Overview

Statement Regarding Excess Fee/Cost Usage

Fannie Mae expects that our allowable foreclosure and bankruptcy fees/costs are sufficient compensation for the majority of cases your office will manage.  We will monitor your usage of Excess Fees/Costs and overall fees/costs incurred against others in your jurisdiction or similar jurisdictions.  Your total fee/cost dollars per managed case is one of many metrics that Fannie Mae will utilize to evaluate overall performance.

Indemnification for Losses

Fannie Mae Selling Guide, Part A, Subpart I, Chapter 1, Section A2-1-03 (Indemnification for Losses) provides that a lender or servicer has a responsibility to indemnify and hold Fannie Mae harmless against all losses, damages, judgments, claims, legal actions, costs and legal fees that are based on, or result from, the lender’s breach or alleged breach of its selling warranties and representations or its origination or selling activities related to Fannie Mae owned or Fannie Mae securitized mortgages loans. Similarly, Fannie Mae requires a servicer to make the same indemnification for all losses, damages, judgments, claims, legal actions, costs and legal fees that are based on, or result from, the lender’s failure or alleged failure to satisfy its duties and responsibilities as a mortgage servicer for Fannie Mae. This indemnification provision applies regardless of whether the claim, suit, or proceeding has merit.

Third Party Costs Related to Foreclosure and Bankruptcy

Fannie Mae guidelines generally require all legal costs to be actual, reasonable, and necessary. The retention agreement and related documents between Fannie Mae and the attorney may also contain specific guidelines concerning third-party costs for foreclosure and bankruptcy.  Law firms must be familiar with Fannie Mae’s fee and cost-related requirements.

Other Legal Fees

There may be other matters unrelated to foreclosure or bankruptcy where legal services are required to protect the interest of the servicer or Fannie Mae.  Examples of these matters include probate matters, condemnations, and defense of borrower or third-party actions that are outside foreclosure and bankruptcy proceedings. You must obtain our prior approval of legal fees related to these matters (see Non-Standard Excess Fees) to ensure the servicer will be properly reimbursed.  However, there may be some matters where our fee approval is not required because the fees are ineligible for reimbursement by Fannie Mae (see Ineligible Fees/Costs).   

As a general rule, foreclosure and bankruptcy proceedings should not be suspended pending excess fee approval, if the actions needing to be taken to protect Fannie Mae’s or the servicer’s interests are routine in nature (see Fannie Mae Servicing Guide, Part E, Chapter 3, Section E-3.4-01 [Suspending Foreclosure Proceedings for Workout Negotiations]). However, there may be nonroutine litigation matters or other nonroutine matters that require notification to Fannie Mae’s Legal Department prior to any action being taken (see Fannie Mae Servicing Guide, Part E, Chapter 1, Section E0-1.3 [Handling Non-Routine Litigation]). This notification should be sent to Fannie Mae’s Legal Department using the Form 20 process, which will enable Fannie Mae to concur in the necessity of the action, the selection of legal counsel, development of legal strategy, and approval of legal fees and costs.  At times, even if nonroutine actions must be taken to protect Fannie Mae’s or the servicer’s interest, fee approval may not be given by Fannie Mae (see Ineligible Fees). If you are unsure whether a matter is a nonroutine in nature, you should seek guidance from our Legal Department.

Supporting Documentation

Pursuant to Fannie Mae Servicing Guide, Part E, Chapter 5, Sections E-5-02 through E-5-05 (regarding requesting reimbursement for expenses associated with default-related legal matters), excess fee/cost requests must be submitted with supporting documentation and explanation to warrant the request.  Lack of information could cause an automatic denial. If the information cannot be obtained from the servicer, Fannie Mae will deem the servicer to be responsible for the fees/costs until if and when the necessary information is provided.