Loan Administration

Servicers should have processes to handle general servicing functions regarding escrow administration and the onboarding and offboarding of loans.

Each year, the servicer should analyze each escrow account to determine that the balance is adequate and, if necessary, make any adjustments to meet the estimated future charges. In addition, servicers should provide all appropriate parties timely notification of their escrow analysis, where applicable. Servicers should have a process to ensure timely and accurate disbursements of real estate taxes, special assessments, hazard and flood insurance premiums, mortgage insurance, and other escrow related advances. Servicers should have reporting to track all escrow account disbursements and any aged payments that are past due.

Servicers should have appropriate controls and adequate procedures for the on boarding of new loans and offboarding of existing loans to avoid any delayed application of borrower payments of principal, interest, taxes, or insurance.

CSF: 7.1.2.1 Escrow Administration: Escrow accounts are administered by trained and qualified staff in accordance with all applicable laws, government regulations, and investor requirements.

Assessment: Escrow Analysis

Servicers should have procedures to ensure all servicer escrow responsibilities are defined, monitored, and executed in an accurate and timely manner. Servicers should perform an annual analysis of escrow accounts to determine overages, shortages, or deficiencies, and notify the borrower of any changes. Additionally, servicers should develop and maintain escrow analysis service levels to ensure they have the capacity and scalability to perform analyses as workloads adjust.

 

Loan Administration: Escrow Administration: Escrow Analysis

Evidence Procedures for escrow analysis activities, in adherence to all applicable laws, government regulations, and investor requirements Vendor scorecards used to assess performance for third parties that provide escrow analysis activities Quality control processes for escrow analysis activities

Assessment: Escrow Management

Servicers should have processes to identify when escrow accounts should be established. In addition, servicers should have procedures on how escrow accounts are set up and managed in accordance with all laws, regulations, and investor requirements. Servicers should also have controls to ensure escrow accounts are established timely and accurately.

When determining borrower eligibility for foreclosure prevention alternatives, servicers must retain all documents and information related to escrow set-up, escrow analysis, and escrow advances.

 

Loan Administration: Escrow Administration: Escrow Management

Evidence Procedures for establishing escrow accounts along with required implementation timeframes Evidence of document retention for escrow activities

Assessment: Escrow Disbursements

Servicers should have procedures to ensure that taxes, insurance, and assessment payments made on behalf of the borrower are timely and accurate. Servicers must also ensure that any escrow surplus due to the borrower is paid in a timely manner.

Servicers must also certify that they are complying with any laws, regulations, or contracts related to a borrower’s escrow deposit account and other collateral accounts (including those that are required to pay interest on a borrower’s escrow deposit account).

 

Loan Administration: Escrow Administration: Escrow Disbursements

Evidence Description of procedures used to manage escrow disbursements Vendor scorecards used to assess performance for third parties providing escrow disbursement services Sample reporting to track all escrow account disbursements and any aged payments that are past due Sample exception reports showing impending escrow payments Documentation of adherence to any laws, regulations, or contracts related to a payment of interest on a borrower’s escrow deposit account

Evaluation and Recommendations

Escrow Accounts are administered by:

• Trained, qualified staff.
• If mortgage insurance, hazard insurance, flood insurance functions, and tax services are performed by third parties, third party activities are monitored and managed (if applicable).

Escrow Accounts are administered in compliance with the mortgage documents, all applicable laws and government regulations, such as Real Estate Settlement Procedures Act (RESPA), and investor requirements.

• At a minimum, an annual analysis is performed on all Escrow Accounts and servicers send the borrower a notification detailing any pending changes at least 30 days prior to the payment change date.

Escrow Accounts are established in adherence to all applicable laws, regulations, and investor requirements, and are managed accordingly.

Documentation and information on escrow activities is retained as stated in the Fannie Mae Servicing Guide.

Escrow Account administration includes processes to ensure:

• Borrowers are notified of overages, shortages, and deficiencies identified during the escrow analysis and the servicer has processes to appropriately recoup escrow account shortages and/or deficiencies and refund escrow account overages.

Escrow Account disbursements:

• For taxes, insurance and assessments, payments are made in a timely and accurate manner.
• Refunds are returned to the borrower in a timely fashion following mortgage payoffs or escrow account overages identified via escrow analysis, as appropriate.

Servicers should have procedures to detect when escrow items are not paid when due:

• Reports are in place to monitor past due payments.
• The mortgage accounting system provides tickler reports to prompt payment of items as they become due.

CSF: 7.1.2.2 Onboarding and Offboarding: Loan on and offboarding involves coordinating data and the transfer of information when loans are boarding or de-boarding the servicer’s loan servicing system. The success of a transfer is based on the new servicer’s ability to address all servicing aspects of the loans in a timely manner and in accordance with the Fannie Mae Servicing Guide and applicable laws. The transfer process should have minimal borrower impact and a defined hand off process for loans in different statuses including but not limited to loss mitigation, foreclosure, bankruptcy, or litigation. The transfer strategy is based on the servicer’s ability to accurately reconcile and balance loan data files and ensure continuity of servicing. In addition, servicers must obtain Fannie Mae’s approval for all transfers, in writing, prior to the transfer.

Assessment: Communication

Servicers must ensure they have adequate processes and controls to notify borrowers of changes affecting the servicing of their loan. Both parties are responsible for notifying borrowers whose mortgages are being transferred as required by the Real Estate Settlement Procedures Act.

Transferee servicers that are boarding new loans are expected to have sufficient and dedicated staff to handle borrower inquiries and communication throughout the transition period.

In addition, policies and procedures should be in place to notify third parties, such as insurance carriers, tax services, document custodians and foreclosure and bankruptcy attorneys, of servicing transfers.

 

Loan Administration: Loan Onboarding and Offboarding: Communication

Evidence Welcome letter Goodbye letter Third party notices Policies and procedures for notifying borrowers and third parties of servicing transfers

Assessment: Onboarding

Established onboarding processes should be in place to ensure pre- and post-transfer activities occur in a timely manner, are accurate, and do not disrupt service to the borrower. The transferee servicer should have procedures to quickly identify if loan transfer files contain all necessary information to complete the onboarding process. A smooth transition requires the transferee servicer to work with the transferor servicer to answer any questions or resolve any disputes regarding the transition. Staff and facilities should be prepared to handle all the normal servicing and accounting transactions, as well as all of the borrowers’ inquiries regarding the transition.

When the servicing transferee receives the Principal and Interest (P&I) and Taxes and Insurance (T&I) custodial funds, experienced staff should be designated to handle the reconciliation process. If the transferor servicer has advanced delinquent interest or scheduled principal and interest to Fannie Mae, funds should be reimbursed to the transferor servicer as soon as a final account of all funds is received. All net amounts owed must be paid to the appropriate party on the effective date of the transfer.

 

Loan Administration: Loan Onboarding and Offboarding: Onboarding

Evidence Onboarding checklist Transfer instructions or documented process Policies and procedures for reconciling all P&I and T&I custodial account, suspense and loss draft balances Policies and procedures for reconciling accurate loan status for mortgages pending ARM changes, in foreclosure, bankruptcy and/or loss mitigation Documentation for reconciling mortgage assignments Documentation for recertification of loan documents with the custodian upon completion of the transfer (if applicable) Documentation for requesting transfer of custody of Mortgage-Backed Securities (MBS) loan documents to the transferee’s custodian (if applicable) Policies and procedures for reconciling loan documents and mortgage files and records from the transferor, including any mortgages that are in foreclosure, bankruptcy or loss mitigation, and for any properties acquired by foreclosure or Mortgage Release™ Documented process for handling mortgages in litigation, the process of foreclosure or bankruptcy, and information for the attorneys (or trustee) handling the cases

Assessment: Offboarding

To effectively transfer loan data files and information, the transferor servicer must provide detailed servicing records, including borrower information, loan status, Fannie Mae investor reporting and cash management information (including reports, transaction histories, litigation information, and all other loan account specific information that is deemed necessary to accurately service a borrower’s mortgage loan). In addition, all documents applicable to a loan should be transferred, including copies of the servicing files and custody documents.

Cash management is an integral part of the loan servicing transfer process. Both the servicing transferor and transferee should ensure they appropriately manage balancing the inflow and outflow of cash transactions prior to and after the transfer period. Efficient cash management processes include handling the transfer of borrower balances, borrower payments and/or payoffs, custodial balances, recoverable advances, and reconciliation issues.

 

Loan Administration: Loan Onboarding and Offboarding: Offboarding

Evidence Offboarding checklist Transfer instructions or documented process Policies and procedures for reconciling all P&I and T&I custodial account balances Policies and procedures for reconciling accurate loan status for mortgages pending ARM changes, in foreclosure, bankruptcy and/or loss mitigation Documentation for preparing mortgage assignments Policies and procedures for transferring custody of MBS loan documents and mortgage files and records to the new servicer   Policies and procedures for notifying the new servicer of any mortgages that are in foreclosure

Evaluation and Recommendations

Communication:

• Dedicated team or single point of contact (SPOC) is in place to handle loan servicing transfers.
• Servicer provides the borrower with a follow up phone call or email after the welcome letter is sent.
• Internal communication exists among the business units affected by loan servicing transfers.

Onboarding and offboarding:

• Servicer has an established process to identify and handle missing loan file information. When there are missing documents, an escalation process should be in place to immediately request the missing documents from the transferring servicer.
• Servicer transfer requirements and instructions should include defined deadlines or completion dates and include specific information on data transfer reports and file formats.
• It is a leading practice for servicers to use electronic data transfers and files.
• Servicers efficiently verify and validate the data boarded onto the loan servicing systems compared to the loan documents.
• A detailed execution plan is used for on and offboarding loans and transferring data.
• Impact analysis should be conducted to determine necessary resources required to manage transfers before and after transfers occur.
• Comprehensive onboarding and offboarding checklists should include all necessary documentation for each area within servicing including collections, loss mitigation, bankruptcy, foreclosure, IR&A, escrow, and litigation. Example: correspondence, letters or documents, requests, invoices, loan histories and comments, complete remittance history, a listing of all deals in progress, partial packages and trial modifications, last escrow analysis, ARM plans and details.
• Servicers are expected to handle post transfer items (i.e., missing data, documents, files) timely.
• Regular meetings should occur during the transfer period and include a final reconciliation of required deliverables including deadlines.
• Servicers use Fannie Mae provided job aids regarding servicing transfers including required forms and approvals.