Legal Alert

Fannie Mae and Freddie Mac Update Servicing Requirements and Relief Related to COVID-19

March 25, 2020

On March 25, 2020, Fannie Mae and Freddie Mac updated their servicing requirements and relief related to the COVID-19 crisis. Fannie Mae updated Lender Letter 2020-02, and Freddie Mac issued Bulletin 2020-7.

Property Inspection and Preservation. Fannie Mae and Freddie Mac announce temporary flexibility regarding property inspection and preservation requirements. With regard to inspections, the relief relates to property inspections for delinquent loans and property inspections related to hazard insurance loss repairs.

Mortgage Insurance Cancellation. For borrower requests to cancel mortgage insurance that require a new valuation of the property through a broker price opinion or appraisal, Fannie Mae and Freddie Mac acknowledge that servicers may not be able to obtain the valuation. They instruct servicers to advise the borrower that the servicer is unable to approve the request until the valuation can be obtained, and all other requirements are satisfied.

QRPC. Fannie Mae and Freddie Mac address the requirement to establish Qualified Right Party Contact. Fannie Mae advises that a servicer is authorized to use various outreach methods to contact the borrower as permitted by applicable law, including without limitation mail, email, texting, and voice response unit technology. Freddie Mac states that while form letters and notices have a place in any servicing program, generally they are not as effective as personal contact and may not be used exclusively. Freddie Mac also states that collection techniques must include the use of telephone contacts or face-to-face interviews, written communications (such as notices and letters), and other responsible collection techniques as permitted by applicable law, including without limitation email, text messaging, voice response use technology, or a servicer’s web portal.

Delinquency Code. Fannie Mae and Freddie Mac advise that servicers should use a specified delinquency code that currently identifies another circumstance for identifying to them a borrower who has experienced a hardship associated with COVID-19. For Fannie Mae, servicers should use delinquency code 022, Energy-Environment Costs (and with a loan for which the servicer would have reported code 022, Energy-Environment Costs, it should use delinquency code 007, Excessive Obligations). For Freddie Mac, servicers should use delinquency code 032. While that code currently indicates “Contaminated drywall,” Freddie Mac advises that it will update its system to refer to “National Emergency Declaration.” 

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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