Fannie Mae Issues Servicing Standards for Delinquent Mortgages

By Fannie Mae, PRNE
Sunday, June 5, 2011

WASHINGTON, June 6, 2011 -

- Standards are First Step in Fannie Mae's Implementation of the Aligned
Servicing Requirements Announced by FHFA on April 28, 2011

Fannie Mae (OTC Bulletin Board: FNMA) today issued new standards for
mortgage servicers regarding the management of delinquent loans, default
prevention and foreclosure time frames under the Federal Housing Finance
Agency's Servicing Alignment Initiative. The new standards, reinforced by new
incentives and compensatory fees, require servicers to take a more consistent
approach for homeowner communications, loan modifications and other workouts,
and, when necessary, foreclosures.

"These new standards give homeowners facing difficulty making their
mortgage payments a clear, consistent process," said Jeff Hayward, Senior
Vice President of Fannie Mae's National Servicing Organization. "We want
homeowners to be able to understand their options when facing foreclosure,
and we want servicers to reach homeowners early in the process, communicate
frequently and clearly, and help homeowners avoid foreclosure."

These standards require servicers to implement consistent processes
across a number of areas, and hold them accountable if they do not.

Borrower Contact. Under the new standards, servicers must achieve
"quality right party contact" with borrowers. This includes building a strong
customer-service relationship with homeowners, determining the reasons for
their delinquency, assessing their ability to pay, and educating homeowners
on the availability of foreclosure prevention options. Fannie Mae's borrower
contact standards will increase servicer effectiveness in reaching
homeowners, bring greater consistency and clarity to servicer communications
with homeowners, and increase the likelihood that servicers will contact
homeowners early in the default process, which is one of the most important
factors in reaching a resolution that avoids a foreclosure. During the first
120 days of delinquency, homeowners will be contacted both verbally and in
writing to complete a mortgage modification or other solution to remain in
the home, or enter into an arrangement to exit the home without a

Foreclosure Timelines. Servicers must follow clear timelines for
referring loans to foreclosure, setting a date of sale for foreclosed
properties, and use of designated counsel, and they will face compensatory
fees for timeline violations. These standards will bring greater consistency,
fairness, and efficiency to a process that has too often been characterized
by inconsistency, abuse, and delay - to the detriment of mortgage investors,
homeowners, and communities alike. Once 120 days of delinquency have passed,
the foreclosure process will begin.

"We hope this step will encourage any homeowner who has not yet acted to
work with the servicer to pursue all options to avoid foreclosure," said
Hayward. "But even in situations where foreclosure can't be avoided, we
believe this process and this timetable will help motivate all participants
toward resolutions that will ultimately stabilize neighborhoods as quickly as

Incentives and Compensatory Fees. Fannie Mae will provide incentives for
servicers to complete loan workouts earlier in a homeowner's delinquency, and
charge compensatory fees when servicers fail to make quality right party
contact. Incentives and fees will be based on clear benchmarks. These steps
are intended to help improve servicer performance and hold servicers
accountable for their effectiveness in assisting homeowners. Compensatory
fees remain a possibility for servicers who do not process foreclosures in a
timely manner.

Between January 1, 2009 and March 31, 2011, Fannie Mae helped over
500,000 struggling homeowners avoid foreclosure. Implementation of the new
servicing standards will speed further progress and ensure greater clarity
for servicers on how to work with homeowners.

The new standards are set forth in two servicing guide announcements. To
view the announcements, visit here
( and
here (

Fannie Mae exists to expand affordable housing and bring global capital
to local communities in order to serve the U.S. housing market. Fannie Mae
has a federal charter and operates in America's secondary mortgage market to
enhance the liquidity of the mortgage market by providing funds to mortgage
bankers and other lenders so that they may lend to home buyers. Our job is to
help those who house America.

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Andrew Wilson, +1-202-752-5168

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