Paying Interest on an Escrow Account
Fannie Mae will not reimburse the servicer when the servicer pays interest on an escrow account, whether required by law or voluntary.
Waiving Escrow Account Requirements
The servicer must not solicit a borrower with an offer to waive the escrow account requirements but is authorized to evaluate a borrower’s request subject to the requirements in the following table.
| ✓ | The servicer must... |
|---|---|
Evaluate whether it is appropriate to waive the escrow account requirement based on the mortgage loan documents and applicable law. | |
Deny a request to waive escrow requirement for a mortgage loan if
| |
Maintain the basis for the waiver decision and any disclosures provided to the borrower, if applicable, in the mortgage loan servicing file. The servicer must make this information available to Fannie Mae upon request. |
The servicer must not waive the individual escrow requirement for MIPs when the premiums are paid monthly.
Administering an Escrow Account in Connection With a Mortgage Loan Modification
The following table outlines the escrow requirements when a servicer enters a mortgage loan modification.
| ✓ | The servicer must... |
|---|---|
Revoke any escrow deposit account waiver and establish an escrow deposit account in accordance with Fannie Mae’s requirements, unless the mortgage loan modification is a Streamlined Modification Post Disaster Forbearance (see D2-3.2-09, Fannie Mae Streamlined Modification Post Disaster Forbearance for additional information) or a Cap and Extend Modification for Disaster Relief (see D2-3.2-10, Fannie Mae Cap and Extend Modification for Disaster Relief for additional information) and the borrower is current on the payments for taxes, special assessments, property and flood insurance premiums, premiums for borrower-purchased MI, ground rents, and similar items. | |
Analyze an existing escrow account to estimate the periodic escrow deposit required to ensure adequate funds are available to pay future charges, taking into consideration T&I premiums that may come due during any trial period. In the event the initial escrow analysis identifies a shortage, collect such funds from the borrower over a 60-month period unless the borrower decides to pay the shortage up-front. When the servicer calculates the repayment of the escrow shortage over a 60-month period, any subsequent shortage that may be identified in the next annual analysis cycle must be spread out over the remaining term of the initial 60-month period. | |
Ensure the borrower’s monthly mortgage loan payments, including trial period payments, include an escrow payment. See the applicable mortgage loan modification program in Section D2–3.2, Home Retention Workout Options for additional information. |
Manufactured Home Tax Requirements
When the property securing the mortgage loan is a manufactured home, the servicer must ensure the manufactured home and land are taxed as real property and a single tax bill is issued.
If this is not possible, the dwelling must be taxed separately as personal property and the servicer must adjust its system to escrow for both real and personal property taxes. Fannie Mae’s requirements for real estate taxes apply equally to personal property taxes applicable to the dwelling.
Paying a Special Assessment
When a special assessment is imposed on a property, including by a HOA of a PUD or condo, the servicer must
- maintain accurate records on the status of a special assessment that could become a lien against a property, and
- advance its own funds to pay the special assessment to protect the priority of Fannie Mae’s mortgage lien when the HOA notifies the servicer that the borrower is 60 days delinquent in the payment of the special assessment or charges levied by the association.
When pursuing foreclosure on a property in a PUD or condo project, the servicer must
- determine the amount to clear an HOA’s claim of lien and preserve the priority of the mortgage lien and pay the minimum amount necessary no later than 30 days after the foreclosure sale date or acceptance of a Mortgage Release, and
- notify Fannie Mae’s Legal department by submitting a Non-Routine Litigation Form (Form 20) if the HOA refuses to release its claim of lien against a property after reasonable efforts to reach an agreement.
The servicer must follow the procedures in General Expense Reimbursement Requirements in F-1-06, Expense Reimbursement to determine the timing and amount of advances, if any, Fannie Mae will reimburse.
Advancing Funds to Cover Expenses
The servicer must promptly advance the funds to cover an expense when an escrow account has insufficient funds to pay the expense in a timely manner. The servicer must require the borrower to reimburse it for advances because the escrow deposit account did not have sufficient funds to cover an expense or emergency repairs to the property. Any funds the servicer advances must stay in the T&I custodial account until the borrower remits funds sufficient to cure the deficit.
The following table outlines the requirements when the servicer waives the escrow account requirement and the borrower fails to pay the insurance premiums, taxes, or other related charges.
| ✓ | The servicer must... |
|---|---|
Advance the payment, including any late payment penalties, from its own funds. | |
Revoke any escrow waiver and establish an escrow account in accordance with Fannie Mae’s requirements to collect funds to repay the advances and pay future bills. |
The servicer must follow the procedures in General Expense Reimbursement Requirements in F-1-06, Expense Reimbursement to determine how to obtain reimbursement from future payments, and how to obtain reimbursement from Fannie Mae.
Related Announcements
The following table provides references to Announcements that are related to this topic.
Announcements | Issue Date |
|---|---|
May 10, 2017 |
Additional resources: https://www.fanniemae.com/content/guide/servicing/b/1/01.html