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Foreclosure News | Foreclosure Resources | Foreclosure Prevention Guide

Foreclosure Prevention Becomes More Lucrative

Fannie raises servicer incentives

August 12, 2008

By MortgageDaily.com staff

Following a similar move by Freddie Mac last month, Fannie Mae said it would increase incentives to servicers that successfully avert foreclosures.

Fees paid for repayment plans have been bumped to $400, according to Announcement 08-20 issued Monday. The fee applies to loans that are at least 60 days past due when first reported and are brought current upon successful completion of the repayment plan. Successive repayment plans will only be considered no sooner than 12 months after the loan is brought current from the prior repayment plan.

The Washington, D.C.-based company said it will pay servicers $700 for the successful completion of a HomeSaver Advance. The incentive is contingent upon the borrower making the first-lien payments within the month due during the first three months.

Servicers will be paid $200 after the HomeSaver note is executed and delivered, while the remaining $500 will be paid after the three required monthly payments are recorded in Fannie's servicing system.

Successfully completed modifications will also earn servicers $700. Payment is subject to the case entry into the Home Saver Solutions Network.

But servicers can no longer charge $500 in administrative processing costs associated with modifications, though they can charge for actual out-of-pocket credit report and title bringdown expenses.

Incentives will be paid to servicers monthly, and no requests need to be submitted by servicers.

Properties that are successfully sold in a pre-foreclosure sale will earn servicers $1,500 when the net proceeds to value are at least 92 percent or when the mortgage insurance claim is projected to cover all of Fannie's losses. The incentive will be $1,250 when the NPTV is at least 90 percent, while NPTVs lower than 90 percent will earn servicers $1,000.

Servicers need to identify the applicable incentive fee amount when entering the pre-foreclosure sale case in the Home Saver Solutions Network. They also need to submit a cash disbursement request that includes reimbursements for attorneys' fees and other associated expenses.

Completed deeds-in-lieu will earn $1,000 for servicers. In addition, attorney's fees and title update fees that the borrower can't afford can be reimbursed.

"Incentive fees are only applicable to mortgage loans serviced under the special servicing option, in which Fannie Mae assumes the risk of loss from borrower default," Fannie stated. "The new incentive fee amounts are effective for repayment plans or loss mitigation alternatives completed on or after Aug. 11."

Fannie reported that residential 90-day delinquency was 1.30 percent on May 31, climbing from 1.22 percent on April 30 and rising each month since May 2007, when delinquency stood at just 0.62 percent

In July, cousin Freddie Mac -- which reported its 90-day delinquency during May rose to the highest level since February 2004 -- said it would double foreclosure prevention fees for its servicers.

GSE News | Fannie/Freddie Share Statistics
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