Fannie Expands ‘Imminent Default’ Test, Issues Short Sale Value Rules

""Fannie Mae"":http://www.fanniemae.com has issued a ""notice to servicers"":https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/svc1106.pdf detailing changes to how they should apply ""imminent default"" evaluations and determine the market value of properties for pre-foreclosure sales.

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The GSE is requiring servicers to apply the evaluation methods now used only for the Home Affordable Modification Program (HAMP) in determining whether a borrower faces imminent default to all non-HAMP modifications secured by owner-occupied properties.

Servicers have been required to seek Fannie Mae’s prior written approval for a mortgage modification when default is reasonably foreseeable, or imminent. But effective immediately, the GSE is allowing servicers to follow the standard imminent default evaluation used in HAMP for borrowers that do not qualify for the federal program and who are either current or in default but less than 60 days delinquent.

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This evaluation hierarchy involves first assessing the borrower’s cash reserves, which can be no more than $25,000; submitting the mortgage loan data to Freddie Mac’s Imminent Default Indicator (IDI) which can be accessed through Fannie Mae’s HomeSaver Solutions Network (HSSN); and confirming that the borrower is experiencing an “acceptable” hardship, such as death of a co-borrower, long-term illness or disability, or divorce.

Additional details on the “imminent default” update are provided on ""Fannie Mae’s business site"":https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2011/svc1106.pdf.

In addition, Fannie Mae is requiring servicers to use certain providers approved by the GSE to obtain broker price opinions (BPOs) or appraisals to complete the evaluation of short sales and deeds-in-lieu of foreclosure.

The Fannie Mae Network Provider list includes specific contacts from nine companies: Clear Capital, Integrated Asset Serves, ISGN, PCV Murcor, EMortgage Logic, LPS Applied Analytics, Old Republic Default Management Services, CoreLogic, and Mark to Market.

This full list is also available on ""Fannie Mae’s business site"":https://www.efanniemae.com/sf/servicing/hafa/pdf/preforeclosurevalprovider.pdf. The GSE says the new requirement regarding short sale and deed-in-lieu valuation providers is effective “as soon as possible, but no later than July 15, 2011.”

Fannie Mae noted that in order to limit risks arising from the concentration of orders, the GSE requires servicers to request no more than 75 percent of their orders from a single provider.