© 2018 Fannie Mae Single Family Servicing Guide
Introduction
SCRA provides protection and relief to civilians who incur a mortgage debt and subsequently enter military service, including members of the National Guard who are called to active duty by federal authorities. Fannie Mae’s military indulgence policy covers those servicemembers entitled to relief under SCRA as well as members of the National Guard or other state-supported military unit who are called to active duty by a state governor and entitled to state-mandated relief. The relief generally begins when the individual reports for active duty and ends a period of time after he or she is separated from active duty. The servicer must grant relief in compliance with applicable law
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(see Selling Guide A3-2-01, Compliance with
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Laws).
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This topic contains the following:
- Initiating Relief
- Reducing the Interest Rate
- Providing Forbearance
- Initiating or Proceeding with Foreclosure Proceedings
Initiating Relief
Before granting any military indulgence (which includes
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any
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protection afforded to a servicemember by applicable law), the servicer must document the servicemember’s active duty orders using (i) Fannie
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Mae’s Request for Military Indulgence (Form 180) or (ii) other sources (such as a report certifying the active duty status for a servicemember from the Defense Manpower Data Center, an organization within the Department of Defense) and other forms such as
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the Mortgage Assistance Application (Form
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710), or equivalent, to document financial and hardship information. While use
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of Form 180
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is optional, it reflects the minimum level of information the servicer must obtain to verify the servicemember’s active duty orders, unless the servicemember is requesting assistance in addition to the assistance that is required under the SCRA.
Note: The servicer is authorized to
- identify servicemembers who may be eligible for Fannie Mae’s military indulgence by using the Defense Manpower Data Center’s SCRA website database, and
- proactively inform active duty servicemembers of Fannie Mae’s military indulgence options.
The servicer should contact the eligible servicemember or his or her family, at a minimum, every three months to determine when his or her active duty status will end
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If the servicer must waive any late charges that became due after the servicemember was called to active duty.
If the servicemember receives a military indulgence forbearance in accordance with applicable law, the servicer must consider the mortgage loan to be current as long as the servicemember remits the amount, if any, required in accordance with the terms of the military indulgence forbearance.
Reducing the Interest Rate
The servicer must grant an eligible servicemember a reduction in the interest rate to 6% in accordance with the provisions of the SCRA; provided, however, that the servicer must not exercise the option provided by the SCRA to apply to a court for relief from reducing the interest rate to 6% if the servicer is of the opinion that the servicemember’s ability to pay interest at a rate in excess of 6% per year is not materially affected by reason of the servicemember’s military service. The servicer should make the new interest rate effective with the first payment due after the servicemember (i) enters active duty or (ii) is entitled to the new interest rate under the SCRA.
If the servicemember is unable to make the full monthly payment after the interest rate is reduced to 6%, see Chapter D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options for additional information on workout options that may be available. In addition to reducing the interest rate to 6%, the servicer must reapply any prepaid monthly payments with due dates during the period of active duty at the 6% interest rate. If the servicemember fails to notify the servicer when he or she enters active duty status, but subsequently provides evidence of the active duty status, the servicer must reapply any monthly payments made during the period of active duty at the 6% interest rate. Installments that are delinquent when the servicemember enters active duty status must be paid at the interest rate that was in effect when the payments came due. The servicer must provide the following options to the servicemember regarding the treatment of any remaining funds after any reapplication:
- application as a monthly payment, if sufficient;
- application as a principal curtailment; or
- a refund to the servicemember.
The servicer must follow the procedures
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in Determining the Monthly Mortgage Payment Amount
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for calculating the monthly payment amount during and after the servicemember’s active duty and
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in Determining the Servicing Fee Amount
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for calculating the servicing fee
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in F-1-
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22, Processing Military Indulgence
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(06/13/2018). The servicer must provide written correspondence to the servicemember that indicates the new payment amount, the date it becomes effective, and the date it will be discontinued and the servicemember is not required to execute any document to reflect the reduced interest rate attributable to the military indulgence.
Providing Forbearance
If the servicemember is unable to make the full monthly payment after the interest rate is reduced to 6%, the servicer is authorized to agree to accept lesser payments, which can continue for the entire term of the servicemember’s active duty and for any period after active duty ends in which the SCRA requires an interest rate reduction to 6%. If the servicemember is unable to repay all delinquent installments under the mortgage loan within this time, the servicer must work out a repayment plan that cures the delinquency as soon as possible. If circumstances warrant, the servicer must consider modifying the mortgage loan once the servicemember’s active duty has been completed.
While the servicer should request the servicemember to pay an amount that is at least equal to the amount needed to cover escrow deposits for T&I payments, it must arrange repayment terms that best suit the individual servicemember’s ability to pay, while keeping in mind the need to minimize the accumulated arrearages. The servicer must not require the servicemember to have a court order to obtain this relief. The servicer must waive any late charges that become due after the servicemember was called to active duty.
If Fannie Mae’s mortgage loan is in a second lien position and the first lien mortgage loan is granted military indulgence, the second lien mortgage loan must also be placed under military indulgence. The servicer of the second lien mortgage loan must request a copy of the military indulgence plan for the first lien mortgage loan, and, if provided, make sure that the indulgence period for the second lien mortgage loan will end at the same time.
The servicer must consider the mortgage loan to be current as long as the servicemember remits the amount required per the terms of the military indulgence forbearance agreement. If the mortgage loan becomes 90 days delinquent under the terms of the military indulgence forbearance agreement, the servicer must investigate the reason for the delinquency and arrange additional forbearance, if appropriate, but must not initiate foreclosure proceedings. If the servicemember cannot make any monthly payments, the servicer must instruct him or her to request a stay in enforcement of the mortgage loan terms from the court.
Initiating or Proceeding with Foreclosure Proceedings
The servicer must attempt to ascertain the military status of the mortgagor(s) before initiating foreclosure proceedings and must comply with specific state or local laws that address the effect of the SCRA on the foreclosure process, or that impose other restrictions or limitations on foreclosure for servicemembers.
The servicer must stay any foreclosure proceedings that were already in process or postpone the initiation of foreclosure proceedings against a servicemember eligible for military indulgence. The servicer must also provide a 12–month extended stay of foreclosure and other legal proceedings from the date on which military service ends. The servicer must not attempt to obtain the eligible servicemember’s written consent or petition the court to continue or commence foreclosure proceedings
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Related Announcements
The following table provides references to Announcements that are related to this topic.
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