Fannie Mae Updates Servicers’ Payments of Homeowners Association & Condo Dues
by Carolyne Munyui
Assistant Vice President
On April 11, 2012, Fannie Mae issued an Announcement (SVC-2012005) requiring servicers to protect the priority of the mortgage lien and to clear all liens for delinquent homeowners’ association (HOA) dues and condo assessments, on properties acquired through foreclosure or deed-in-lieu of foreclosure. The Policy changes specified in this Announcement are effective July 1, 2012 but servicers are encourages to implement them as soon as possible.
Servicers must follow the policies outlined on this announcement for all conventional mortgage loans held in, or purchased from Fannie Mae’s portfolio but securitized in MBS pools, or have special or regular servicing option, or a shared-risk MBS pool with Fannie Mae or Servicer marketing the acquired property, or other loans sold to Fannie Mae under recourse or other credit enhancement arrangements.
Property Assessment
Servicers are required to advance funds when notified by an HOA for a PUD or condo project that borrower is 60 days delinquent in the payments, or charges levied by association inorder to protect the priority of Fannies Mae’s mortgage lien. Reimbursements for such advances may be provided to the servicer for up to 6 months in certain states.
In addition, Servicers are currently required to ensure any priority liens for delinquent HOA dues and assessments on acquired properties are cleared immediately, but no later than 30 days after the foreclosure sale or acceptance of a deed-in-lieu of foreclosure.
Servicers must take steps to protect the priority of the mortgage lien for properties located in states providing priority for assessment liens over a previously-recorded mortgage document. Servicer must determine the amount to be paid in order to clear the association’s claim of lien when pursuing foreclosure. The amount is generally the lowest of:
–The actual delinquent assessment balance and allowed costs
–The maximum amount due from the foreclosing first mortgage entity based on the provisions in the project’s declaration, or under the relevant state statute.
The servicer must pay this amount immediately following, but no later than 30 days after, the foreclosure sale date or acceptance of a deed-in-lieu of foreclosure. Clearing the priority lien within this time frame ensures Fannie Mae’s lien position is preserved and costly delays are avoided when selling the property. Fannie Mae is revising the reimbursement policy to servicers for the advances made.
If an association refuses to release its claim of lien against a property for the amount determined to be the obligated amount after reasonable efforts to reach agreement, the servicer or its foreclosure attorney must contact the Fannie Mae legal department for further guidance.
All other requirements provided in the associated sections of the Servicing Guide remain unchanged. Servicer responsibilities in regards to acquired properties are outlined on the Servicing Guide and as required by applicable state law. Non-compliance with Fannie Mae’s policy regarding delinquent HOA dues and assessments may result to repurchase,” make whole” or indemnification.
Servicers should contact their Servicing Consultant, Portfolio Manager or Fannie Mae’s National Servicing Organization’s Servicing Solutions Center at 1-888-FANNIE5 (888-326-6435) with any questions regarding this Announcement.
About the Author
Carolyne is A.V.P. and Director of Quality Assurance Research for Bankers Advisory. She formerly worked as a project manager for Fannie Mae in the National Loan Servicing Organization in Dallas, Texas. She can be reached at carolyne@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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