, DU Underwriting Findings Report
• B3-3.1-01, General Income Information
• B3-3.1-02, Standards for Employment Documentation
• B3-3.1-03, Base Pay (Salary or Hourly), Bonus, and Overtime Income
• B3-3.1-04, Commission Income
• B3-3.1-05, Secondary Employment Income (Second Job and Multiple Jobs) and Seasonal Income
• B3-3.1-06, Requirements and Uses of IRS IVES Request for Transcript of Tax Return Form 4506-C
• B3-3.1-07, Verbal Verification of Employment
• B3-3.1-08, Rental Income
• B3-3.1-09, Other Sources of Income
• B3-3.1-10, Income Calculator
• B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower
• B3-3.2-02, Business Structures
• B3-3.2-03, IRS Forms Quick Reference
• B3-3.3-01, General Information on Analyzing Individual Tax Returns
• B3-3.3-02, Income Reported on IRS Form 1040
• B3-3.3-03, Income or Loss Reported on IRS Form 1040, Schedule C
• B3-3.3-04, Income or Loss Reported on IRS Form 1040, Schedule D
• B3-3.3-05, Income or Loss Reported on IRS Form 1040, Schedule E
• B3-3.3-06, Income or Loss Reported on IRS Form 1040, Schedule F
• B3-3.3-07, Income or Loss Reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1
• B3-3.4-01, Analyzing Partnership Returns for a Partnership or LLC
• B3-3.4-02, Analyzing Returns for an S Corporation
• B3-3.4-03, Analyzing Returns for a Corporation
• B3-3.4-04, Analyzing Profit and Loss Statements
• B3-3.5-01, Income and Employment Documentation for DU
• B3-3.5-02, Income from Rental Property in DU
• B3-4.1-01, Minimum Reserve Requirements
• B3-4.1-02, Interested Party Contributions (IPCs)
• B3-4.1-03, Types of Interested Party Contributions (IPCs)
• B3-4.1-04, Virtual Currency
• B3-4.2-01, Verification of Deposits and Assets
• B3-4.2-02, Depository Accounts
• B3-4.2-03, Individual Development Accounts
• B3-4.2-04, Pooled Savings (Community Savings Funds)
• B3-4.2-05, Foreign Assets
• B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds
• B3-4.3-02, Trust Accounts
• B3-4.3-03, Retirement Accounts
• B3-4.3-04, Personal Gifts
• B3-4.3-05, Gifts of Equity
• B3-4.3-06, Grants and Lender Contributions
• B3-4.3-07, Disaster Relief Grants or Loans
• B3-4.3-08, Employer Assistance
• B3-4.3-09, Earnest Money Deposit
• B3-4.3-10, Anticipated Sales Proceeds
• B3-4.3-11, Trade Equity
• B3-4.3-12, Rent Credit for Option to Purchase
• B3-4.3-13, Sweat Equity
• B3-4.3-14, Bridge/Swing Loans
• B3-4.3-15, Borrowed Funds Secured by an Asset
• B3-4.3-16, Credit Card Financing and Reward Points
• B3-4.3-17, Personal Unsecured Loans
• B3-4.3-18, Sale of Personal Assets
• B3-4.3-19, Cash Value of Life Insurance
• B3-4.3-20, Anticipated Savings and Cash-on-Hand
• B3-4.3-21, Borrower's Earned Real Estate Commission
• B3-4.4-01, DU Asset Verification
• B3-4.4-02, Requirements for Certain Assets in DU
• B3-5.1-01, General Requirements for Credit Scores
• B3-5.1-02, Determining the Credit Score for a Mortgage Loan
• B3-5.2-01, Requirements for Credit Reports
• B3-5.2-02, Types of Credit Reports
• B3-5.2-03, Accuracy of Credit Information in a Credit Report
• B3-5.3-01, Number and Age of Accounts
• B3-5.3-02, Payment History
• B3-5.3-03, Previous Mortgage Payment History
• B3-5.3-04, Inquiries: Recent Attempts to Obtain New Credit
• B3-5.3-05, Credit Utilization
• B3-5.3-06, Authorized Users of Credit
• B3-5.3-07, Significant Derogatory Credit Events — Waiting Periods and Re-establishing Credit
• B3-5.3-08, Extenuating Circumstances for Derogatory Credit
• B3-5.3-09, DU Credit Report Analysis
• B3-5.4-01, Eligibility Requirements for Loans with Nontraditional Credit
• B3-5.4-02, Number and Types of Nontraditional Credit References
• B3-5.4-03, Documentation and Assessment of a Nontraditional Credit History
• B3-6-01, General Information on Liabilities
• B3-6-02, Debt-to-Income Ratios
• B3-6-03, Monthly Housing Expense for the Subject Property
• B3-6-04, Qualifying Payment Requirements
• B3-6-05, Monthly Debt Obligations
• B3-6-06, Qualifying Impact of Other Real Estate Owned
• B3-6-07, Debts Paid Off At or Prior to Closing
• B3-6-08, DU: Requirements for Liability Assessment
• B4-1.1-01, Definition of Market Value
• B4-1.1-02, Lender Responsibilities
• B4-1.1-03, Appraiser Selection Criteria
• B4-1.1-04, Unacceptable Appraisal Practices
• B4-1.1-05, Disclosure of Information to Appraisers
• B4-1.1-06, Uniform Appraisal Dataset (UAD) and the Uniform Collateral Data Portal (UCDP)
• B4-1.2-01, Appraisal Report Forms and Exhibits
• B4-1.2-02, Desktop Appraisals
• B4-1.2-03, Hybrid Appraisals
• B4-1.2-04, Appraisal Age and Use Requirements
• B4-1.2-05, Requirements for Verifying Completion and Postponed Improvements
• B4-1.3-01, Review of the Appraisal Report
• B4-1.3-02, Subject and Contract Sections of the Appraisal Report
• B4-1.3-03, Neighborhood Section of the Appraisal Report
• B4-1.3-04, Site Section of the Appraisal Report
• B4-1.3-05, Improvements Section of the Appraisal Report
• B4-1.3-06, Property Condition and Quality of Construction of the Improvements
• B4-1.3-07, Sales Comparison Approach Section of the Appraisal Report
• B4-1.3-08, Comparable Sales
• B4-1.3-09, Adjustments to Comparable Sales
• B4-1.3-10, Cost and Income Approach to Value
• B4-1.3-11, Valuation Analysis and Reconciliation
• B4-1.3-12, Appraisal Quality Matters
• B4-1.4-01, Factory-Built Housing: Manufactured Housing
• B4-1.4-02, Factory-Built Housing: Modular, Prefabricated, Panelized, or Sectional Housing
• B4-1.4-03, Condo Appraisal Requirements
• B4-1.4-04, Co-op Appraisal Requirements
• B4-1.4-05, Leasehold Interests Appraisal Requirements
• B4-1.4-06, Community Land Trust Appraisal Requirements
• B4-1.4-07, Mixed-Use Property Appraisal Requirements
• B4-1.4-08, Environmental Hazards Appraisal Requirements
• B4-1.4-09, Special Assessment or Community Facilities Districts Appraisal Requirements
• B4-1.4-10, Value Acceptance (Appraisal Waiver)
• B4-1.4-11, Value Acceptance + Property Data
• B4-2.1-01, General Information on Project Standards
• B4-2.1-02, Waiver of Project Review
• B4-2.1-03, Ineligible Projects
• B4-2.1-04, Environmental Hazard Assessments
• B4-2.1-05, Unacceptable Environmental Hazards
• B4-2.1-06, Remedial Actions for Environmental Hazard Assessments Below Standards
• B4-2.2-01, Limited Review Process
• B4-2.2-02, Full Review Process
• B4-2.2-03, Full Review: Additional Eligibility Requirements for Units in New and Newly Converted Condo Projects
• B4-2.2-04, Geographic-Specific Condo Project Considerations
• B4-2.2-05, FHA-Approved Condo Review Eligibility
• B4-2.2-06, Project Eligibility Review Service (PERS)
• B4-2.2-07, Projects with Special Considerations and Project Eligibility Waivers
• B4-2.3-01, Eligibility Requirements for Units in PUD Projects
• B4-2.3-02, Co-op Project Eligibility
• B4-2.3-03, Legal Requirements for Co-op Projects
• B4-2.3-04, Loan Eligibility for Co-op Share Loans
• B4-2.3-05, Geographic-Specific Co-op Project Considerations
• B5-1-01, High-Balance Mortgage Loan Eligibility and Underwriting
• B5-1-02, High-Balance Pricing, Mortgage Insurance, Special Feature Codes, and Delivery Limitations
• B5-2-01, Manufactured Housing
• B5-2-02, Manufactured Housing Loan Eligibility
• B5-2-03, Manufactured Housing Underwriting Requirements
• B5-2-04, Manufactured Housing Pricing, Mortgage Insurance, and Loan Delivery Requirements
• B5-2-05, Manufactured Housing Legal Considerations
• B5-3.1-01, Conversion of Construction-to-Permanent Financing: Overview
• B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions
• B5-3.1-03, Conversion of Construction-to-Permanent Financing: Two-Closing Transactions
• B5-3.2-01, HomeStyle Renovation Mortgages
• B5-3.2-02, HomeStyle Renovation Mortgages: Loan and Borrower Eligibility
• B5-3.2-03, HomeStyle Renovation Mortgages: Collateral Considerations
• B5-3.2-04, HomeStyle Renovation Mortgages: Costs and Escrow Accounts
• B5-3.2-05, HomeStyle Renovation Mortgages: Completion Certification
• B5-3.2-06, HomeStyle Renovation: Renovation Contract, Renovation Loan Agreement, and Lien Waiver
• B5-3.3-01, HomeStyle Energy for Improvements on Existing Properties
• B5-3.4-01, Property Assessed Clean Energy Loans
• B5-4.1-01, Texas Section 50(a)(6) Loans
• B5-4.1-02, Texas Section 50(a)(6) Loan Eligibility
• B5-4.1-03, Texas Section 50(a)(6) Loan Underwriting, Collateral, and Closing Considerations
• B5-4.1-04, Texas Section 50(a)(6) Loan Delivery and Servicing Considerations
• B5-4.2-01, Native American Conventional Lending Initiative (NACLI)
• B5-4.2-02, Disaster-Related Limited Cash-Out Refinance Flexibilities
• B5-4.2-03, Loans Secured by HomePath Properties
• B5-5.1-01, Community Seconds Loans
• B5-5.1-02, Community Seconds Loan Eligibility
• B5-5.1-03, Community Seconds: Shared Appreciation Transactions
• B5-5.2-01, Loans With Resale Restrictions: General Information
• B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements
• B5-5.3-01, Shared Equity Overview
• B5-5.3-02, Shared Equity Transactions: General Requirements
• B5-5.3-03, Shared Equity Transactions: Eligibility, Underwriting and Collateral Requirements
• B5-5.3-04, Massachusetts Resale Restriction Loan Eligibility Requirements
• B5-6-01, HomeReady Mortgage Loan and Borrower Eligibility
• B5-6-02, HomeReady Mortgage Underwriting Methods and Requirements
• B5-6-03, HomeReady Mortgage Loan Pricing, Mortgage Insurance, and Special Feature Codes
• B5-7-01, High LTV Refinance Loan and Borrower Eligibility
• B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan
• B5-7-03, High LTV Refinance Alternative Qualification Path
• B5-7-04, High LTV Refinance Representations and Warranties
• B5-7-05, High LTV Refinance Pricing, Mortgage Insurance, and Special Feature Codes
• B6-1-01, General Government Mortgage Loan Requirements
• B6-1-02, Eligible FHA-Insured Mortgage Loans
• B6-1-03, Eligible VA-Guaranteed Mortgages
• B6-1-04, Eligible HUD-Guaranteed Section 184 Mortgages
• B6-1-05, Eligible RD-Guaranteed Mortgages
• B7-1-01, Provision of Mortgage Insurance
• B7-1-02, Mortgage Insurance Coverage Requirements
• B7-1-03, Lender-Purchased Mortgage Insurance
• B7-1-04, Financed Borrower-Purchased Mortgage Insurance
• B7-1-05, Government Mortgage Loan Guaranty or Insurance
• B7-2-01, Provision of Title Insurance
• B7-2-02, Title Insurer Requirements
• B7-2-03, General Title Insurance Coverage
• B7-2-04, Special Title Insurance Coverage Considerations
• B7-2-05, Title Exceptions and Impediments
• B7-2-06, Attorney Title Opinion Letter Requirements
• B7-3-01, General Property Insurance Requirements for All Property Types
• B7-3-02, Property Insurance Requirements for One-to Four-Unit Properties
• B7-3-03, Master Property Insurance Requirements for Project Developments
• B7-3-04, Individual Property Insurance Requirements for a Unit in a Project Development
• B7-3-05, Additional Insurance Requirements
• B7-3-06, Flood Insurance Requirements for All Property Types
• B7-3-07, Evidence of Property Insurance
• B7-3-08, Mortgagee Clause, Named Insured, and Notice of Cancellation Requirements
• B7-4-01, General Liability Insurance Requirements for Project Developments
• B7-4-02, Fidelity/Crime Insurance Requirements for Project Developments
• B8-1-01, Publication of Legal Documents
• B8-2-01, Security Instruments for Conventional Mortgages
• B8-2-02, Special-Purpose Security Instruments
• B8-2-03, Signature Requirements for Security Instruments
• B8-3-01, Notes for Conventional Mortgages
• B8-3-02, Special Note Provisions and Language Requirements
• B8-3-03, Signature Requirements for Notes
• B8-3-04, Note Endorsement
• B8-4-01, Riders and Addenda
• B8-5-01, General Information on Special-Purpose Legal Documents
• B8-5-02, Inter Vivos Revocable Trust Mortgage Documentation and Signature Requirements
• B8-5-03, HomeStyle Renovation Mortgage Documentation Requirements
• B8-5-04, Sample Legal Documents
• B8-5-05, Requirements for Use of a Power of Attorney
• B8-7-01, Mortgage Electronic Registration Systems (MERS), Inc.
• B8-8-01, General Information on eMortgages
• B8-8-02, Requirements for Creating, Closing, and Correcting eNotes
• C1-1-01, Execution Options
• C1-2-01, General Information on Delivering Loan Data and Documents
• C1-2-02, Loan Data and Documentation Delivery Requirements
• C1-2-03, Ownership of Mortgage Loans Prior to Purchase or Securitization and Third-Party Security Interests
• C1-2-04, Delivering eMortgages to Fannie Mae
• C1-2-05, Bailee Letters
• C1-3-01, General Information on Remittance Types
• C2-1.1-01, Mandatory Commitment Process
• C2-1.1-02, General Information about Mandatory Commitment Pricing and Fees
• C2-1.1-03, Mandatory Commitment Terms, Amounts, Periods and Other Requirements
• C2-1.1-04, Mandatory Commitment Extensions and Pair-Offs
• C2-1.1-05, Servicing Fees
• C2-1.1-06, Accrued Interest Payments for Regularly Amortizing Mortgages
• C2-1.1-07, Standard ARM and Converted ARM Resale Commitments
• C2-1.2-01, Best Efforts Commitment Process
• C2-1.2-02, Best Efforts Commitment Pricing, Periods, and Fees
• C2-1.2-03, Best Efforts Commitment Terms, Amounts, and Other Requirements
• C2-1.3-01, Servicing Marketplace
• C2-2-01, General Requirements for Good Delivery of Whole Loans
• C2-2-02, Documentation Requirements for Whole Loan Deliveries
• C2-2-03, General Information on Whole Loan Purchasing Policies
• C2-2-04, Timing of Distribution of Whole Loan Purchase Proceeds
• C2-2-05, Whole Loan Purchasing Process
• C2-2-06, Authorization to Transfer Funds
• C2-2-07, Purchase Payee Codes
• C3-1-01, General Information About Fannie Mae’s MBS Program
• C3-1-02, Preparing to Pool Loans into MBS
• C3-2-01, Determining Eligibility for Loans Pooled into MBS
• C3-2-02, Selecting a Servicing Option
• C3-2-03, MBS Remittance Type and Selecting a Remittance Cycle
• C3-2-04, Mandatory MBS Commitments
• C3-3-01, Determining and Remitting Guaranty Fees
• C3-3-02, Accessing Buyup and Buydown Ratios and Calculating Payments or Charges
• C3-3-03, Buying Up and Buying Down the Guaranty Fee for MBS
• C3-4-01, Term-Related Fixed-Rate Mortgage Pooling Parameters
• C3-5-01, Creating Weighted-Average ARM MBS
• C3-5-02, Calculating the Weighted-Average Pool Accrual Rates for ARM Flex Pools Using a Fixed MBS Margin
• C3-5-03, Calculating the Weighted-Average Pool Accrual Rates for ARM Flex Pools Using a Weighted-Average MBS Margin
• C3-5-04, Pooling ARMs with a Conversion Option
• C3-5-05, Commingling ARMs in MBS
• C3-6-01, Parameters for Pooling Loans Into Fannie Majors
• C3-7-01, Establishing an MBS Trading Account
• C3-7-02, Initiating an MBS Sale
• C3-7-03, Making Good Delivery
• C3-7-04, Delivering MBS Pool Data and Documents
• C3-7-05, Confirming Presettlement Information
• C3-7-06, Settling the Trade
• C3-7-07, Sale of Fannie Mae Securities to Third Parties
• D1-1-01, Lender Quality Control Programs, Plans, and Processes
• D1-1-02, Lender Quality Control Staffing and Outsourcing of the Quality Control Process
• D1-2-01, Lender Prefunding Quality Control Review Process
• D1-3-01, Lender Post-Closing Quality Control Review Process
• D1-3-02, Lender Post-Closing Quality Control Review of Approval Conditions, Underwriting Decisions, and Documentation
• D1-3-03, Lender Post-Closing Quality Control Review of Data Integrity
• D1-3-04, Lender Post-Closing Quality Control Review of Appraisers, Appraisals, Property Data Collectors, and Property Data Collection
• D1-3-05, Lender Post-Closing Quality Control Review of Closing Documents
• D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention, and Audit
• D2-1-01, General Information on Fannie Mae QC Reviews
• D2-1-02, Fannie Mae QC File Request and Submission Requirements
• D2-1-03, Outcomes of Fannie Mae QC Reviews
• D2-1-04, Identifying and Remedying Origination Defects Under the Remedies Framework
• E-1-01, References to Fannie Mae's Website
• E-1-02, List of Contacts
• E-1-03, List of Lender Contracts
• E-2-01, Required Custodial Documents
• E-2-02, Suggested Format for Phase I Environmental Hazard Assessments
• E-2-03, Revocable Trust Rider (Sample Language)
• E-2-04, Signature Requirements for Mortgages to Inter Vivos Revocable Trusts
• E-2-05, Servicing Marketplace — Mortgage Loan Servicing Purchase and Sale Agreement
• E-2-06, Correcting Errors in eNotes
• E-2-07, Description of eNote Header, Footer, and eNote Clause
• E-3-01, Acronyms and Glossary of Defined Terms: A
• E-3-02, Acronyms and Glossary of Defined Terms: B
• E-3-03, Acronyms and Glossary of Defined Terms: C
• E-3-04, Acronyms and Glossary of Defined Terms: D
• E-3-05, Acronyms and Glossary of Defined Terms: E
• E-3-06, Acronyms and Glossary of Defined Terms: F
• E-3-07, Acronyms and Glossary of Defined Terms: G
• E-3-08, Acronyms and Glossary of Defined Terms: H
• E-3-09, Acronyms and Glossary of Defined Terms: I
• E-3-10, Acronyms and Glossary of Defined Terms: J
• E-3-11, Acronyms and Glossary of Defined Terms: K
• E-3-12, Acronyms and Glossary of Defined Terms: L
• E-3-13, Acronyms and Glossary of Defined Terms: M
• E-3-14, Acronyms and Glossary of Defined Terms: N
• E-3-15, Acronyms and Glossary of Defined Terms: O
• E-3-16, Acronyms and Glossary of Defined Terms: P
• E-3-17, Acronyms and Glossary of Defined Terms: Q
• E-3-18, Acronyms and Glossary of Defined Terms: R
• E-3-19, Acronyms and Glossary of Defined Terms: S
• E-3-20, Acronyms and Glossary of Defined Terms: T
• E-3-21, Acronyms and Glossary of Defined Terms: U
• E-3-22, Acronyms and Glossary of Defined Terms: V
• E-3-23, Acronyms and Glossary of Defined Terms: W
• E-3-24, Acronyms and Glossary of Defined Terms: X
• E-3-25, Acronyms and Glossary of Defined Terms: Y
• E-3-26, Acronyms and Glossary of Defined Terms: Z

D2-3.4-03, Assignment of a Mortgage Loan to the Insurer or Guarantor (11/12/2014)

Assignment of a conventional mortgage loan to the mortgage insurer, assignment of a hud or va mortgage loan to the insurer or guarantor.

If the mortgage insurer exercises a right under the master policy to acquire a delinquent conventional first lien mortgage loan, the servicer must assign the mortgage loan to the mortgage insurer and take whatever action is necessary to obtain payment under the insurance policy.

If the mortgage insurer instructs the servicer to assign an insured delinquent second lien conventional mortgage loan to it rather than continuing the foreclosure process, the servicer must prepare the necessary legal documents to assign the second lien mortgage loan and file a claim under the insurance contract.

See the Investor Reporting Manual for reporting the assignment to Fannie Mae.

If the mortgage insurer or guarantor exercises its right under the policy to acquire a delinquent government mortgage loan or an assignment is the only way to liquidate a mortgage loan, the servicer must

assign the mortgage loan to the insurer or guarantor and take required follow-up actions in compliance with applicable regulations and procedures,

file a claim with the insurer or guarantor, and

report the assignment to Fannie Mae. See the Investor Reporting Manual for reporting the assignment to Fannie Mae.

Fannie Mae will hold the servicer accountable for any loss Fannie Mae incurs because it failed to assign a VA-guaranteed mortgage loan for refunding when the VA instructed it to do so.

There are no recently issued Announcements related to this topic.                      

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Servicing Guide

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(Published: May 08 2024 )

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• Copyright and Preface
• A1-1-01, Application and Approval of Seller/Servicer
• A1-1-02, Representation and Warranty Requirements
• A1-1-03, Evaluating a Servicer’s Performance
• A1-2-01, Servicer’s Termination of the Lender Contract
• A1-2-02, Fannie Mae’s Termination of the Lender Contract without Cause
• A1-3-01, Requirements for Voluntary Repurchase
• A1-3-02, Fannie Mae-Initiated Repurchases, Indemnifications, Make Whole Payment Requests and Deferred Payment Obligations
• A1-3-03, Repurchase Obligations Related to Bifurcated Mortgage Loans
• A1-3-04, Reporting the Repurchase
• A1-3-05, Redelivering a Mortgage Loan
• A1-3-06, Automatic Reclassification of MBS Mortgage Loans
• A1-4.1-01, Defining a Breach of Contract
• A1-4.1-02, Fannie Mae’s Remedies
• A1-4.2-01, Compensatory Fees Other Than Delays in the Liquidation Process
• A1-4.2-02, Compensatory Fees for Delays in the Liquidation Process
• A2-1-01, General Servicer Duties and Responsibilities
• A2-1-02, Servicer’s Duties and Responsibilities Related to MBS Mortgage Loans
• A2-1-03, Servicer's Duties and Responsibilities Related to Mortgage Loans with Resale Restrictions or Shared Equity Transactions
• A2-1-04, Execution of Legal Documents
• A2-1-05, Note Holder Status for Legal Proceedings Conducted in the Servicer’s Name
• A2-1-06, Use of Fannie Mae Trademarks
• A2-1-07, Subservicing
• A2-1-08, First Lien Mortgage Loan Requirements
• A2-1-09, Compliance with Requirements and Laws
• A2-2-01, Refinance and Lending Practices
• A2-3-01, Servicer Compensation
• A2-3-02, Servicing Fees for Portfolio and MBS Mortgage Loans
• A2-3-03, Yield Differential Adjustments
• A2-3-04, Late Charges as Compensation
• A2-3-05, Fees for Certain Servicing Activities
• A2-3-06, Prepayment Premiums
• A2-4-01, Quality Control Reviews
• A2-5-01, Ownership and Retention of Individual Mortgage Loan Files and Records
• A2-6-01, Custodial Documents
• A2-7-01, Concurrent Servicing Transfers
• A2-7-02, Pledge of Servicing Rights and Transfer of Interest in Servicing Income
• A2-7-03, Post-Delivery Servicing Transfers
• A2-8-01, Mortgage Electronic Registration System
• A2-9-01, General Requirements
• A2-9-02, Special Provision for Puerto Rico
• A3-1-01, Maintaining Fannie Mae Seller/Servicer Status
• A4-1-01, Staffing, Training, Procedures, and Quality Control Requirements
• A4-1-02, Establishing Custodial Bank Accounts
• A4-1-03, Addressing Borrower Inquiries and Disputes
• A4-2.1-01, Preventing Defaults and Managing Delinquencies
• A4-2.1-02, Property Inspection Vendor Management and Oversight
• A4-2.1-03, Managing Short Sales
• A4-2.1-04, Establishing Contact with the Borrower
• A4-2.1-05, Requirements for Collection and Foreclosure Prevention Strategies Unique to Second Lien Mortgage Loans
• A4-2.1-06, Adverse Action Notification Certification
• A4-2.1-07, Servicer's Duties and Responsibilities Related to Mortgage Loans with an Outstanding Non-Interest-Bearing Balance
• A4-2.2-01, Selecting and Retaining Law Firms
• A4-2.2-02, Law Firm Management and Oversight
• A4-2.2-03, Prohibition Against Servicer-Specified Vendors for Fannie Mae Referrals, Use of Vendors, and Outsourcing Companies
• A4-2.2-04, Law Firm Suspensions, Matter Transfers, and Terminations
• B-1-01, Administering an Escrow Account and Paying Expenses
• B-2-01, Property Insurance Requirements Applicable to All Property Types
• B-2-02, Property Insurance Requirements for One- to Four-Unit Properties
• B-2-03, Master Property Insurance Requirements for Project Developments
• B-2-04, Individual Property Insurance Requirements for Units in Project Developments
• B-3-01, Flood Insurance Requirements Applicable to All Property Types
• B-4-01, Additional Insurance Requirements
• B-5-01, Insured Loss Events
• B-5-02, Uninsured Loss Events
• B-6-01, Lender-Placed Insurance Requirements
• B-7-01, General Liability Insurance Requirements for Project Developments
• B-7-02, Fidelity/Crime Insurance Requirements for Project Developments
• B-8.1-01, Conventional Mortgage Insurance Servicer Responsibilities
• B-8.1-02, Paying Conventional Mortgage Insurance Premiums
• B-8.1-03, Replacing Conventional Mortgage Insurance Policies
• B-8.1-04, Termination of Conventional Mortgage Insurance
• B-8.2-01, FHA Mortgage Insurance Coverage Requirements
• B-8.2-02, Conversion of FHA Coinsured Mortgage Loans to Full Insurance
• B-8.2-03, Termination or Cancellation of FHA Mortgage Insurance and FHA Mortgage Insurance Premium
• C-1.1-01, Servicer Responsibilities for Processing Mortgage Loan Payments
• C-1.1-02, Processing Payment Shortages or Funds Received When a Mortgage Loan Modification Is Pending
• C-1.1-03, Automatically Drafting Payments from the Borrower’s Bank Account
• C-1.1-04, Accepting Biweekly Payments from Third-Party Payment Contractors
• C-1.2-01, Processing Additional Principal Payments
• C-1.2-02, Processing Short Sale Proceeds
• C-1.2-03, Processing Payments in Full
• C-1.2-04, Satisfying the Mortgage Loan and Releasing the Lien
• C-1.2-05, Charging for a Release of Lien
• C-2.1-01, Responsibilities for ARM Loan Servicing
• C-2.1-02, Notifying the Borrower Regarding Interest Rate and/or Payment Changes
• C-2.2-01, Identifying and Disclosing Adjustment Errors
• C-2.2-02, Assuming Responsibility for Conversion Notice Errors
• C-2.2-03, Determining Whether to Provide a Refund or Credit for Overcharges
• C-2.3-01, Processing ARM Conversions to Fixed Rate Mortgage Loans
• C-2.3-02, Notifying Fannie Mae of Conversions for Portfolio Mortgage Loans
• C-2.3-03, Repurchasing Converted MBS Mortgage Loans and Redelivering Them to Fannie Mae
• C-3-01, Responsibilities Related to Remitting P&I Funds to Fannie Mae
• C-3-02, Remitting Payoff Proceeds
• C-4.1-01, Notifying Credit Repositories
• C-4.2-01, Filing IRS Forms
• C-4.3-01, Servicer Responsibilities Related to Investor Reporting
• D1-1-01, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan
• D1-1-02, Evaluating a First Lien Mortgage Loan for Charge-Off and Release of Lien
• D1-1-03, Evaluating a Second Lien Mortgage Charge-Off
• D1-2-01, Renovation Mortgage Loans
• D1-3-01, Evaluating the Impact of a Disaster Event and Assisting a Borrower
• D1-4.1-01, Determining Whether a Transfer of Ownership Is Permitted
• D1-4.1-02, Allowable Exemptions Due to the Type of Transfer
• D1-4.1-03, Allowable Exceptions Due to State Law Restrictions (“Window-Period” Mortgage Loans)
• D1-4.1-04, Transfers of Ownership by Grant Deed
• D1-4.1-05, Enforcing the Due-on-Sale (or Due-on-Transfer) Provision
• D1-4.2-01, Conventional Mortgage Loans that Do Not Include a Due-on-Sale (or Due-on-Transfer) Provision
• D1-4.2-02, Conventional Mortgage Loans That Include a Due- on-Sale (or Due-on-Transfer) Provision
• D1-4.3-01, Transfers of Ownership on FHA and VA Mortgage Loans
• D1-4.3-02, Transfers of Ownership on RD Mortgage Loans
• D1-5-01, Call Options and Cross-Default Provisions
• D1-6-01, Requesting to Waive Certain Rights under the Mortgage Loan
• D1-6-02, Handling Notices of Liens, Legal Action, Other Actions Impacting Fannie Mae’s Interest
• D1-6-03, Handling Property Forfeitures and Seizures
• D2-1-01, Determining if the Borrower’s Mortgage Payment is in Imminent Default
• D2-2-01, Achieving Quality Right Party Contact with a Borrower
• D2-2-02, Outbound Contact Attempt Requirements
• D2-2-03, Sending a Payment Reminder Notice
• D2-2-04, Sending a Borrower a Solicitation Package for a Workout Option
• D2-2-05, Receiving a Borrower Response Package
• D2-2-06, Sending a Breach or Acceleration Letter
• D2-2-07, Resolving an Appeal of a Mortgage Loan Modification Trial Period Plan Denial for a Principal Residence
• D2-2-08, Interviewing Face-to-Face with a Borrower for Certain FHA and HUD Mortgage Loans
• D2-2-09, Additional Borrower Contact Requirements for the Servicer of a Second Lien Mortgage Loan
• D2-2-10, Requirements for Performing Property Inspections
• D2-3.1-01, Determining the Appropriate Workout Option
• D2-3.1-02, Conditions of a First and Second Lien Mortgage Loan Modification for an MBS Mortgage Loan
• D2-3.1-03, Working with a Borrower that has a Group Home Mortgage Loan
• D2-3.1-04, Offering a Workout Option When Also Servicing a Subordinate Lien Mortgage Loan
• D2-3.1-05, Interacting with Mortgage Assistance Fund Program Providers
• D2-3.1-06, Notifying Fannie Mae of Lead-Based Paint Citations
• D2-3.2-01, Forbearance Plan
• D2-3.2-02, Repayment Plan
• D2-3.2-03, Government Mortgage Loan Modifications
• D2-3.2-04, Payment Deferral
• D2-3.2-05, Disaster Payment Deferral
• D2-3.2-06, Fannie Mae Flex Modification
• D2-3.3-01, Fannie Mae Short Sale
• D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure)
• D2-3.4-01, Military Indulgence
• D2-3.4-02, Offering a Mortgage Release (Deed-in-Lieu of Foreclosure) for a Second Lien Mortgage Loan
• D2-3.4-03, Assignment of a Mortgage Loan to the Insurer or Guarantor
• D2-3.4-04, Qualifying Mortgage Assumption Workout Option
• D2-4-01, Reporting a Delinquent Mortgage Loan to Fannie Mae
• D2-4-02, Reporting a Workout Option to Fannie Mae
• D2-4-03, Reporting Certain Workout Options to Treasury
• E-1.1-01, General Requirements for Referring a Mortgage Loan to a Law Firm
• E-1.1-02, Required Referral Documents
• E-1.1-03, Required Referral Data
• E-1.2-01, Timing of the Bankruptcy Referral
• E-1.2-02, Timing of the Foreclosure Referral for Mortgage Loans Generally
• E-1.2-03, Timing of the Foreclosure Referral for Second Lien Conventional Mortgage Loans Not Secured by a Principal Residence
• E-1.2-04, Timing of the Foreclosure Referral for Government Mortgage Loans
• E-1.3-01, General Servicer Responsibilities for Non-Routine Matters
• E-1.3-02, Reporting Non-Routine Litigation to Fannie Mae
• E-1.3-03, Reporting “Legal Filings” to MERS
• E-2.1-01, General Servicing Requirements for Mortgage Loans Under Bankruptcy Protection
• E-2.1-02, Confirming Bankruptcy Information
• E-2.1-03, Suspending Debt Collection Efforts
• E-2.1-04, Expected Servicer/Attorney Interaction During Bankruptcy Proceedings
• E-2.1-05, Filing a Notice of Appearance and Sending Proper Notices
• E-2.1-06, Reviewing Bankruptcy Reorganization Plans
• E-2.1-07, Preparing and Filing a Proof of Claim
• E-2.1-08, Monitoring Borrower Payments and Critical Dates
• E-2.1-09, Identifying Workout Opportunities
• E-2.1-10, Dealing with Delays in the Bankruptcy Process
• E-2.1-11, Remitting P&I for MBS Mortgage Loans That Are Part of a Bankruptcy
• E-2.2-01, Managing Chapter 7 Bankruptcies
• E-2.2-02, Managing Chapter 11 Bankruptcies
• E-2.2-03, Managing Chapter 12 Bankruptcies
• E-2.2-04, Managing Chapter 13 Bankruptcies
• E-2.3-01, Identifying Abusive Filers
• E-2.3-02, Addressing Individuals with Fractional Interests in a Security Property
• E-2.3-03, Handling Cramdowns of the Mortgage Debt
• E-2.3-04, Bankruptcies Involving Mortgage Loans Secured by Investment Properties
• E-2.3-05, Bankruptcies Involving Multiple Fannie Mae Mortgage Loans
• E-2.3-06, Responding to Bankruptcies Identified After Foreclosure Sale
• E-2.3-07, Cross-Border Insolvency Proceedings
• E-3.1-01, General Servicing Requirements Related to Foreclosure Proceedings
• E-3.1-02, Performing Due Diligence Prior to Considering Foreclosure
• E-3.1-03, Fannie Mae Address for Instruments of Record
• E-3.1-04, Addressing a Bankruptcy Filed During Active Foreclosure
• E-3.2-01, Conducting Prereferral Review
• E-3.2-02, Initiating Foreclosure Proceedings on a First Lien Conventional Mortgage Loan
• E-3.2-03, Initiating Foreclosure Proceedings on a Second Lien Conventional Mortgage Loan
• E-3.2-04, Postponing Foreclosure Referral for Mortgage Loans Not Secured by a Principal Residence
• E-3.2-05, Expected Servicer/Attorney Interaction During Foreclosure Proceedings
• E-3.2-06, Conducting Borrower Outreach During Foreclosure
• E-3.2-07, Impact of Engagement with a Mortgage Assistance Fund Program Provider
• E-3.2-08, Processing Reinstatements During Foreclosure
• E-3.2-09, Conducting Foreclosure Proceedings
• E-3.2-10, Paying Certain Expenses During the Foreclosure Process
• E-3.2-11, Collecting Under an Assignment of Rents
• E-3.2-12, Performing Property Preservation During Foreclosure Proceedings
• E-3.2-13, Addressing Title Defects Generally
• E-3.2-14, Addressing Title Defects for Bifurcated Mortgage Loans
• E-3.2-15, Allowable Time Frames for Completing Foreclosure
• E-3.3-01, Completing Preforeclosure Sale Review
• E-3.3-02, Certifying the Status of Workout Negotiations Prior to Foreclosure Sale
• E-3.3-03, Inspecting Properties Prior to Foreclosure Sale
• E-3.3-04, Marketing the Foreclosure Sale and Using Foreclosure Auction Services
• E-3.3-05, Issuing Bidding Instructions
• E-3.3-06, Handling a Suspension or Reduction of the Redemption Period
• E-3.3-07, Pursuing a Deficiency Judgment
• E-3.4-01, Suspending Foreclosure Proceedings for Workout Negotiations
• E-3.4-02, Canceling the Foreclosure Sale for a Completed Workout
• E-3.5-01, Foreclosure of a Property Securing an MBS Mortgage Loan
• E-3.5-02, Handling Third-Party Sales
• E-3.5-03, Providing Evidence of Title
• E-4.1-01, Notifying Fannie Mae of an Acquired Property
• E-4.1-02, Eliminations and Rescissions of Foreclosure Sales
• E-4.2-01, Completing Conveyance Documents
• E-4.2-02, Handling Reconveyance to the Insurer or Guarantor
• E-4.3-01, Managing the Property Post-Foreclosure Sale
• E-4.3-02, Inspecting Properties Post-Foreclosure Sale
• E-4.3-03, The Broker's, Agent's, or Property Management Company's Responsibilities
• E-4.3-04, Handling Eviction Proceedings
• E-4.4-01, Continuing or Canceling Property Insurance Coverage
• E-4.4-02, Remitting Property Insurance Settlement Proceeds or Unearned Premium Refunds
• E-4.4-03, Canceling Flood Insurance Coverage for Acquired Properties
• E-4.4-04, Remitting Flood Insurance Settlement Proceeds or Unearned Premium Refunds
• E-4.5-01, Filing MI Claims for Conventional Mortgage Loans or for Other Mortgage Loans for which Fannie Mae Bears the Risk of Loss
• E-4.5-02, Filing MI Claims for FHA Mortgage Loans
• E-4.5-03, Filing MI Claims for FHA Coinsured Mortgage Loans
• E-4.5-04, Filing MI Claims for FHA Title I Loans
• E-4.5-05, Filing MI Claims for HUD Section 184 Mortgage Loans
• E-4.5-06, Filing MI Claims for VA Mortgage Loans
• E-4.5-07, Filing MI Claims for RD Mortgage Loans
• E-5-01, Requesting Reimbursement for Expenses
• E-5-02, Servicer Responsibilities Prior to Requesting Reimbursement of Attorney Fees and Costs
• E-5-03, Allowable Bankruptcy Fees
• E-5-04, Allowable Foreclosure Fees
• E-5-05, Reimbursing Law Firms/Reimbursement of Uncollected Fees, Costs or Advances
• E-5-06, Technology Fees and Electronic Invoicing
• E-5-07, Other Reimbursable Default-Related Legal Expenses
• F-1-01, Servicing ARM Loans
• F-1-02, Escrow, Taxes, Assessments, and Insurance
• F-1-03, Establishing and Implementing Custodial Accounts
• F-1-04, Evaluating a Request for the Release, or Partial Release, of Property Securing a Mortgage Loan
• F-1-05, Expense Reimbursement
• F-1-06, Filing an MI Claim for a Liquidated Mortgage Loan or Acquired Property
• F-1-07, Handling Property Forfeitures and Seizures
• F-1-08, Managing Foreclosure Proceedings
• F-1-09, Processing Mortgage Loan Payments and Payoffs
• F-1-10, Obtaining and Executing Legal Documents
• F-1-11, Post-Delivery Servicing Transfers
• F-1-12, Preparing to Implement a Workout Option
• F-1-13, Processing a Fannie Mae Mortgage Release (Deed-In-Lieu of Foreclosure)
• F-1-14, Processing a Fannie Mae Short Sale
• F-1-15, Processing a Government Mortgage Loan Modification
• F-1-16, Processing a Repayment Plan
• F-1-17, Processing a Transfer of Ownership
• F-1-18, Processing a Workout Incentive Fee
• F-1-19, Processing a Military Indulgence
• F-1-20, Remitting and Accounting to Fannie Mae
• F-1-21, Reporting a Delinquent Mortgage Loan via Fannie Mae’s Servicing Solutions System
• F-1-22, Reporting a Workout Option via Fannie Mae’s Servicing Solutions System
• F-1-23, Reporting to Third Parties
• F-1-24, Requesting Fannie Mae’s Approval via Fannie Mae’s Servicing Solutions System
• F-1-25, Reclassifying or Voluntary Repurchasing an MBS Mortgage Loan
• F-1-26, Servicing eMortgages
• F-1-27, Processing a Fannie Mae Flex Modification
• F-1-28, Reviewing a Transfer of Ownership for Credit and Financial Capacity
• F-2-01, Bankruptcy Referral and Completion Timelines
• F-2-02, Incentive Fees for Workout Options
• F-2-03, Compensatory Fee Calculation Examples
• F-2-04, Firm Minimum Requirements
• F-2-05, Historical Yield Differential Adjustment Provisions
• F-2-06, Mortgage Insurer Delegations for Workout Options
• F-2-07, Reporting the Principal Amount for Mortgage Loans with Principal Forbearance
• F-2-08, Servicing Fees for MBS Mortgage Loans
• F-2-09, Servicing Fees for Portfolio Mortgage Loans
• F-2-10, Fannie Mae’s Workout Hierarchy
• F-3-01, Acronyms and Glossary of Defined Terms: A
• F-3-02, Acronyms and Glossary of Defined Terms: B
• F-3-03, Acronyms and Glossary of Defined Terms: C
• F-3-04, Acronyms and Glossary of Defined Terms: D
• F-3-05, Acronyms and Glossary of Defined Terms: E
• F-3-06, Acronyms and Glossary of Defined Terms: F
• F-3-07, Acronyms and Glossary of Defined Terms: G
• F-3-08, Acronyms and Glossary of Defined Terms: H
• F-3-09, Acronyms and Glossary of Defined Terms: I
• F-3-10, Acronyms and Glossary of Defined Terms: J
• F-3-11, Acronyms and Glossary of Defined Terms: K
• F-3-12, Acronyms and Glossary of Defined Terms: L
• F-3-13, Acronyms and Glossary of Defined Terms: M
• F-3-14, Acronyms and Glossary of Defined Terms: N
• F-3-15, Acronyms and Glossary of Defined Terms: O
• F-3-16, Acronyms and Glossary of Defined Terms: P
• F-3-17, Acronyms and Glossary of Defined Terms: Q
• F-3-18, Acronyms and Glossary of Defined Terms: R
• F-3-19, Acronyms and Glossary of Defined Terms: S
• F-3-20, Acronyms and Glossary of Defined Terms: T
• F-3-21, Acronyms and Glossary of Defined Terms: U
• F-3-22, Acronyms and Glossary of Defined Terms: V
• F-3-23, Acronyms and Glossary of Defined Terms: W
• F-3-24, Acronyms and Glossary of Defined Terms: X
• F-3-25, Acronyms and Glossary of Defined Terms: Y
• F-3-26, Acronyms and Glossary of Defined Terms: Z
• F-4-01, References to Fannie Mae's Website
• F-4-02, List of Contacts
• F-4-03, List of Lender Contracts

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HUD Updates MOE Assignment Requirements for HECMs

On September 23, 2019, HUD issued Mortgagee Letter 2019-15 (ML 2019-15), which updates the Mortgagee Optional Election (MOE) Assignment requirements for HECMs with an Eligible Surviving Non-Borrowing Spouse (Eligible Surviving NBS).  ML 2019-15 is effective immediately and applies to all HECMs with FHA case numbers assigned prior to August 4, 2014.

HUD previously issued Mortgagee Letter 2015-15 (ML 2015-15), which provides mortgagees the option to defer the due and payable date of HECMs with an Eligible Surviving NBS and assign them to FHA through a MOE Assignment.  In ML 2019-15, HUD states that since the MOE Assignment process was implemented pursuant to ML 2015-15, mortgagees have experienced difficulties complying with various MOE requirements (e.g., the requirement that the Eligible Surviving NBS must, within 90 days following the death of the last surviving borrower, obtain good, marketable title to the property or a legal right to remain in the property for life).  ML 2019-15 modifies the MOE Assignment requirements and, according to HUD, addresses the complications mortgagees have experienced under ML 2015-15.

Some of the key changes made by ML 2019-15 include the following:

• For example, a mortgagee is no longer required to notify HUD of its election to do a MOE Assignment within 120 days of the death of the last surviving borrower.  However, the mortgagee must still notify HUD of its election as soon as the mortgagee determines it will pursue a MOE Assignment.
• To demonstrate reasonable diligence in processing a MOE Assignment and avoid any curtailment, the mortgagee must initiate a MOE Assignment within 180 days from the date the last surviving borrower dies, or the effective date of ML 2019-15, whichever is later.
• ML 2019-15 provides a revised model Eligible Surviving NBS Certification and updates the documentation requirements for a MOE Assignment.
• Appendices A and B of ML 2019-15 provide a sample information collection form and a fact sheet that servicers may use to obtain NBS information.

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What to Expect When Your Reverse Mortgage is Assigned to HUD

We received a notice that our reverse mortgage loan is being assigned to HUD, along with the name of the handling company.  This company has numerous complaints, especially about foreclosing before heirs can settle the home.  I am the beneficiary of my mom’s house, which is in a trust and a will to avoid probate.  What recourse do I have if they refuse to work with me and foreclose despite my efforts?  The complaints mention lies, runarounds, no payoff amounts, and unreturned calls.  This is terrifying, as there’s enough equity to sell the house and pay off the loan.  I don’t want to hire an attorney if I’m following all requirements and they still refuse to cooperate.  Who can I complain to, and why is this company still in business?  My mother, who has the reverse mortgage, is still alive but may not have much longer.  Why do they make settling the loan so difficult? -Thank you, Laura K.

Why Lenders Assign Reverse Mortgages to HUD

Let’s start with some background.

Reverse mortgages are typically assigned to HUD when the loan amount is very high compared to the original value or maximum claim amount.  The HUD manual mentions other reasons for assignment, but this is the most common one.

Many homes that reach this point have little to no equity left because borrowers have used all the funds available to them, and the interest has accrued on the loan.  This is the purpose of a reverse mortgage: it allows borrowers to live in the property without making payments.

If borrowers can afford to make monthly payments to keep equity in the property, they can do so with a reverse mortgage.  However, most borrowers choose a reverse mortgage to live in their home without making payments.

Once the borrowers no longer live in the home, HUD’s servicer will move quickly toward foreclosure to minimize losses if they believe the heirs are not actively working to pay off the loan.

Timing of Reverse Mortgage Assignments to HUD

Most reverse mortgages are assigned to HUD when there is little equity left in the property.  The longer they wait, the more losses they will incur.  Ideally, HUD prefers that heirs pay off the loans, but this is not common when there is little equity.

HUD will contact an appraiser to assess the property’s value.  If there is no equity and no one has transferred the title from the deceased borrowers, it is clear that no one is making an effort to repay the loan promptly.

Reverse mortgage lenders and servicers have been sued for releasing information to unauthorized individuals.  They can only release information if they have written consent from the borrower, a court order, or a trust with a certified successor trustee.

If someone contacts them without proper authorization, they cannot release any information.  This is not the lender or HUD being difficult; it is the law and a result of previous lawsuits.

To avoid issues, make sure everything is in order ahead of time.  I have overseen a few reverse mortgage payoffs (including settling my own mother’s loan), and they went smoothly.

Here’s what you need to do:

Setting Up Authority with the Servicer

Ensure you have the authority to speak with the lender on behalf of the loan.  This can be done now by having your parents sign an authorization form, allowing the lender or servicer to communicate with the heirs they designate.  With this authorization in place, the lender can discuss all loan-related matters with the designated heirs.

This applies to all heirs and must be done in advance. It’s too late to have Mom and Dad sign an authorization after they pass away or become incapacitated.

Ensuring the Trust is in Order

If your mom has a family trust , speak to your estate attorney now and devise a plan to complete the certification of the trust as soon as possible after your mom passes.  If your mom is incapacitated, the trust may contain language allowing you to be moved from successor trustee to trustee immediately so you do not have to wait.

Either way, when your mom passes, you will already be the new trustee, with the power to sell the property or take out a new loan without delay.

Neither HUD nor the servicer wants to foreclose.  However, they cannot speak to anyone who is not authorized to communicate on behalf of the borrower or show proof of being the new owner.  This process usually takes time if you have to go through probate or if heirs do not take immediate steps to change the title after the borrowers pass.

Often, heirs start contacting the lender without proper authorization, leading to frustration and negative comments you may have read.  If you have taken the necessary steps to change the title and have the trust certification showing you are now the trustee, the servicer can and will work with you to sell the home.

If you are not recognized as authorized to communicate and act on the borrowers’ behalf, and the title is still in the borrowers’ names (the estate) with no moves being made to change that, the foreclosure action will eventually begin in accordance with the loan terms, especially if there is no equity left in the property to minimize losses.

I recommend taking the steps outlined above: get a signed authorization from your mom if she is capable, or move to position yourself as the trustee of the trust if you are the successor trustee.  This will make dealing with the reverse mortgage much easier.

Consulting with an Attorney

As always, I strongly recommend that you speak to your estate attorney who handled the will and trust and get legal advice on any tax or other estate implications before taking any action.

If you ensure that your title and authorizations are in order in advance, you will likely find the process much easier than you have been led to believe.

ARLO recommends these helpful resources: 

• Reverse Mortgage After Death: What Heirs & Family Must Know
• HUD Servicing Manual .PDF (4235.1 REV-1 )

Have a Question About Reverse Mortgages?

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3 Stocks That Could Bounce Back in the Second Half of 2024

• UiPath is down 49% this year, but analysts see a return to growth next year.
• A new CEO and recent layoffs could stabilize Chegg, a stock that is trading for just 3 times earnings.
• Roku has fallen after more than doubling last year, but it's still growing in the metrics that matter.
• Motley Fool Issues Rare “All In” Buy Alert

These stocks are down as much as 74% this year. Tap into your inner contrarian.

It's been a rough first half for some investors. If you owned shares of UiPath ( PATH ) , Chegg ( CHGG 6.76% ) , and Roku ( ROKU 1.32% ) since the start of 2024, you're in a world of hurt. The three stocks are down between 36% and 74% so far this year.

It doesn't have to stay that way. I think all three stocks have a chance to deliver meaningful gains in the final six months of 2024. They may not make back the ground they lost in the first half of this year, but even a modest bounce from these humble starting lines can beat the market. Let's take a closer look.

1. UiPath, Down 49%

It's hard to believe that UiPath has been roughly cut in half this year. As a leading provider of robotics, automation, and artificial intelligence software solutions, this should be a fertile stock in 2024. Between wage inflation driving labor expenses higher and companies trying to gain an operational edge, UiPath's tech platform for robotic process automation should be a dinner bell. So far this year, it's been a fire alarm.

UiPath's biggest hit came in late May following a poorly received quarterly report . Weak guidance and losing its second CEO this year weren't bullish events. Now it's time to see if the dramatic markdown here is ripe for a comeback story.

UiPath began the year with a pair of CEOs. Co-founder Daniel Dines, who was serving as co-CEO, stepped down in January. His fellow helmsman backed out at the end of May following the brutal financial update after just a couple of months as lone CEO. Dines agreed to return to the corner office.

Image source: Getty Images.

Growth has slowed at UiPath. The 16% revenue increase for its fiscal first quarter is about half the year-over-year jump it posted three months earlier. Its latest guidance suggests that the top line will continue to decelerate. The news isn't necessarily any better on the bottom line. UiPath remains profitable on an adjusted basis, but it's not expected to return to reported profitability until 2027.

Why should one be optimistic in the near term here? Well, despite the uninspiring guidance for the balance of 2024, analysts see revenue accelerating from 8% this fiscal year to 12% next year. It has a cash-rich balance sheet that shaves its current $7.3 billion market cap to an enterprise value of just $5.4 billion. It's going through some hiccups, but it still topped $100 million in adjusted free cash flow in its latest quarter, and it has found a way to exceed Wall Street's profit targets in each of the last four quarters. Dines is back, and what a great name to ring the dinner bell again.

2. Chegg, Down 74%

The biggest sinker on this list is Chegg. The homework help specialist has been reeling since warning that ChatGPT is eating away at its business nearly 14 months ago. It was sputtering before it said the obvious. It has posted negative year-over-year revenue growth for eight consecutive quarters. However, those were single-digit top-line declines. Guidance calls for a slide of 12% to 13% in the current quarter.

Chegg knows the assignment. It's a study help pro, after all. The new CEO who took over last month was the chief operating officer who set the company on the track to embrace AI to avoid disruption well before the market knew there was a problem. Chegg also remains very profitable. It's trading for less than 3 times trailing and forward adjusted earnings. The multiple is still less than five if you prefer to go with enterprise value instead of market cap. The price-to-free-cash-flow multiple is even lower.

Chegg is a money tree, but it has mistakenly spent a lot of that greenery on buying back shares at much higher price points. It spent more than $300 million on repurchases last year alone, more than enough to swallow its entire remaining share count at today's deeply discounted prices. Last week it announced that it would be reducing its workforce by 23% , a move that will help shave costs as it puts more effort into leading the way in AI-fueled educational tools.

3. Roku, Down 36%

Let's close with Roku. The popular TV streaming enabler is doing well on some fronts. Revenue and user counts are growing in the double digits, and engagement has never been stronger. However, a lack of profitability, near-term competitive concerns, and sluggish connected TV advertising growth are weighing on the niche pioneer.

Roku is volatile, and it has a knack for bouncing back after a sell-off. The stock isn't likely to return to its 2021 peak anytime soon, but the business is a lot larger and its reach much wider since then. If recent efforts to prioritize initiatives that will deliver strong early returns pay off, Roku will be more than just a four-letter word to investors who have been burned in 2024.

Rick Munarriz has positions in Chegg, Roku, and UiPath. The Motley Fool has positions in and recommends Roku and UiPath. The Motley Fool recommends Chegg. The Motley Fool has a disclosure policy .

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