October 14, Fannie Mae s Investor Reporting Manual

Transcription

1 Fannie Mae Investor Reporting Manual October 14, 2015 Fannie Mae s Investor Reporting Manual i

2 Fannie Mae Copyright Notice (1) 2015 Fannie Mae. No part of this publication may be reproduced in any form or by any means without Fannie Mae s prior written permission, except as may be provided herein or unless otherwise permitted by law. Limited permission to reproduce this publication in print in whole or in part and limited permission to distribute electronically parts of this publication are granted to Fannie Mae-approved lenders, servicers, and other mortgage finance professionals, strictly for their own use in originating mortgages, selling mortgages to Fannie Mae, or servicing mortgages for Fannie Mae. Fannie Mae may revoke these limited permissions by written notice to any or all Fannie Mae-approved users. Trademarks are the property of their respective owners. A full version of this publication is available on Fannie Mae's website. If there should ever be a difference between this publication as it appears on the AllRegs website and the version published by Fannie Mae, the difference is an error. In such event, the Fannie Mae version of this publication shall be deemed the correct authoritative version. Material discrepancies between the two versions, identified by Fannie Mae or otherwise brought to our attention, may be addressed by Announcement. (2) Disclaimer: This publication is posted on the AllRegs website of Mortgage Resource Center, Inc., ( MRC ) under license from and with the express permission of Fannie Mae. MRC is the exclusive third-party electronic publisher of this publication. Fannie Mae makes no representation or warranty regarding any of the features, functionality, or other contents of the AllRegs website. You acknowledge and agree (individually and on behalf of the entity for which you are accessing this publication, You ) that You may not make any claim against Fannie Mae or MRC for any errors, and: (i) neither Fannie Mae nor MRC shall be liable to You for any losses or damages whatsoever resulting directly or indirectly from any errors, and (ii) MRC expressly disclaims any warranty as to the results to be obtained by You from use of the AllRegs website, and MRC shall not be liable to You for any damages arising directly or indirectly out of the use of the AllRegs website by You. Fannie Mae s Investor Reporting Manual ii

3 Preface This Investor Reporting Manual (Manual) outlines Fannie Mae's requirements for the mortgage loan accounting system it uses for reporting on the status of one- to four-unit mortgage loans either held in its portfolio or pooled in an MBS. (The Fannie Mae investor reporting system is also used for multifamily mortgage loans that are in MBS pools). This Manual is incorporated into the Servicing Guide by reference. In the event that the Manual and the Servicing Guide are conflicting, the servicer must follow the requirements set forth in the Servicing Guide. Content Organization This Manual is organized into the following chapters: Chapter 1: General Requirements Chapter 2: Reporting Specific Transactions Chapter 3: Special Reporting Requirements Chapter 4: Formulas and Calculations Chapter 5: Fannie Mae-Generated Reports Chapter 6: Correction of Errors To learn more about the details on the content included in a chapter, see the Table of Contents. Effective Dates for the Manual Each topic within the Manual is followed by a date shown in parentheses. With the publication of the new Manual, this date will represent the date of the most recent Servicing Announcement that amended content within an individual topic. The servicer must refer to the individual Announcement to locate the policy effective date. Access Options The Manual is available on AllRegs and in Adobe PDF format on Fannie Mae s website. Related Announcements, Lender Letters, and Notices may be obtained through a variety of mediums, including: using a free electronic version on the AllRegs website through a link from Fannie Mae s website; a subscription paid directly to AllRegs for an enhanced electronic version with additional features and a higher degree of functionality (than the free version); and in PDF format on Fannie Mae s website. Fannie Mae s Investor Reporting Manual iii

4 Amendments to the Manual Fannie Mae may at any time alter or waive any of the requirements of this Manual, impose other additional requirements, or rescind or amend any and all material set forth in this Manual. The servicer must ensure that its staff is thoroughly familiar with the content and requirements of the Manual as it now exists and as it may be changed. Notification of Changes and Manual Updates Fannie Mae notifies servicers of changes and updates to its Manual policies and procedures, as communicated in Announcements, Lender Letters, and Notices, in two ways: posting the documents on Fannie Mae s website and the AllRegs website, and ing notification of those postings to servicers that subscribe to Fannie Mae s subscription service and select the option Servicing News. Forms, Exhibits, and Content Incorporated by Reference The Manual provides information about the specific forms servicers must use to fulfill Fannie Mae s requirements. Servicers can access the actual forms on Fannie Mae s website. Some materials are only referenced in the Manual and are posted in their entirety on Fannie Mae s website. All forms and exhibits whether it currently exists or is subsequently created referenced in the Manual now or later are legally a part of this Manual, the Servicing Guide and Fannie Mae s contract with its servicers. Technical Issues In the event of technical difficulties or system failures with Fannie Mae s website, the delivery of the Servicing News option of Fannie Mae s subscription service, or the AllRegs website, users may contact the following resources: For Fannie Mae s website and Fannie Mae s subscription service, use the Contact Us link on the website to ask questions or obtain more information or contact Fannie Mae s Single-Family Technology Support at For the AllRegs website, submit an support request from the website or contact AllRegs Customer Service at When Questions Arise The Manual provides information about normal and routine investor reporting matters. Servicers must address questions relevant to a particular situation not covered in the Manual to its Fannie Mae Investor Reporting Representative. Fannie Mae s Investor Reporting Manual iv

5 Table of Contents Chapter 1, General Requirements , Using Machine-Processable Input (11/12/2014)... 1 Processing All Other Transactions , Performing Monthly Reconciliations (11/12/2014)... 3 Submitting Formal Reconciliations... 3 Handling Unreconciled Shortages and Surpluses , Requesting Audit Confirmations (11/12/2014)... 4 Chapter 2, Reporting Specific Transactions , Reporting a Transaction Type 96 (Loan Activity Record) (11/12/2014) , Reporting a Transaction Type 97 (Extended Loan Activity Record) (11/12/2014) , Reporting a Transaction Type 81 (Lender Loan I.D. Change Record) (11/12/2014) , Reporting a Transaction Type 82 (Loan Address Change Record) (11/12/2014) , Reporting a Transaction Type 83 (Payment/Rate Change Record) (11/12/2014) , Reporting a Transaction Type 80 (Subservicer Arrangement Record) (06/10/2015) , Reporting a Transaction Type 32 (Servicing Transfer Record) (11/12/2014) , Mapping Fannie Mae Investor Reporting System Records to EDI Investor Reporting Transaction Set 203 (11/12/2014) Chapter 3, Special Reporting Requirements , Reporting a Mortgage Loan Modification (11/12/2014) , Reporting ARM Interest Rate and Monthly Payment Changes (11/12/2014) Reporting for Scheduled/Actual Remittance Types Reporting for Scheduled/Scheduled Remittance Types , Recovering Delinquency Advances (11/12/2014) Seeking Reimbursement for Scheduled/Actual Remittance Types Seeking Reimbursement for Scheduled/Scheduled Remittance Types , Reinstating Seriously Delinquent Mortgage Loans (11/12/2014) Fannie Mae s Investor Reporting Manual v

6 3-05, Reporting Military Indulgence to Fannie Mae (11/12/2014) , Reporting a Liquidation to Fannie Mae (10/14/2015) , Reversing Curtailments/Removals (11/12/2014) , Reporting Mortgage Loans with Interest in Advance (11/12/2014) , Reporting Mortgage Loans with Odd Due Dates (11/12/2014) , Reporting During the First Reporting Cycle for Same Month MBS Mortgage Loans (11/12/2014) , Reporting the Discontinuance of Mortgage Insurance (11/12/2014) , Reporting MBS Security Balances (11/12/2014) Chapter 4, Formulas and Calculations , Mathematical Formulas (11/12/2014) , Calculations Related to Principal Payments (05/20/2015) Calculating Monthly Principal Payments Calculating Biweekly Principal Payments Calculating the Principal Balance Paid Off Calculating the Principal Balance Repurchased Calculating Actual UPB Calculating Scheduled UPB Calculating the Security Balance Calculating the Pool Deficiency Amount , Calculations Related to Interest Payments (11/12/2014) Calculating Monthly Interest Payments Calculating Biweekly Interest Payments Calculating Interest Paid Off Calculating Interest Repurchased , Calculations Related to Pass-through Rates (11/12/2014) Determining Pass-through Rates for Converted ARMs Determining Pass-through Rates for ARM Adjustments Determining Weighted-Average Pass-through Rates , Calculations Related to Servicing Fee/Excess Yield (11/12/2014) , Calculations Related to Weighted-Average Guaranty Fee (11/12/2014) , Exhibits (11/12/2014) Fannie Mae s Investor Reporting Manual vi

7 Exhibit 1: Monthly Fixed Installment Formula Exhibit 2: Regular Amortization Formula Exhibit 3: Negative Amortization Formula Exhibit 4: Reverse Amortization Formula Exhibit 5: Servicing Fee/Yield Differential Adjustment Formula Chapter 5, Using Fannie Mae Generated Reports , The Lender Recap Report (11/12/2014) , The Remittance Update Report (11/12/2014) , The Monthly Payment/Rate Change Report (11/12/2014) , The Final Maturity Due Report (11/12/2014) , The Trial Balance Report (11/12/2014) , The Shortage/Surplus Analysis Report (11/12/2014) , The Pool Deficiency Summary/Guaranty Fees to be Paid Report (11/12/2014) , The Pool-to-Security Reconciliation Detail Report (11/12/2014) Chapter 6, Correcting Reporting Errors , Correcting Liquidation Transactions (11/12/2014) Correcting an Erroneous Payoff/Repurchase Transaction Changing Receivable Control File Transactions to Payoff/Repurchase Transactions Changing Receivable Control File Transactions to Referral Transactions Changing Receivable Control File Transaction to Different Receivable Control File Transaction , Correcting ARM Adjustment Errors (11/12/2014) Correcting Portfolio Mortgage Loans vs. MBS Mortgage Loans Correcting Interest Rate and Payment Change Errors Correcting an Interest Rate Change Error Only Correcting a Payment Change Error Only Fannie Mae s Investor Reporting Manual vii

8 Chapter 1, General Requirements The Fannie Mae investor reporting system is an integrated investor reporting system used to capture loan-level detail for all regularly amortizing mortgage loans serviced for Fannie Mae. Although all of these mortgage loans are accounted for under a single reporting system, Fannie Mae's investor reporting system separates mortgage loans by remittance type to ensure the servicer can easily recognize and account for procedural or policy differences. 1-01, Using Machine-Processable Input (11/12/2014) The servicer must use an automated format to report all loan-level transactions. This includes reporting corrections to erroneous transactions previously reported to the Fannie Mae investor reporting system. The electronic transmission of Fannie Mae's investor reporting system reports can be accomplished by: CPU-to-CPU electronic file transfer, or Fannie Mae's SURF, a web application that is available for reporting the different types of transactions. Access to SURF is available on Fannie Mae s website. Fannie Mae also accepts a common format for the electronic data interchange (EDI) of investor reporting information. The action that a servicer must take to ensure it satisfies Fannie Mae's requirements for using the EDI format will vary depending on how it submits its Fannie Mae investor reporting system reports to Fannie Mae, as shown in the following table. If the servicer submits its monthly loan-level Fannie Mae investor reporting system reports through SURF or through electronic file transfer uses a service bureau to transmit its monthly Fannie Mae investor reporting system reports Then the servicer must have its own EDI translation software or translation services to convert its flat files to the ANSI X12 format. confirm that its service bureau will have the appropriate translation software in place before the servicer begins reporting under the ANSI X12 format. Fannie Mae addresses its investor reporting system requirements in terms of the transaction types and data element identification that is part of the Fannie Mae investor reporting system record. To assist in converting this information into EDI references, 2-07, Reporting Transaction Type 32 (Servicing Transfer Record), includes an example that maps the Fannie Mae investor reporting system record to the EDI Investor Reporting Transaction Set 203. Fannie Mae s Investor Reporting Manual 1

9 Processing All Other Transactions Actual/Actual and Scheduled/Actual Remittance Portfolio Mortgage Loans The following example illustrates the relationship between cut-off dates, reporting periods, and deadlines for transmitting the bulk of a servicer's transactions for actual/actual and scheduled/actual remittance type portfolio mortgage loans which have an end-of-month cut-off date. Example: For the June 2011 reporting period, the servicer must report all activity that occurred between June 1 and June 30 and transmit the transaction types that reflect this activity in time to reach Fannie Mae by July 6 (since July 3 is a Sunday and the Fourth of July is a holiday). Scheduled/Scheduled Type Portfolio and MBS Mortgage Loans For scheduled/scheduled remittance type portfolio and MBS mortgage loans, the servicer may select from two different options for transmitting the bulk of its monthly accounting transactions. The two options are further described in the following table. Option Under this option the servicer must 1 Transmit transactions in time to reach Fannie Mae by the third business day of the month following its cutoff date. Example: A servicer that uses the 25th of the month as its cut-off must transmit these transactions for June 2011 activity in time to reach Fannie Mae by July 6 (since July 3 is a Sunday and the Fourth of July is a holiday) if it selects Option 1. 2 Transmit transactions representing a snapshot of the activity that has occurred up to the 25th of the month, and Submit a supplemental report for activity that occurred between the 25th and the servicer's actual cut-off date (if the actual cut-off date is later than the 25th). The snapshot report must be transmitted by the third business day following the 25th of the month; the supplemental report, by the third business day of the month following the servicer's cut-off date. Example: A servicer that uses a month-end cut-off for its MBS pools must transmit the snapshot report for June 2011 activity in time to reach Fannie Mae by June 29 and the supplemental report for June 2011 activity in time to reach Fannie Mae by July 6 (since July 3 is a Sunday and the Fourth of July is a holiday). Fannie Mae s Investor Reporting Manual 2

10 1-02, Performing Monthly Reconciliations (11/12/2014) October 14, 2015 Each month, the servicer must reconcile the Fannie Mae investor reporting system reports it receives from Fannie Mae to its internal records. Further instructions for the monthly reconciliation process are provided in the following table. Loan Type Portfolio mortgage loans (regardless of remittance type) MBS mortgage loans that are scheduled/scheduled remittance type The servicer must Compare portfolio totals, interest rates, and pass-through rates carried in the servicer's records to those that Fannie Mae has in its investor reporting system database; and Reconcile the components of any shortage or surplus Fannie Mae is carrying for the servicer's reports. Compare portfolio totals, interest rates, and pass-through rates in the servicer's records to those in Fannie Mae's records only. Submitting Formal Reconciliations Reconciliations must be prepared using the following forms (or an acceptable equivalent format): Reconciliation of Mortgage Portfolio (Form 473), Reconciliation of Mortgage Portfolio S/S MBS and MRS (Form 512), Reconciliation of Interest Rate/Pass-Through Rate (Form 473A), and Reconciliation of Shortage/Surplus (Form 472). Handling Unreconciled Shortages and Surpluses A shortage or surplus in the Fannie Mae investor reporting system represents the cumulative difference between: the cash the servicer remitted to Fannie Mae, and the interest and principal the servicer reflected in its monthly loan-level reports as being applied to the portfolio mortgage loans serviced for Fannie Mae. Unreconciled shortages are payable to Fannie Mae. The following table provides the servicer with instructions for the reconciliation a shortage. The servicer must Remit the amount of the unreconciled shortage to Fannie Mae immediately. Transfer the funds from its corporate account(s) into its designated Fannie Mae custodial drafting account before reporting the remittance as part of its regular P&I remittances. Contact its Fannie Mae Investor Reporting Representative (see Servicing Guide F-4-03, List of Contacts) for instructions on handling subsequent adjustments and corrections, before transmitting its Fannie Mae investor reporting system transactions for the next reporting period. Fannie Mae s Investor Reporting Manual 3

11 Unreconciled surpluses are income items for Fannie Mae. The following table provides additional information to the servicer regarding surpluses. If the servicer And the servicer Then Fannie Mae is unable to reconcile the surplus within 90 days after it first appears on its Fannie Mae investor reporting system report cannot explain any extenuating circumstances related to the unreconciled surplus may adjust the servicer's shortage/surplus account to zero out the surplus. Note: Fannie Mae will give the servicer advance notification and advise it on how subsequent adjustments and corrections must be handled. 1-03, Requesting Audit Confirmations (11/12/2014) A servicer may instruct its external auditors to contact Fannie Mae directly about providing confirmation of the servicer's portfolio composition and outstanding balances as they are carried in Fannie Mae's records. Fannie Mae will respond to such requests as promptly as possible although there can be a delay of up to one month. The request for audit confirmation must be sent to: [email protected]. All requests for audit confirmations must include the information shown in the following table. Requirements for Audit Confirmation Requests The servicer's name and address. An authorized signature of an officer of the financial institution. The servicer's 9-digit Fannie Mae lender identification number. The name and telephone number of the auditor's contact person (either with the servicer's institution or auditor). The effective date for the confirmation. Fannie Mae s Investor Reporting Manual 4

12 Chapter 2, Reporting Specific Transactions All reportable Fannie Mae investor reporting system transactions will fall into one or more of the following categories. Some transactions update the status of a mortgage loan or summarize collection activity, while others update the information in Fannie Mae's records (such as property addresses, lender Loan I.D. identification numbers, mortgage loan terms, subservicing status, etc.). The seven reportable transaction types include: Transaction Type 96 (Loan Activity Record), Transaction Type 97 (Extended Loan Activity Record), Transaction Type 83 (Payment/Rate Change Record), Transaction Type 82 (Loan Address Change Record), Transaction Type 81 (Lender Loan I.D. Record), Transaction Type 80 (Sub servicer Arrangement Record), and Transaction Type 32 (Transfer of Servicing Record). These codes can be mapped to the EDI segment positions, names, and data element references that a servicer must use when reporting Fannie Mae investor reporting system transactions in the ANSI X12 format. See also, 2-07, Reporting a Transaction Type 32 (Transfer of Servicing Record) and 1-01, Using Machine- Processable Input. 2-01, Reporting a Transaction Type 96 (Loan Activity Record) (11/12/2014) The servicer must use Transaction Type 96 (Loan Activity Record) or (LAR) to provide loan-level detail for each mortgage loan on the servicer's trial balance. The loan-level information can be broken down into three categories described in the following table. Transaction Type 96 (LAR) Category Payment collection Mortgage loan status Description Relates to the receipt and application of the mortgage loan payment Relates to special actions that have occurred such as a payoff; a repurchase; the liquidation of the debt by foreclosure, short sale, Mortgage Release, or assignment to the mortgage insurer or guarantor; or the automatic termination or a borrower-initiated cancellation of the mortgage insurance coverage. Information that must be reported The LPI date, UPB, and the remittance amount (distributed between interest and principal). An action code there are several codes available and an action date to specify when the reported action occurred (or will occur). The servicer also must notify Fannie Mae of any termination or cancellation of mortgage insurance. Fannie Mae s Investor Reporting Manual 5

13 Transaction Type 96 (LAR) Category Fee collection Description Relates to any special fees such as late charges, assumption fees, or prepayment premiums that were collected from the borrower during the reporting period Information that must be reported The combined total of the special fees. Record specifications and additional descriptions for Transaction Type 96 are shown in the following table. Data Element Position Format Description Lender Number 1-9 (9) Numeric only Investor 10 (1) Alphanumeric; F = Fannie Mae Record Identifier (2) Always 96 Source Code 13 (1) Always zero (0) Fannie Mae Loan Number (10) Numeric only LPI Date (4) MMYY format UPB S9(9)V99 Numeric; zone signed; code $50, as A Interest S9(9)V99 Numeric; zone signed; code $ as B Principal S9(9)V99 Numeric; zone signed; code -$9.91 as J Action Code (2) Numeric or blank Action Date (6) MMDDYY format Other Fees S9(6)V99 Numeric; zone signed; may be zero-filled Filler (4) Blanks or zeroes Fannie Mae s Investor Reporting Manual 6

14 2-02, Reporting a Transaction Type 97 (Extended Loan Activity Record) (11/12/2014) Transaction Type 97 (Extended Loan Activity Record) is an extended LAR that includes the date of payment. This date must be included in reporting for all daily simple interest mortgage loans and actual/actual biweekly loans. The interest accrual is driven by the date of payment. Record specifications and descriptions for Transaction Type 97 are shown in the following table. Data Element Position Format Description Lender Number 1 (9) Numeric only (must be the special Servicer Number assigned for DSI loans) Investor 10 (1) Alphanumeric; F = Fannie Mae Record Identifier 11 (2) Always 97 Reversal Flag 13 (1) Zero (0) - normal One (1) - reversal Fannie Mae Loan Number 14 (10) Numeric only (The unique 10-digit Fannie Mae assigned loan number) Gross Actual Payment 24 (11) 9(9)v99 Full payment amount sent by borrower (P&I). If reporting curtailment, this is the curtailment amount. Payment Effective Date 35 (8) MMDDYYYY (Effective date the payment is being applied). Must equal action date (LAR 96 position 63), if action is reported. Filler 43 (30) Blank Full LPI Date 73 (8) MMDDYYYY Month and year must agree with the month and year reported in LAR 96 position 24 (LPI date). Fannie Mae s Investor Reporting Manual 7

15 2-03, Reporting a Transaction Type 81 (Lender Loan I.D. Change Record) (11/12/2014) Transaction Type 81 (Lender Loan I.D. Change Record) must be used to add, delete, or change the information Fannie Mae is carrying in its records for the servicer's unique identifier for the mortgage loan. The servicer can determine the I.D. that Fannie Mae is carrying in its records by reviewing the trial balance report that Fannie Mae provides. (See Exhibit: Trial Balance Report, which is available in SURF or on Fannie Mae s website.) Record specifications and descriptions for Transaction Type 81 are shown in the following table. Data Element Position Format Description Lender Number 1-9 (9) Numeric only Investor 10 (1) Alphanumeric; F = Fannie Mae Record Identifier (2) Always 81 Source Code 13 (1) Always zero (0) Fannie Mae Loan Number (10) Numeric only New Lender Loan I.D (15) Alphanumeric Filler (42) Blanks 2-04, Reporting a Transaction Type 82 (Loan Address Change Record) (11/12/2014) Transaction Type 82 (Loan Address Change Record) must be used to update Fannie Mae's records to reflect changes or corrections to a property address. Changes that must be reported include: the renumbering or renaming of streets, changing an address from a lot and block description to a house number and street, and changing ZIP codes because of postal realignments. Record specifications and descriptions for Transaction Type 82 are shown in the following table. Data Element Position Format Description Lender Number 1-9 (9) Numeric only Investor 10 (1) Alphanumeric; F = Fannie Mae Record Identifier (2) Always 82 Fannie Mae s Investor Reporting Manual 8

16 Data Element Position Format Description Source Code 13 (1) Always zero (0) Fannie Mae Loan Number (10) Numeric only New Street (32) Alphanumeric; combination of house or building number, street type (La = Lane, Ave = Avenue, etc.), street direction (NE, NW, SE, SW), and unit number, if applicable. City (15) Alphabetic; truncate if necessary Zip Code (5) Numeric Blank (5) Blanks 2-05, Reporting a Transaction Type 83 (Payment/Rate Change Record) (11/12/2014) Two months before a scheduled interest rate or monthly payment change for an ARM, a GEM, or a graduatedpayment mortgage (GPM), Fannie Mae provides the servicer with a listing of mortgage loans Fannie Mae expects to change on that date. Transaction Type 83 (Payment/Rate Change Record) must be used to report the actual change to Fannie Mae. The following table provides a list of servicer requirements for reporting Transaction Type 83. The servicer must Report a Transaction Type 83 no later than the reporting period that includes the scheduled change date because Fannie Mae cannot process any transaction against a mortgage loan that has a scheduled (or past due) change date; but may report the Transaction Type 83 to Fannie Mae as soon as it knows the effective date and exact amount of the new interest rate or monthly payment.. Use Transaction Type 83 to report the conversion of an ARM to a fixed-rate mortgage loan. Report a Transaction Type 83 for the conversion by no later than the due date of the Fannie Mae investor reporting system reports for the reporting period that includes the effective date for the new monthly payment, but may report the Transaction Type 83 to Fannie Mae when it transmits its first Fannie Mae investor reporting system reports after it knows the effective date of the conversion and the new converted interest rate and monthly payment. Report any unscheduled change event for a loan, including: a change to the loan s P&I due to a curtailment made by the borrower, or a change to the loan s interest rate and P&I due to the borrower s qualifying for an interest rate reduction (such as a Timely Payment Reward loan). Fannie Mae s Investor Reporting Manual 9

17 Record specifications and descriptions for Transaction Type 83 are included in the following table. Data Element Position Format Description Lender Number 1-9 (9) Numeric only Investor 10 (1) Alphanumeric; F = Fannie Mae Record Identifier (2) Always 83 Source Code 13 (1) Always zero (0) Fannie Mae Loan Number (10) Numeric only Effective with Payment Due on (4) MMYY format Index Value (2) (4) Numeric or blank; code 6.5% as New Interest Rate (2) (4) Numeric or blank; code 8.25% as Pass-Through Rate (2) (4) Numeric or blank; code 7.25% as October 14, 2015 New Payment (9) Numeric or blank; code $ as Extended Term (3) Numeric or blank Converted to Fixed Rate 58 (1) Alphanumeric; uppercase Y if converted; otherwise blank Filler (22) Blanks Fannie Mae s Investor Reporting Manual 10

18 2-06, Reporting a Transaction Type 80 (Subservicer Arrangement Record) (06/10/2015) Each mortgage loan that is subject to a subservicing arrangement must be identified in Fannie Mae's records using Transaction Type 80, in accordance with the requirements in the following table. The master servicer (or its designated subservicer) must Report the subservicing arrangement and the subservicer's identification to Fannie Mae in the month after it purchases or securitizes a mortgage loan (or pool of mortgage loans), with subsequent changes in the arrangement being reported as they occur. Use Transaction Type 80 (Subservicer Arrangement Record) to report the creation of a subservicing arrangement for a mortgage loan, as well as any change to an existing arrangement (including a deletion). For mortgage loans that are subject to a subservicing arrangement included in a transfer of servicing, the following table provides additional servicer reporting requirements for these mortgage loans. If deleting any prior applicable subservicer arrangement adding any new applicable subservicer arrangement Then the master servicer (or its designated subservicer) must report any deletion of prior applicable subservicer arrangement for the transferred mortgage loans in the month preceding the effective date of the servicing transfer, and report a D (for Delete an Existing Subservicer) as the Modification Code. report any new applicable subservicer arrangement for the transferred mortgage loans by submitting a Transaction Type 80 in the Fannie Mae investor reporting system period in the month following the effective date for the servicing transfer, and report an A (for Add a New Subservicer) as the Modification Code, since the subservicing relationship will appear to be a new one for the transferee servicer (at least with respect to the transferred mortgage loans). Fannie Mae s Investor Reporting Manual 11

19 Record specifications and descriptions for Transaction Type 80 are included in the following table. Data Element Position Format Description Lender Number 1-9 (9) Numeric; identification number Fannie Mae assigned to the servicer (or the master servicer) Investor 10 (1) Alphanumeric; F = Fannie Mae Record Identifier (2) Always 80 Source Code 13 (1) Always zero (0) Modification Code 14 (1) Alphanumeric; A = Add a new subservicer; C = Change an existing subservicer; D = Delete an existing subservicer; always use A to update records for mortgage loans included in a servicing transfer. Subservicer Lender Number (9) Numeric; for Add a New Subservicer or Change an Existing Subservicer, use the identification number Fannie Mae assigned to the subservicer; if deleting a subservicer leave blank. Subservicer Type Code (2) Numeric; code indicating whether the request relates to a single mortgage loan or a group of mortgage loans; 00 = one mortgage loan; 01 = all mortgage loans; 04 = one MBS pool; 09 = one remittance type. Key Field (10) Alphanumeric; further defines subservicer type code; if type code was 00, insert the applicable 10-digit Fannie Mae loan number; if type code was 01; leave blank; if type code was 04, insert the MBS pool number (with 4 trailing blanks); if the type code was 09, insert the 1-digit code that identifies the specific remittance type (with 9 trailing blanks). The remittance type codes are 1 (actual/actual), 2 (scheduled/actual), and 3 (scheduled/scheduled). Filler (45) Always blank Related Announcements The table below provides references to the Announcements that have been issued that are related to this topic. Announcements Issue Date Announcement SVC June 10, 2015 Fannie Mae s Investor Reporting Manual 12

20 2-07, Reporting a Transaction Type 32 (Servicing Transfer Record) (11/12/2014) October 14, 2015 A servicer that has received approval for transfer of servicing (including an MBS loan-level transfer) must transmit loan-level information for the mortgage loans that will be included in the partial transfer to the Fannie Mae investor reporting system. The following table provides additional instructions regarding these transactions. The servicer must Use Transaction Type 32 (Servicing Transfer Record) to provide this information. Submit this loan-level information in time for Fannie Mae to receive it no later than 15 days before the effective date of the transfer; it may be submitted it as early as six months before the proposed effective date. Record specifications and descriptions for Transaction Type 32 are shown in the following table. Data Element Position Format Description Transferor Lender Number 1-9 (9) Numeric Blank 10 (1) Blank Record Identifier (2) Always 32 Source Code 13 (1) Always zero (0) Key Field (10) Fannie Mae loan number (for portfolio transfers and MBS loan-level transfers); MBS pool number, with four trailing blanks (for MBS pool-level transfers); or blank Request Effective Date (6) Numeric; CCYYMM format; for a transfer that is effective January 31, 2003, use Transferee Lender Number (9) Numeric Lender Loan I.D (15) Alphanumeric Transfer Request Type Code (2) Numeric; as detailed below: 00 Non-MBS Loan 10 MBS Loan 04 MBS Pool 03 MBS Portfolio 05 Actual/Actual Portfolio 06 Scheduled/Actual Portfolio 07 Scheduled/Scheduled Cash Portfolio Fannie Mae also accepts a common EDI format of investor reporting information. The action the servicer must take to ensure it satisfies Fannie Mae's requirements for using the EDI format will vary depending on how it submits its Fannie Mae investor reporting system reports to Fannie Mae, as shown in the following table. Fannie Mae s Investor Reporting Manual 13

21 2-08, Mapping Fannie Mae Investor Reporting System Records to EDI Investor Reporting Transaction Set 203 (11/12/2014) Current Investor Reporting Record Identifier & Data Element Field Name Location of Data Element Within Investor Reporting Record Identifier EDI Segment Position & Segment Name EDI Data Element Reference EDI Requirement Designation 010/ST ST01 Mandatory Field Mandatory Segment 010/ST ST02 Mandatory Field Mandatory Segment 020/BGN BGN01 Mandatory Field Mandatory Segment 020/BGN BGN02 Mandatory Field Mandatory Segment 020/BGN BGN03 Mandatory Field Mandatory Segment 020/BGN BGN04 Optional Field Mandatory Segment 020/BGN BGN05 Optional Field Mandatory Segment 030/DTP DTP01 Mandatory Field Mandatory Segment 030/DTP DTP02 Mandatory Field Mandatory Segment 030/DTP DTP03 Mandatory Field Mandatory Segment 040/REF REF01 Mandatory Field Mandatory Segment (96) Fannie Mae Lender Number /REF REF02 Mandatory Field Mandatory Segment 010/LX LX01 Mandatory Field Mandatory Segment 020/REF REF01 Mandatory Field Optional Segment (80) Subservicer Number /REF REF02 Mandatory Field Optional Segment Fannie Mae s Investor Reporting Manual 14

22 Current Investor Reporting Record Identifier & Data Element Field Name Location of Data Element Within Investor Reporting Record Identifier EDI Segment Position & Segment Name EDI Data Element Reference EDI Requirement Designation (80) Subservicer Number /REF REF02 Mandatory Field Optional Segment (80) Subservicer Number /REF REF02 Mandatory Field Optional Segment (80) Subservicer Modification Code (80) Subservicer Type Code /REF REF02 Mandatory Field Optional Segment /REF REF02 Mandatory Field Optional Segment 050/RLT RLT01 Mandatory Field Optional Segment (96) Fannie Mae Loan Number /RLT RLT02 Mandatory Field Optional Segment 050/RLT RLT03 Conditional Field Optional Segment (81) New Lender Loan I.D /RLT RLT04 Conditional Field Optional Segment 060/DTP DTP01 Mandatory Field Mandatory Segment 060/DTP DTP02 Mandatory Field Mandatory Segment (96) LPI Date /DTP DTP03 Mandatory Field Mandatory Segment (NEW) Date of Last Full Payment 060/DTP DTP03 Mandatory Field Mandatory Segment (NEW) Curtailment Date 060/DTP DTP03 Mandatory Field Mandatory Segment 070/AMT AMT01 Mandatory Field Mandatory Segment (96) UPB (96) Principal (96) Interest (96) Other Fees (NEW) Prepay Penalty (NEW) Curtailment /AMT AMT02 Mandatory Field Mandatory Segment Fannie Mae s Investor Reporting Manual 15

23 Current Investor Reporting Record Identifier & Data Element Field Name Location of Data Element Within Investor Reporting Record Identifier EDI Segment Position & Segment Name EDI Data Element Reference EDI Requirement Designation (96) Action Code /IRA IRA01 Mandatory Field Optional Segment 080/IRA IRA02 Conditional Field Optional Segment (96) Action Code /IRA IRA03 Conditional Field Optional Segment 100/PRC PRC01 Mandatory Field Optional Segment 100/PRC PRC02 Mandatory Field Optional Segment (83) Effective Date of Rate or Payment Change /PRC PRC03 Mandatory Field Optional Segment (83) Index Value /PRC PRC04 Optional Field* Optional Segment (83) Pass-Thru Rate /PRC PRC05 Optional Field* Optional Segment (83) New Interest Rate /PRC PRC06 Optional Field* Optional Segment 100/PRC PRC07 Conditional Field Optional Segment (83) New P&I Payment /PRC PRC08 Conditional Field Optional Segment (83) Converted to Fixed Rate /PRC PRC09 Optional Field Optional Segment 100/PRC PRC10 Conditional Field Optional Segment (83) Extended Term /PRC PRC11 Conditional Field Optional Segment 100/PRC PRC12 Conditional Field Optional Segment 110/NX2 NX201 Mandatory Field Optional Segment Fannie Mae s Investor Reporting Manual 16

24 Current Investor Reporting Record Identifier & Data Element Field Name Location of Data Element Within Investor Reporting Record Identifier EDI Segment Position & Segment Name EDI Data Element Reference EDI Requirement Designation (82) Street Address (82) City (82) Zip Code /NX2 NX202 Mandatory Field Optional Segment Fannie Mae s Investor Reporting Manual 17

25 Chapter 3, Special Reporting Requirements Under the investor reporting system, delinquent mortgage loans remain on the servicer's trial balance until one of the following occurs: the servicer repurchases them, or the foreclosure sale is held and the servicer reports the appropriate action code Code 70, 71, or 72 with a Transaction Type 96 (Summary Loans) or Transaction Type 96 and 97 (Detailed Reporting Loans) LAR. In addition to special reporting requirements mentioned in the Servicing Guide and its related procedures, special reporting requirements also are necessary for all transactions described in the following table. Transactions Requiring Special Reporting Requirements Bringing seriously delinquent scheduled/actual remittance type mortgage loans current. Reporting reversals of curtailments or removal transactions for MBS mortgage loans. Preparing the initial monthly accounting report for MBS mortgage loans that provide for the payment of interest in advance. Reporting payment applications for MBS mortgage loans that have odd due dates (payments due other than the first of the month). Preparing the initial monthly accounting reports for same month MBS pools (those that include mortgage loans closed in the month in which the pool is issued). Reporting a borrower-initiated cancellation or the automatic termination of mortgage insurance coverage. Reporting security balances for MBS pools each month. The following table provides additional instructions related to special reporting requirements for loan modifications that include a principal forbearance. If a mortgage loan modification includes Then the servicer must a principal forbearance report the net UPB (full UPB minus the forbearance amount) in the Actual UPB field in the LAR for the reporting month that the mortgage loan modification becomes effective. report interest on the LAR based on the net UPB. Note: The initial reduction in UPB caused by the principal forbearance must not be reported to Fannie Mae as a principal curtailment. Fannie Mae s Investor Reporting Manual 18

26 If a mortgage loan modification includes a principal forbearance resulting in a balloon payment due upon the borrower's sale of the property or payoff, or maturity of the mortgage loan a principal forbearance for which a principal curtailment is received Then the servicer must include the principal forbearance amount when reporting principal on the LAR, when reporting a payoff or repurchase of the mortgage loan. never compute interest on the principal forbearance amount, including at the time of liquidation. Note: Attempting to report a payoff or repurchase without including the principal forbearance amount will generate an exception upon submission of the LAR. apply the principal curtailment to the interest-bearing UPB. If the principal curtailment is greater than or equal to the interest-bearing UPB, then the curtailment must be applied to the principal forbearance portion. If the curtailment satisfies the principal forbearance portion, any remaining funds must be applied to the interest-bearing UPB. The following table provides additional detail on the requirements related to reporting a liquidation of a modified mortgage loan with principal forbearance. Reporting LAR Liquidations Reporting for Remittance Type Actual/Actual Reporting for Remittance Type Scheduled/Actual Reporting for Remittance Type Scheduled/Scheduled (Portfolio / also called MRS or MBS-Acquired) Payoff Actual UPB = $0.00 Actual UPB = $0.00 Actual UPB = $0.00 (Action Code 60) Principal Amount = Prior Month Ending Actual UPB + Principal Forbearance Amount Principal Amount = Prior Month Ending Actual UPB Actual UPB + Principal Forbearance Amount Principal Amount = Prior Month Scheduled UPB + Forbearance Amount Repurchase Actual UPB = $0.00 Actual UPB = $0.00 Actual UPB = $0.00 (Action Code 65) Principal Amount = (Prior Month Ending Actual UPB + Principal Forbearance Amount) x Purchase Price Principal Amount = (Prior Month Ending Actual UPB + Principal Forbearance Amount) x Purchase Price Principal Amount = (Prior Month Scheduled UPB + Principal Forbearance Amount) x Purchase Price Foreclosure (Action Codes 70, 71, 72) Actual UPB¹ = Actual UPB reported as of the end of the prior reporting month. Actual UPB¹ = Actual UPB reported as of the end of the prior reporting month. Actual UPB¹ = Actual UPB reported as of the end of the prior reporting month. Principal Amount = $0.00 Principal Amount = $0.00 Principal Amount = Prior Month Scheduled UPB + Principal Forbearance Amount ¹ Actual UPB = UPB reported to Fannie Mae as of the end of the prior reporting month, not including principal forbearance. Fannie Mae s Investor Reporting Manual 19

27 3-01, Reporting a Mortgage Loan Modification (11/12/2014) October 14, 2015 The servicer must report the modification of any mortgage loan in the first delinquency status information it transmits to Fannie Mae after Fannie Mae approves the mortgage loan modification. Existing monthly LAR reporting requirements for Fannie Mae servicers will not change for a mortgage loan that has been modified. The following table provides additional information on these requirements. The servicer must Continue to report the standard LAR format for a mortgage loan payment by the third business day of each month for the prior month's activity. Continue to report the standard LAR form for payoff activity by the second business day of each month for the prior month s activity (for example, payoff reporting to the received by April 2 will contain March activity). Report post-modification UPB once the mortgage loan modification is closed in HSSN (for example, if a mortgage loan modification is closed on March 25, the post-modification UPB must be reported on the April 3 LAR). Note: If the servicer submits a LAR to report the post-modification UPB before the case is closed in HSSN, an exception will occur. If the pre-modification UPB or the pre-modification LPI reported in HSSN for the closed mortgage loan modification does not agree with the pre-modification UPB or the pre-modification LPI in Fannie Mae's investor reporting system, the mortgage loan modification will not be processed until the discrepancy is resolved. If, in the final month of the trial period, the sum of unapplied trial period payments is equal to or greater than a full contractual payment on the underlying mortgage loan, and the mortgage loan modification is closed in the same month, the servicer must report the contractual payment before the post-modification balances can be reported. This will require two LARs and two reporting cycles to complete. 3-02, Reporting ARM Interest Rate and Monthly Payment Changes (11/12/2014) Scheduled/actual and scheduled/scheduled remittance types require the payment of interest (or, in the case of scheduled/scheduled remittance types, P&I) to Fannie Mae whether or not the servicer actually collects the payment from the borrower. Therefore, the servicer must handle ARM interest rate and payment changes for these remittance types differently than they would for mortgage loans that have the actual/actual remittance type. Reporting for Scheduled/Actual Remittance Types The servicer must change the interest rate of a whole mortgage loan account or participation certificate related to a scheduled/actual remittance type mortgage loan when the interest rate adjustment is scheduled to occur, regardless of the LPI date for the mortgage loan. Fannie Mae s Investor Reporting Manual 20

28 This means sometimes the servicer will change the interest rate for Fannie Mae's accounting records: October 14, 2015 at the same time that it changes the rate for the borrower's payment (for current mortgage loans), before it changes the rate for the borrower's payment (for delinquent mortgage loans), or after it changes the rate for the borrower's payment (for prepaid mortgage loans). When a servicer reports a scheduled interest rate change for a scheduled/actual remittance type ARM that provides for the payment of interest in arrears, the servicer must report the change with a Transaction Type 83 (Payment/Rate Change Record), as of the payment date on which the interest rate will become effective, rather than the actual effective date of the interest rate change. Note: If the mortgage loan provides for payment of interest in advance, the scheduled change dates for the interest rate and the monthly payment are always the same. Example: If a mortgage loan that provides for payment of interest in arrears has an interest rate change date of October 1, The new interest rate becomes effective with the payment due November 1, The servicer must use the new interest rate to calculate the interest reported with its Transaction Type 96 (Summary Loans) or Transaction Type 96 and 97 (Detailed Reporting Loans) LAR for November 2011, but the remittance will not actually be due until December 20, Reporting for Scheduled/Scheduled Remittance Types Remittance for scheduled/scheduled remittance type mortgage loans will differ based on the mortgage loan type. Scheduled/scheduled MBS mortgage loans. The servicer must change the interest rate of a portfolio mortgage loan or the accrual rate for an MBS mortgage loan accounted for as a scheduled/scheduled remittance type in Fannie Mae's records before the interest rate adjustment is scheduled to occur, regardless of the actual LPI date for the individual mortgage loan. Scheduled/scheduled ARM loans. The following table provides further instructions for reporting scheduled/scheduled ARM loans. The servicer must Report interest rate and monthly payment changes for scheduled/scheduled remittance type ARMs to Fannie Mae as soon as the new interest rate or monthly payment is known, by transmitting a Transaction Type 83 (Payment/Rate Change Record). Report the ARM interest rate and monthly payment change to Fannie Mae at least two months in advance of the date on which the application of the monthly payment will be based on the new interest accrual rate, (when the mortgage loan interest rate and the monthly payment for an ARM change at the same interval). Fannie Mae s Investor Reporting Manual 21

29 The servicer must Report the ARM interest rate change two months before the date on which the application of the monthly payment will be based on the new interest accrual rate, and the monthly payment two months before the date on which the new payment becomes effective; (when the mortgage loan interest rate and monthly payment change at different intervals). Note: If the index is not available by the time that the interest rate change must be reported to Fannie Mae, the servicer must report the change to Fannie Mae as soon as the appropriate index becomes available and the new interest rate and the monthly payment (if it is changing) have been calculated. To illustrate the correct timing for reporting ARM interest rate and payment changes for scheduled/scheduled remittance types, refer to the following example. Example: The servicer's January report must include any ARM that will have either: a new interest accrual rate effective with the application of the March 1 payment, or a monthly payment change effective March 1 (when the payment change is not tied to a change in the interest accrual rate). Fannie Mae prefers that a servicer that has a cut-off date after the 25th of the month report its ARM changes when it reports the snapshot of its activity, within three business days after the 25th, although it may report the changes with its supplemental reports. 3-03, Recovering Delinquency Advances (11/12/2014) The method and timing of the servicer's reimbursement for interest it advanced for a delinquent mortgage loan depends on whether the mortgage is: a portfolio mortgage loan, or an MBS mortgage loan. Fannie Mae does not reimburse the servicer of regular servicing option MBS mortgage loans for its delinquency advances, but will reimburse delinquency advances related to special servicing option MBS mortgage loans. Reimbursements for delinquency advances related to portfolio mortgage loans vary depending on: the remittance type, and Fannie Mae's ownership interest in the mortgage loan. Fannie Mae s Investor Reporting Manual 22

30 Seeking Reimbursement for Scheduled/Actual Remittance Types October 14, 2015 Because of the nature of scheduled/actual remittances, the servicer must pass through one more month of interest than the number of delinquent installments. The servicer must pass through to Fannie Mae: one month's interest for the reporting period that includes the LPI date for the mortgage loan, and one month's interest for each successive month of delinquency. For delinquent whole mortgage loans or participation pool mortgage loans, the servicer is authorized to recover its advances for delinquent interest during the fourth month of delinquency. To recover this interest advance, the servicer must report a negative interest remittance amount for the mortgage loan when it transmits: its Transaction Type 96 (Summary Loans), or Transaction Type 96 and 97 (Detailed Reporting Loans) LAR for the month in which the mortgage loan becomes four months delinquent. Fannie Mae will reimburse the servicer for the additional month of interest it advances after it reports the loan liquidation (as Action Code 70, 71, or 72) with Transaction Type 96 (Summary Loans) or Transaction Type 96 and 97 (Detailed Reporting Loans) LAR. When the servicer receives Fannie Mae's check for this advanced interest, it must deposit the funds into the account in which it holds Fannie Mae collections, thus replenishing the funds it used to cover the earlier advance. If the servicer actually advanced corporate funds, the check may be deposited into the servicer's corporate account. The following chart illustrates the correct timing for reporting delinquencies, advancing interest, and recovering advanced interest for a whole mortgage loan or a participation pool mortgage loan (other than one that was part of a concurrent mortgage loan sale) that had an LPI date of April 2002: Mortgage LPI Reporting Period Date: April 2002 April 2002 May 2002 June 2002 July 2002 August 2002 Mortgage Status Current 1 mo. Delq. 2 mo. Delq. 3 mo. Delq. 4 mo. Delq. Interest Sent to Fannie Mae 1 mo. 1 mo. 1 mo. 1 mo. -3 mos.* Delinquent Interest Advanced for 3 Months Interest Recovery * Remaining one month of interest will be paid to servicer after it reports the liquidation of the mortgage. Fannie Mae s Investor Reporting Manual 23

31 Seeking Reimbursement for Scheduled/Scheduled Remittance Types October 14, 2015 The following table provides instructions related to requirements for reimbursement for scheduled/scheduled remittance types. The servicer must Report the acquisition of a property securing an MBS mortgage loan. Use its own corporate funds to liquidate the acquired property from the MBS pool, regardless of the applicable servicing option. Seek reimbursement directly from Fannie Mae rather than utilize payments made by or on behalf of a borrower to reimburse itself for corporate funds it advances to liquidate acquired properties from MBS pools. If Fannie Mae reclassifies a delinquent scheduled/scheduled remittance type special servicing option MBS mortgage loan as an actual/actual remittance type mortgage loan that Fannie Mae will hold in its portfolio, Fannie Mae will reimburse the servicer for the UPB of the mortgage loan and its delinquency advances for scheduled P&I once Fannie Mae completes the reclassification. Fannie Mae will automatically reimburse the servicer for the UPB of the mortgage loan. This includes reimbursement for the UPB of special servicing mortgage loans that it acquires by foreclosure and for P&I delinquency advances on the first business date following the 24th day of the same month that the servicer: remits the funds required to remove the mortgage loan from Fannie Mae's active accounting records or a special servicing option MBS pool, and reports the applicable removal action code to the Fannie Mae investor reporting system, including reimbursement of UPB of special servicing mortgage loans that were acquired by foreclosure. The servicer must report the applicable action code for foreclosures, short sales or third-party sales, Mortgage Releases, or assignments Action Code 70, 71, or 72 to remove the mortgage loan from Fannie Mae's active accounting records or an MBS pool. Additional reporting requirements are provided in the following table. The servicer must report The applicable action date the foreclosure sale took place or date the Mortgage Release was accepted. All actions occurring prior to the 25th day of the month to the Fannie Mae investor reporting system when activity for that same month is reported. All actions occurring between the 25th day and the last day of a month to the Fannie Mae investor reporting system when activity for the following month is reported. Note: Fannie Mae will not reimburse a servicer for interest that it has to advance because it fails to remove the mortgage loan in a timely manner. Fannie Mae s Investor Reporting Manual 24

32 3-04, Reinstating Seriously Delinquent Mortgage Loans (11/12/2014) When a whole mortgage loan or any other participation pool mortgage loan that is more than three months' delinquent is brought current (fully reinstated) before the foreclosure sale is held, the servicer will have been reimbursed for a portion of its interest advances. Therefore, the servicer must make appropriate adjustments to ensure that Fannie Mae receives all of the monthly interest payments that it is due. If an interest adjustment date occurs while an ARM is delinquent, the servicer must consider any changes to the pass-through rate for the mortgage loan when calculating the amount of interest due Fannie Mae. The formulas for determining the interest remittance appear in the following table. A Interest Recovery (For FRMs and Unadjusted ARMs) Previously Reported UPB x Pass-through Rate 12 x x Fannie Mae's Percentage Interest Number of Months that have elapsed from the Previously Reported LPI Date through the end of the Reporting Period = Interest Amount Required to Bring Mortgage Current B Interest Recovery (For Adjusted ARMs) Previously Reported UPB x Pass-through Rate 12 x x Fannie Mae's Percentage Interest Number of Months that have elapsed from the Previously Reported LPI Date until the LPI Date that the New Pass-through Rate becomes effective. = Interest Amount to be Remitted at Previous Pass-through Rate Previously Reported UPB x New Pass-through Rate 12 x x Fannie Mae's Percentage Interest Number of Months that have elapsed from the LPI Date that the New Pass-through Rate became effective through the end of the Reporting Period = Interest Amount to be Remitted at New Pass-through Rate Interest Amount to be Remitted at Previous Pass-through Rate + Interest Amount to be Remitted at New Pass-through Rate = Total Interest Amount Required to Bring Mortgage Current To bring a seriously delinquent mortgage loan current under Fannie Mae's investor reporting system, the servicer must report the interest remittance with its Transaction Type 96 (Summary Loans) or Transaction Type 96 and 97 (Detailed Reporting Loans) LAR as interest from the previously reported LPI date through the Fannie Mae s Investor Reporting Manual 25

33 end of the reporting period. The following table illustrates the relationship between the mortgage loan status, the interest due, and the interest remitted. Mortgage LPI Reporting Period Date April 2002 April 2002 May 2002 June 2002 July 2002 August 2002 Sept Mortgage Status Current 1 mo. Delq. 2 mo. Delq. 3 mo. Delq. 4 mo. Delq. Current Interest Due Fannie Mae Interest Remittance 1 mo. 1 mo. 1 mo. 1 mo. 1 mo. 1 mo. 1 mo.* 1 mo. 1 mo. 1 mo. (-3 mos.) 5 mo. 3 mos. + 1 mo. + 1 mo. In the preceding example, the interest due Fannie Mae covers: the three months that the servicer has already recovered, the one month that the servicer has not recovered, interest for the month when the servicer reimbursed itself, and interest due for the reporting period. Since the servicer has not recovered interest advanced for one of the months, it must only remit five months of interest to Fannie Mae. If the interest adjustment date for an ARM occurs during the delinquency period, the servicer must calculate the amount of interest due to Fannie Mae when the mortgage loan is brought current in two steps, as shown in the following table. Step Servicer Actions 1 Using the earlier pass-through rate. 2 Using the new pass-through rate that results from the interest rate adjustment. Note: A new pass-through rate goes into effect for reporting purposes in the month that the monthly payment changes for the mortgage loan. Other than that, the interest remittance must be determined as previously described. In the preceding example, if the effective date for the interest adjustment is June 2002; the servicer must calculate: two of the five months of interest due Fannie Mae at the previous pass-through rate, and three months of interest at the new pass-through rate. Fannie Mae s Investor Reporting Manual 26

34 3-05, Reporting Military Indulgence to Fannie Mae (11/12/2014) October 14, 2015 In order to facilitate the servicer in taking appropriate action in cases where military indulgence is warranted or required, the servicer must follow the procedures in Servicing Guide F-1-30, Processing Military Indulgence, which provides a consolidated presentation of all of the relevant material on Fannie Mae's specific procedures for providing relief to U.S. servicemembers under the Servicemembers Civil Relief Act and its additional forbearance policies. 3-06, Reporting a Liquidation to Fannie Mae (10/14/2015) The action codes that relate to payoffs, repurchases, assignments, Mortgage Releases, and foreclosures codes 60, 65, 67, 70, 71, and 72 are categorized as liquidation transactions. A liquidation transaction removes the mortgage loan from the Fannie Mae investor reporting system. The following table provides a list and further description for the use of liquidation codes. Action Code The servicer must report this Action Code for 60 Borrower Payoff / Investor Payoff 65 Repurchase: in the next Transaction Type 96 LAR it transmits to Fannie Mae through Fannie Mae s investor reporting system, and due to repurchase if the mortgage loan was sold to Fannie Mae with recourse or is part of a regular servicing option MBS pool. Note: The servicer of an MBS mortgage loan must also reflect the repurchase of the mortgage loan in its pool security balance report for the reporting period. 67 To indicate the servicer is repurchasing a modifiable ARM MBS loan (an ARM loan with a mortgage loan modification feature) from a pool. 70 Liquidated Held for Sale for Uninsured Properties: including those in redemption, acquired through a Mortgage Release, or for a VA No-Bid or No Upset case. Note: The servicer must transmit Transaction Type 96 LAR to Fannie Mae if the servicer repurchases an acquired property after it submits an REOgram to Fannie Mae. Note: The servicer must not report an action code that reflects repurchase or payoff since the liquidation actually relates to the disposition of the property that was held for sale. The servicer also must report the repurchase proceeds as special remittance. 71 Liquidated Third-Party Sale / Condemnation / Short Sale, including when: a third-party purchaser has acquired the property, a condemnation of the property has occurred, a short sale has been completed, or Fannie Mae authorized the charge-off of the second-lien mortgage debt. Fannie Mae s Investor Reporting Manual 27

35 Action Code The servicer must report this Action Code for 72 Liquidated Foreclosure Sale Held for Insured Properties: including those in redemption, or for a property acquired through a Mortgage Release pending conveyance to FHA/VA/MI. Related Announcements The table below provides references to the Announcements that have been issued that are related to this topic. Announcements Issue Date Announcement SVC October 14, , Reversing Curtailments/Removals (11/12/2014) The reversal of a previously applied curtailment for an MBS mortgage loan or the re-addition of a mortgage loan to Fannie Mae's accounting records for an MBS pool (to reverse an erroneous previously reported payoff, repurchase, or foreclosure) must be treated differently for accounting purposes than it would be for other remittance types because the funds would have already been passed through to the security holder. The following table provides servicer instructions for reporting the reversal of a previously applied curtailment. The servicer must Increase the UPB of the mortgage loan carried in Fannie Mae's records by the amount of the curtailment that is being reversed. Maintain records to track the recovery of a curtailment reversal. The servicer must not reduce its remittance by the amount of the curtailment reversal unless it has unremitted funds for a curtailment or payoff of another mortgage loan in the MBS pool. When this is the case, the servicer must make the appropriate cash adjustment to its security balance report for that month. If the servicer has no unremitted funds for curtailments or payoffs from the same MBS pool, it must not recover the amount of the curtailment reversal until it receives a curtailment or payoff related to that MBS pool (or until the MBS pool is liquidated, if no curtailment or mortgage loan payoff is received before then). The following table provides instructions for the reversal of an erroneous removal of a mortgage loan from an MBS pool. Fannie Mae s Investor Reporting Manual 28

36 The servicer must Send a written explanation to its Fannie Mae Investor Reporting Representative (see Servicing Guide F-4-03, List of Contacts) that provides the reason for the reversal. Request (also in writing) that the mortgage loan be re-added to Fannie Mae's records for the MBS pool. Maintain records to track its recovery of any funds. The servicer must not recover the funds for the initial removal unless it has unremitted funds for a curtailment or a payoff of another mortgage loan in the same MBS pool. If this is the case, the servicer must make the appropriate cash adjustment to its security balance report for that month. Otherwise, the servicer may not recover the amount of the removal reversal until it receives a curtailment or payoff related to the same MBS pool (or until that pool is liquidated, whichever comes first). 3-08, Reporting Mortgage Loans with Interest in Advance (11/12/2014) When an MBS pool includes fixed-rate mortgage loans that provide for interest to be paid in advance; the servicer must ensure that the initial monthly accounting report after the issue date for the MBS pool reflects the interest and principal portions of all monthly payments due on the first of the month following the issue date. Example: If the issue date for an MBS pool is January 1, 2011, the servicer must report as the principal balance, the mortgage loan balance after application of the principal portion of the mortgage loan payments due on January 1, The P&I distribution amounts represent Fannie Mae's share of the interest and principal portions of the mortgage loan payments due on February 1, , Reporting Mortgage Loans with Odd Due Dates (11/12/2014) When a mortgage loan in an MBS pool has an odd due date, Fannie Mae considers any payment due on a day other than the first of a month as due on the first of the following month, so a December 15 payment date is considered to be a January 1 payment date. Similarly, collection of such an installment is considered collection of a prepaid installment due on the first of the next month. Example: Consider an MBS pool with a January 1, 2011 issue date. The servicer must report as the principal balance, the mortgage loan balance after application of the mortgage loan payments with due dates from December 2 through December 31. The payments collected on these mortgage loans represent the January 2 through January 31 installments (which are considered to be due February 1). 3-10, Reporting During the First Reporting Cycle for Same Month MBS Mortgage Loans (11/12/2014) When a mortgage loan in an MBS pool is closed in the same month that the pool is issued, the borrower does not owe the servicer a monthly payment until after the servicer's first monthly remittance must be made to Fannie Mae. Therefore, the servicer must use its own funds to advance the interest that is scheduled to be passed through to Fannie Mae for the mortgage loan in that month and to make the first guaranty fee Fannie Mae s Investor Reporting Manual 29

37 remittance. The interest advance represents one month's interest, calculated on the issue date principal balance of the mortgage loan and using either: October 14, 2015 the pass-through rate for the pool (for a fixed-rate mortgage loan), the pool accrual rate (for an ARM in a stated-structure pool), or the accrual rate for the mortgage loan (for an ARM in a weighted-average structure ARM Flex pool). The servicer's first remittance for a mortgage loan submitted for same month pooling will be an interest-only remittance, unless the borrower sends the servicer a curtailment before the first payment is due on the mortgage loan. This means that the servicer must not report a scheduled principal reduction. The following table provides additional scenarios and Fannie Mae s requirements for each of those scenarios associated with same month MBS mortgage loans. If the servicer reports a regular scheduled principal payment for one of these mortgage loans for the first reporting cycle receives a curtailment for one of these mortgage loans receives a prepaid installment for one of these mortgage loans during the month the MBS pool is issued, but after the pool was delivered to Fannie Mae Then the transaction will hard reject. the servicer must reduce both the actual mortgage loan balance and the security balance by the amount of the curtailment. the servicer must report the reduced mortgage loan balance to Fannie Mae (as the actual UPB ). Note: The servicer must not reduce the security balance or report a principal remittance (to ensure that the scheduled UPB will continue to equal the issue date balance). The following chart illustrates how a servicer would report a Transaction Type 96 (Loan Activity Record) for its December reports (for mortgage loans in a pool that had a November issue date) to reflect the application for a current mortgage loan (one for which no payment has come due), a prepaid mortgage loan, and a current mortgage loan that has had a $100 curtailment applied. Loan Identification LPI Date Actual Unpaid Balance Interest Remitted Principal Remitted Current January 2011 $100, $1, Prepaid February 2011 $99, $1, Curtail January 2011 $99, $1, $ Fannie Mae s Investor Reporting Manual 30

38 3-11, Reporting the Discontinuance of Mortgage Insurance (11/12/2014) The servicer must notify Fannie Mae about an automatic termination or a borrower-initiated cancellation of mortgage insurance coverage on the next Fannie Mae investor reporting system reports that are due after the effective date of the termination or cancellation, by reporting a Transaction Type 96 (Summary Loans) or Transaction Type 96 and 97 (Detailed Reporting Loans) LAR. The action code that must be reported differs based on whether: the mortgage insurance is automatically terminated or is canceled based on the borrower's request, and the servicer uses EDI for investor reporting. Action codes are further described in the following table. Action Code The servicer must use this code 51 (or EDI Action Code IM) to report a borrower-initiated cancellation based on the original value of the property (or, in the case of a second-lien mortgage loan, the value of the property at the time the second-lien mortgage loan was originated) 52 (or EDI Action Code IN) to report a borrower-initiated cancellation based on the current appraised value of the property 53 (or EDI Action Code IO using the letter O, not zero) to report an automatic termination (regardless of whether the termination is based on the scheduled LTV ratio or the date that is the mid-point of the amortization period). Note: The action date must be reported as the last day of the month in which the termination or cancellation occurs. 3-12, Reporting MBS Security Balances (11/12/2014) Each month (beginning with the first month following the issue date for an MBS pool), the servicer must report the ending aggregate security balance of each MBS pool as of the close of the preceding month. The following table provides Fannie Mae requirements related to reporting MBS security balances. The servicer must Report a security balance amount that reflects the outstanding principal balance for all of the mortgage loans in each pool after crediting the principal portion of all payments due on or before the first day of the month in which the report takes place (even if those payments were not actually collected). Report all security balances no later than 5:00 p.m. (eastern time) on the second business day of each month. Fannie Mae s Investor Reporting Manual 31

39 Use MBS Reporting (a web-based application) to report its MBS security balances to Fannie Mae. Note: The reporting module of MBS Reporting can be used to import files, manipulate and edit data, generate reports, and export projection and security balance data and is available 24 hours a day. If the mortgage loan was closed in the same month the MBS pool was issued, the servicer must treat it as a prepaid mortgage loan when calculating the security balance for the first reporting cycle (since there will have been no principal reduction because no payment will have come due on the mortgage loan). Unless the borrower submitted a curtailment for the mortgage loan, and then the servicer must reduce the security balance accordingly. The following example illustrates the determination of the first security balance report for a $1 million MBS pool issued September 1, 2011 (which would have the first security balance due October 2, 2011). Two of the mortgage loans in the pool (including one that has an odd due date) are eligible for same-month pooling (Loans A and E); three of the mortgage loans were closed in the month prior to the issue date of the pool (Loans B, C, and D). Loan ID First Payment Due Date Actual Unpaid Balance Scheduled Unpaid Balance A November 1, 2011 $ 200,000 $200,000 B October 1, 2011 $ 200,000 $199,900 C October 1, 2011 $ 200,000 $199,900 D October 1, 2011 $ 200,000 $199,900 E October 3, 2011 $ 200,000 $200,000 * This is the amount that must be shown on the security balance report. $1,000,000 $999,700* If a servicer fails to meet Fannie Mae's reporting deadline, Fannie Mae may estimate the servicer's security balances so Fannie Mae can pass through payments to security holders and publish security balances in a timely manner. When Fannie Mae does this, its estimates will become not only the published security balances, but also the beginning security balances that the servicer must use for its security balance report for the next month. Fannie Mae will send the servicer written notification of the estimated security balances that it uses. A servicer may transmit its security balances any time after its month-end cut-off (and completion of its pool-tosecurity balance reconciliation). A servicer may submit corrections to this data at any time up until the 5:00 p.m. (EST) deadline on the second business day of the month following the reporting period. It is important that Fannie Mae get accurate and timely security balances each month to facilitate securities trading. Therefore, Fannie Mae reserves the right to impose compensatory fees for late or repeatedly incorrect reporting of aggregate security balances for MBS pools as described in the following table. Fannie Mae s Investor Reporting Manual 32

40 Occurrence Fannie Mae reserves the right to charge the servicer that reports late or inaccurately for First five or fewer pools, $250. more than five pools, $50 per pool, up to a maximum of $25,000. Second (if within one year of the first) five or fewer pools, $500. more than five pools, $100 per pool, up to a maximum of $100,000. Each subsequent instance ten or fewer pools, $1,000. more than ten pools, $100 per pool. The following format applies to security balance reports that are submitted by the MBS Reporting application or by file upload via the Web. Fannie Mae MBS Reporting Layout (MDIB) Header Record Record Length: 96 bytes Field Name Start Position Field Length Field Format Record ID 1 2 [A Servicer Number 3 9 X(9) Balance Contact Title R for Mr. S for Ms X(1) Balance Contact Name X(24) Balance Contact Phone X(15) Pass-Thru Rate Contact Title R for Mr. S for Ms X(1) Pass-Thru Rate Contact Name X(24) Pass-Thru Rate Contact Phone X(15) Version Number Detail Record Record Length 129 bytes (54 without comments) Field Name Start Position Field Length Field Format Record ID 1 2 [B Fannie Mae s Investor Reporting Manual 33

41 Detail Record Record Length 129 bytes (54 without comments) Field Name Start Position Field Length Field Format Servicer Number 3 9 X(9) Pool Number 12 6 X(6) Security Balance (11).9(2) Unscheduled Principal (11).9(2) Pass-Through Rate (3).9(4) Correction Flag 54 1 X(1) Comment (optional) X(75) Trailer Record Record Length: 17 bytes Field Name Start Position Field Length Field Format Record ID 1 2 [C Servicer Number 3 9 X(9) Number of Detail Records (6) MSSS MBS Reporting Layout Field Type Column Format Default Value Comment Servicer Number CHAR 1 X(9) Blank Pool Number CHAR 12 X(6) Blank Pool Prefix CHAR 18 X(2) Blank Security Balance NUM 20 9(11).9(2) 0.0 Pass-Through Rate NUM 40 9(3).9(2) 0.0 Fannie Mae s Investor Reporting Manual 34

42 Field Type Column Format Default Value Comment Pool Type CHAR 50 X(1) F F=Fixed, A=ARM, D=Deferred Eligible Comment CHAR 55 X(35) Blank Previous Balance NUM 140 9(10).9(2) 0.0 Scheduled Principal NUM 160 9(10).9(2) 0.0 Unscheduled Principal NUM 180 9(10).9(2) 0.0 Principal & Interest NUM 200 9(10).9(2) 0.0 Wtd. Avg. Note Rate NUM 220 9(3).9(2) 0.0 Origination Date CHAR 230 X(8) Blank MBS Reporting Export Layout Data Field Format Length Offset Comment 1 Servicer Number 9(9) Pool Number X(6) 6 10 XX9999 or Security Balance 9(11) Unscheduled Principal 9(11) Pass-Through Rate 9(3).9(4) Edit Status X 1 52 N Not Edited P Passed W Warned F Failed 7 Submission Status X 1 53 N Not Submitted V Not Submitted/Revised R Resubmitted S Submitted 8 Pool Prefix XXX Issue Date YYMMDD 10 Maturity Date YYMMDD Fannie Mae s Investor Reporting Manual 35

43 Data Field Format Length Offset Comment 11 First Amortization Date YYMMDD 12 Projected Pass-Through Rate 9(3).9(4) Prior Month Pass-Through Rate 9(3).9(4) Minimum Accrual Rate 9(3).9(4) Maximum Accrual Rate 9(3).9(4) Current WAC from the Fannie Mae investor reporting system 17 Current WAM from the Fannie Mae investor reporting system 9(3).9(4) Interest Only Flag X Deferred Interest Flag X Projected Balance 9(11) Prior Month UPB 9(11) Constant P&I 9(11) Scheduled Principal 9(11) Original Balance 9(11) Projected Deferred Interest 9(11) Pool Type X MAST version S Single Pool M Major/multiple pool G mega P PPS 27 MBS Express Flag X Remittance Day 9(2) PTR Type X F Fixed A ARM D Deferred Interest (type of ARM) 30 Next Rate Change Due Date 9(6) YYMMDD Pass Through Rate Change Due Flag X Y Yes N No Fannie Mae s Investor Reporting Manual 36

44 Data Field Format Length Offset Comment 32 Sub Type X Index Value 9(3).9(4) Current Margin 9(3).9(4) Number of Loans Changing 9(6) This is the number of loans in the pool that are changing due to a rate change. 36 Current Loan Count 9(6) This is the number of loans in the pool. 37 Comment X(75) Pool Transfer Date 9(6) YYMMDD Projected MBS3+ 9(12) (aka Projected Unscheduled Principal ) Fannie Mae s Investor Reporting Manual 37

45 Chapter 4, Formulas and Calculations In the update process, the Fannie Mae investor reporting system performs numerous calculations to project or validate data related to the UPB of a mortgage loan, including: the interest rate that is charged to the borrower, the rate at which interest on the mortgage loan is passed through to Fannie Mae, the servicing compensation the servicer is permitted to retain, and the guaranty fees that are payable to Fannie Mae. 4-01, Mathematical Formulas (11/12/2014) The Fannie Mae investor reporting system uses a number of mathematical formulas in the update process for either computational or editing purposes. The servicer may incorporate use of these formulas into its own systems to reduce the potential for rejected transactions. The following formulas appear as exhibits to this chapter: Exhibit 1: Monthly Fixed Installment Formula Exhibit 2: Regular Amortization Formula Exhibit 3: Negative Amortization Formula Exhibit 4: Reverse Amortization Formula Exhibit 5: Servicing Fee/Yield Differential Adjustment Formula 4-02, Calculations Related to Principal Payments (05/20/2015) Calculations related to principal payments can take several forms including those used: to determine the principal reduction for a mortgage loan following application of a borrower's monthly (or biweekly) payment or an additional principal payment, when a mortgage loan is paid off or repurchased, to verify the actual or scheduled UPB for a mortgage loan, and to reconcile the aggregate balances of all mortgage loans in an MBS pool to the balance of the related security and to determine the amount of any pool deficiency. A calculation may differ based on the remittance type and delivery type for a mortgage loan. If Fannie Mae has only a participation interest in a mortgage loan, the principal calculation must factor in Fannie Mae's percentage interest in the mortgage loan to determine the exact data to reflect in Fannie Mae's records. Fannie Mae s Investor Reporting Manual 38

46 Calculating Monthly Principal Payments October 14, 2015 Each month the servicer must send Fannie Mae the actual principal collected from the borrower for a monthly payment mortgage loan that is an actual/actual or scheduled/actual remittance type. The calculation for determining principal payments for these types of mortgage loans differs from the method used for mortgage loans that are the scheduled/scheduled remittance type. The different calculation methods are explained in the following table. If the mortgage loan is actual/actual or a scheduled/actual remittance type scheduled/scheduled remittance type (regardless of whether it is a portfolio mortgage loan or an MBS mortgage loan) To determine the principal remittance amount for a monthly payment mortgage loan, the servicer must subtract the current month's actual UPB from the prior month's actual UPB and multiply the result by Fannie Mae's percentage interest. subtract the current month's scheduled UPB from the prior month's scheduled UPB and multiply the result by Fannie Mae's percentage interest. Calculating Biweekly Principal Payments Biweekly payment mortgage loans held in Fannie Mae's portfolio are accounted for as the scheduled/actual and the actual/actual remittance types, while those in MBS pools are accounted for as the scheduled/scheduled remittance type. This means that the principal payment is calculated differently. The different calculation methods are explained in the following table. If the mortgage loan is a scheduled/actual biweekly payment mortgage loan held in Fannie Mae's portfolio an actual/actual biweekly payment mortgage loan held in Fannie Mae's portfolio a biweekly payment mortgage loan in an MBS pool To determine the principal remittance amount for a biweekly payment mortgage loan, the servicer must subtract the current month's actual UPB from the prior month's actual UPB and multiply the result by Fannie Mae's percentage interest. subtract the current actual UPB from the UPB as of the last reported loan activity and multiply the result by Fannie Mae's percentage interest. subtract the current month's scheduled UPB from the prior month's scheduled UPB and multiply the result by Fannie Mae's percentage interest. Calculating the Principal Balance Paid Off The amount of principal paid when a borrower pays off his or her mortgage loan is the same regardless of the remittance or delivery type of the mortgage loan. However, the principal payment to Fannie Mae will differ depending on whether the servicer is required to send Fannie Mae: actual principal collections, or scheduled principal reductions. Fannie Mae s Investor Reporting Manual 39

47 The different calculation methods are explained in the following table. If the mortgage loan is an actual/actual (except actual/actual biweekly) or scheduled/actual remittance type a scheduled/scheduled remittance type (regardless of whether it is a portfolio mortgage loan or an MBS mortgage loan) an actual/actual biweekly mortgage loan To determine the principal balance paid off, the servicer must multiply the prior month's actual UPB by Fannie Mae's percentage interest. multiply the prior month's scheduled UPB by Fannie Mae's percentage interest. multiply the actual UPB, as of the last reported loan activity, by Fannie Mae's percentage interest Calculating the Principal Balance Repurchased Mortgage loans with actual/actual, scheduled/actual, or scheduled/scheduled remittance types sold to Fannie Mae as cash purchases may have been purchased at par or at a discount or premium price. Mortgage loans with the scheduled/scheduled remittance type sold to Fannie Mae as part of an MBS pool are purchased at par. This means that if the servicer has to repurchase the mortgage loan, the principal balance repurchased calculation will differ. The different calculation methods are explained in the following table. If the mortgage loan is an actual/actual (excluding biweekly) or a scheduled/actual remittance type portfolio mortgage loan a scheduled/scheduled remittance type portfolio mortgage loan (sold as cash) To determine the principal balance repurchased calculation, the servicer must multiply the prior month's actual UPB by the original purchase price, then multiply the result by Fannie Mae's percentage interest. multiply the prior month's scheduled UPB by the original purchase price, then multiply the result by Fannie Mae's percentage interest. an actual/actual biweekly mortgage loan multiply the UPB as of the last reported loan activity, by the original purchase price, then multiply the result by Fannie Mae's percentage interest. an MBS mortgage loan that has the scheduled/scheduled remittance type multiply the prior month's scheduled UPB by Fannie Mae's percentage interest. Fannie Mae s Investor Reporting Manual 40

48 Calculating Actual UPB October 14, 2015 The actual UPB of a mortgage loan in a given month is calculated the same way for all remittance or delivery types except actual/actual biweekly. To determine the current month's actual UPB of a mortgage loan except actual/actual biweekly, the servicer must use the following calculation: Previous Month's UPB - Current Month's Principal Collection = Current Month's UPB To determine the current actual UPB of an actual/actual biweekly mortgage loan, the servicer must use this calculation: Previous reported UPB - Current principal collected = Current UPB This current UPB must equal the UPB on the servicer's trial balance at the end of the activity month. Calculating Scheduled UPB The servicer must calculate a scheduled UPB only for: monthly payment portfolio mortgage loans that are the scheduled/scheduled remittance type, and biweekly and monthly payment scheduled/scheduled remittance type mortgage loans that are in MBS pools. The calculations are the same for both delivery types; however, they will differ depending on the due date of the mortgage loan installments and whether the mortgage loan payments are: current, delinquent, or prepaid. A. Monthly payments due on first day of month. When a monthly payment mortgage loan has payments due on the first day of each month, the scheduled UPB is generally equal to the actual UPB of the mortgage loan amortized to one month beyond the reporting period. The different calculation methods are explained in the following table. If the mortgage loan is The servicer must calculate the ending scheduled UPB as follows: current 1. (Ending Actual UPB x Note Rate) 12 = Gross Interest Amount 2. Monthly Installment Gross Interest Amount = Principal 3. Ending Actual UPB Principal = Ending Scheduled UPB Fannie Mae s Investor Reporting Manual 41

49 If the mortgage loan is delinquent prepaid for one month prepaid two or more months The servicer must calculate the ending scheduled UPB as follows: 1. Repeat steps 1 3 shown above for each month the mortgage loan is delinquent, then 2. Add the additional month required to take the amortization one month beyond the reporting period. No calculation is necessary. The scheduled UPB is equal to the actual UPB. 1. Ending Actual UPB + Monthly Installment = Adjusted UPB 2. Interest Rate 12 = Interest Factor (to 9 decimal places) 3. Adjusted UPB (1+Interest Factor) = Scheduled UPB Note: These steps must be repeated for each prepaid installment (beyond one) that needs to be reversed amortized. B. Monthly payments due on any other day of the month. When a monthly payment mortgage loan has payments due on any day other than the first day of each month, the scheduled UPB will differ based on the mortgage loan status. The different calculation methods are explained in the following table. If the mortgage loan is current delinquent prepaid The servicer must calculate the ending scheduled UPB as follows: No calculation is necessary. The scheduled UPB is equal to the actual UPB. 1. (Ending Actual UPB x Note Rate) 12 = Gross Interest Amount 2. Monthly Installment Gross Interest Amount = Principal 3. Ending Actual UPB Principal = Ending Scheduled UPB Note: These steps must be repeated for each delinquent installment that needs to be amortized to bring the balance to the correct scheduled balance for the reporting period. 1. Ending Actual UPB + Monthly Installment = Adjusted UPB 2. Interest Rate 12 = Interest Factor (to 9 decimal places) 3. Adjusted UPB (1 + Interest Factor) = Scheduled UPB Note: These steps must be repeated for each prepaid installment that needs to be reverse amortized. C. Biweekly payments. When a mortgage loan provides for biweekly payments, the scheduled UPB is equal to the actual UPB after all biweekly payments due on or before the first day of the month following the reporting month are credited (whether or not they were actually collected). D. Calculations Related to Daily Simple Interest Loans. Interest accrues daily (based upon a 365-day year) up to but not including the date a payment is received that reduces principal. Then, starting on the date the Fannie Mae s Investor Reporting Manual 42

50 principal was reduced, interest accrues on the new balance. The following example provides an illustration of the calculation the servicer must complete. Example: Balance as of March 5 (and assuming interest is fully satisfied to this date): $10, Payment of $ received on March 24 (effective date = March 24 with interest accrued through March 23) Interest rate = 5.5% Fannie Mae's system will calculate interest on $10, for 19 days (March 5 to March 5.5%. 10, x 0.055/365 x 19 = $28.63 would be applied to interest and $ would go to principal, bringing the new UPB to $9, Starting on March 24, Fannie Mae's system would calculate interest on the new UPB, $9, When a payment is made by the borrower, the servicer must satisfy accrued interest first, then principal with the payment effective, driving the interest calculation. Calculating the Security Balance Each MBS pool has a corresponding security balance. The servicer must determine the security balance for any given month by reducing the prior month's security balance for the pool by the sum of the current month's scheduled principal payments and any unscheduled principal payments (such as curtailments, payoffs, and repurchases) for mortgage loans in the pool and comparing the result to the sum of the current scheduled UPBs of all the mortgage loans in the pool. The lesser of the two figures becomes the current month's security balance for the pool. The following example illustrates this calculation. Loan Prior Month's Scheduled UPB Scheduled Principal Current Month's Scheduled UPB A $94, $13.72 $94, B $94, $13.86 $94, C $94, $14.00 $94, D $94, $14.14 $.00 (Loan was paid off) =Total $378, $55.72 $283, Prior Month's Security Balance $378, _ Current Month's Scheduled Principal = Calculated Security Balance $378, Fannie Mae s Investor Reporting Manual 43

51 Calculated Security Balance $378, Sum of Current Month's Scheduled UPB $283, *(Since this is the lesser of the two, it becomes the current month's security balance.) Performing Pool-to-Security Balance Reconciliation There are two methods for performing a pool-to-security balance reconciliation. With the first method, the servicer must compare the scheduled UPBs in its records to the security balance it reported as shown in the following table. Sum of Scheduled UPBs per Servicer's Records - Security Balance Reported by Servicer = Pool-to-Security Difference With the second method of calculating the pool-to-security balance reconciliation, the servicer must compare the actual balance for the mortgage loans in an MBS pool (the mortgage loan collateral) to the aggregate security balance for that pool to determine whether the security is over collateralized or under collateralized. When an MBS pool is subdivided as the result of a loan-level servicing transfer, the transferee servicer's portion of the pool will have a beginning security balance equal to the sum of the scheduled UPBs for all of the transferred mortgage loans. The new security balance for the transferor servicer's remaining portion of the original pool will be equal to the prior ending security balance for the pool less the beginning security balance for the transferee servicer's supplemental pool. To perform the pool-to-security balance reconciliation, the servicer must use the calculation shown in the following table. Ending Actual Principal Balance for Mortgages in Pool (from current month) + Prepaid Principal (as of current month) - Delinquent Principal (as of current month) - Scheduled Principal (as of current month) + Principal Portion of Last Installment for Liquidated Mortgage Loan (as of current month) = Adjusted Principal Balance for Pool - Ending Security Balance for Reporting Period = Difference Note: A negative difference means the security is under collateralized; a positive difference means it is over collateralized. Fannie Mae s Investor Reporting Manual 44

52 Because the total amount of the security that is issued for an MBS pool is rounded down to the next lowest whole dollar amount of the actual issue date principal balances of the mortgage loans, the security balance will be smaller than the aggregate mortgage loan balances. The difference will never be greater than $0.99 for a single pool. The servicer must adjust for this difference in the first monthly accounting report it submits after the issue date of the securities, classifying it as an unscheduled principal adjustment. Other differences may arise in the reconciliation between the aggregate principal balance of the mortgage loans in an MBS pool and the outstanding security balance. These differences cannot exceed more than $0.25 for each mortgage loan in the pool. At least once a year, the servicer must make an adjustment to correct the differences. The following table provides the servicer with additional guidance dependent upon the resulting security balance. If the security balance is higher lower Then the servicer must immediately deposit the funds in the scheduled/scheduled P&I custodial account for MBS pools so that the funds can be passed through to Fannie Mae (as an unscheduled principal collection) with the servicer's next monthly remittance. adjust a subsequent pass-through amount that includes an unscheduled principal collection to correct for this difference. The Fannie Mae investor reporting system produces a Pool-to-Security Reconciliation Detail Report and Pool Deficiency Summary/Guaranty Fees to be Paid Report, (SURF-Related Reports), to assist the servicer with its reconciliation. Calculating the Pool Deficiency Amount Each month, the servicer of an MBS pool must report a security balance to Fannie Mae. Fannie Mae compares the balance it receives from the servicer to the one calculated by the investor reporting system. If the security balance reported by the servicer is higher than Fannie Mae's calculated security balance, a pool deficiency exists. The following table shows how this deficiency is calculated. Sum of the investor reporting system's Scheduled UPBs - Servicer's Reported Security Balance = Difference (Pool Deficiency, if negative) Related Announcements The table below provides references to the Announcements that have been issued that are related to this topic. Announcements Issue Date Announcement SVC May 20, 2015 Fannie Mae s Investor Reporting Manual 45

53 4-03, Calculations Related to Interest Payments (11/12/2014) Calculations related to interest payments can take a few different forms, including: those used to determine the interest allocation of a borrower's monthly (or biweekly) payment, those used to determine the amount of interest Fannie Mae is due when a mortgage loan is paid off, and those used to determine the amount of interest Fannie Mae is due when a mortgage loan is repurchased. For all remittance types, the pass through rate is generally is determined when Fannie Mae purchases the mortgage loan and remains in effect from that point forward, although the rate may change under certain circumstances. See 4-04, Calculations Related to Pass-through Rates. If Fannie Mae has only a participation interest in a mortgage loan, the interest calculation must factor in its percentage interest in the mortgage loan to determine the exact amount of interest it is due. Calculating Monthly Interest Payments Interest payments due to Fannie Mae each month for monthly payment mortgage loans vary depending on the remittance type of the mortgage loan. For an actual/actual remittance type mortgage loan, the servicer must send Fannie Mae interest only if it is actually collected from the borrower. For a scheduled/actual or a scheduled/scheduled remittance type mortgage loan, the servicer must send Fannie Mae interest whether or not it is collected from the borrower. The calculations used for determining the amount of interest due are similar, except that the interest for a scheduled/scheduled remittance type mortgage loan will be based on a scheduled UPB since principal payments for that type of mortgage loan must be sent to Fannie Mae whether or not they are collected. The following table provides further instructions to determine the interest payment for a monthly payment mortgage loan depending upon the mortgage loan remittance type. If the mortgage loan is an actual/actual or a scheduled/actual remittance type a scheduled/scheduled remittance type (regardless of whether it is a portfolio mortgage loan or an MBS mortgage loan) actual/actual remittance type that is prepaid is a scheduled/actual remittance type that is prepaid Then the servicer must use this calculation (Prior Month's Actual UPB x Pass-through Rate) 12 x Fannie Mae's Percentage Interest = Pass-through Interest Remittance Amount (Prior Month's Scheduled UPB x Pass-through Rate) 12 x Fannie Mae's Percentage Interest = Scheduled Interest Remittance Amount (Prior Months Actual UPB x Pass-through Rate) / 12 x (number of months prepaid) x (Fannie Mae's Percentage Interest) = Passthrough Interest Remittance Amount (Prior Months Actual UPB x Pass-through Rate) / 12 x (Fannie Mae's Percentage Interest) = Pass-through Interest Remittance Amount. Note: The receipt of a curtailment in a given month will not affect the interest calculation for that month. The servicer must compute interest for the current month based on the previous month's ending UPB (if the Fannie Mae s Investor Reporting Manual 46

54 mortgage loan has an actual/actual or a scheduled/actual remittance type) or on the prior month's scheduled UPB (if the mortgage loan has a scheduled/scheduled remittance type). Calculating Biweekly Interest Payments Interest payments related to scheduled/actual biweekly payment mortgage loans must be sent to Fannie Mae each month whether or not they are collected from the borrower. Interest payments related to actual/actual biweekly payment mortgage loans must be reported to Fannie Mae as received. Because biweekly mortgage loans in Fannie Mae's portfolio are accounted for as the scheduled/actual and actual/actual remittance types and those in MBS pools as the scheduled/scheduled remittance type, the calculations for determining the amount of interest due differ slightly (since the interest for an MBS mortgage loan is based on a scheduled UPB because the payments had to be sent to Fannie Mae even though they may not have been collected from the borrower). The following table provides further instructions to determine the interest payment for a biweekly payment mortgage loan depending upon the mortgage loan remittance type. If the biweekly payment mortgage loan is a scheduled/actual remittance type an actual/actual remittance type a scheduled/scheduled remittance type MBS mortgage loan Then the servicer must use this calculation (Prior Month's Actual UPB x Pass-through Rate) 12 x Fannie Mae's Percentage Interest = Pass-through Interest Remittance Amount (Actual UPB x Pass-through Rate/365) x 14 days x Fannie Mae's Percentage Interest = Pass-through Interest Remittance Amount* (Prior Month's Scheduled UPB x Pass-through Rate) 12 x Fannie Mae's Percentage Interest = Scheduled Interest Remittance Amount Note: The receipt of a curtailment may have an impact on the calculation of interest on an actual/actual biweekly mortgage loan. The servicer must report curtailments as a separate principal only transaction as received, indicating the transaction type and effective date of the application. Interest on the regularly scheduled biweekly payment, which is reported separately from the curtailment, is calculated as described in the following table. Step 1 Servicer Actions Use the UPB prior to receipt of curtailment and calculate interest up to but not including the date of the curtailment. 2 Use the UPB after the curtailment to calculate the remaining interest for the payment period. 3 Report the total interest calculated. Note: Actual/actual biweekly loans are amortized every 14 days using a 365-day basis year for interest calculation. Fannie Mae s Investor Reporting Manual 47

55 Calculating Interest Paid Off The amount of interest collected when a borrower pays off his or her mortgage loan is determined by: October 14, 2015 the type of mortgage loan, and the date of the payoff. The interest due Fannie Mae, however, also will differ depending on the remittance type of the mortgage loan. The various calculation methods for portfolio mortgage loans that are actual/actual remittance type are shown in the following table. If the mortgage loan is actual/actual remittance type and a VA, RD, FHA Title I, or conventional first- or second lien mortgage loan an FHA mortgage loan or HUD-guaranteed Section 184 mortgage loan Then the servicer must compute interest from the LPI date up to, but not including, the date the payoff funds are received, using this calculation: (Prior Month's UPB x Pass-through Rate) 12 = One Month's Interest (Prior Month's UPB x Pass-through Rate) 365 = One Day's Interest One Month's Interest x Number of Full Months of Interest Due (if mortgage loan is delinquent) = Accrued Monthly Interest Due One Day's Interest x Number of Days of Partial Month of Interest Due = Accrued Daily Interest Due (Accrued Monthly Interest Due + Accrued Daily Interest Due) x Fannie Mae's Percentage Interest = Total Payoff Interest from the LPI due date up to the date of payoff (if the funds are received on an installment due date) or through the end of the month due date (if the funds are received after an installment due date), using this calculation: (Prior Month's UPB x Pass-through Rate) 12 = One Month's Interest (One Month's Interest x Number of Full Months of Interest Due) x Fannie Mae's Percentage Interest = Total Payoff Interest Note: When the installment due date of an FHA mortgage loan falls on a non-work day, the receipt of the payoff funds shall be considered received on the installment due date if received on the next working day. Note: A full month of interest will be based on a 360-day year, while a partial month's interest will be based on a 365-day year. Fannie Mae s Investor Reporting Manual 48

56 For most portfolio mortgage loans that are scheduled/actual remittance type and for all portfolio mortgage loans and MBS mortgage loans that are scheduled/scheduled remittance type, the type of mortgage loan and the date of the payoff has no effect on the interest due Fannie Mae. The calculations to be used for scheduled/actual and scheduled/scheduled remittance types are shown in the following table. If the mortgage loan is a portfolio mortgage loan that is scheduled/actual remittance type a portfolio mortgage loan or an MBS mortgage loan that is scheduled/scheduled remittance type Then Fannie Mae is due one-half of one month's interest, this servicer must calculate this amount as follows: (Prior Month's UPB x Pass-through Rate) 24 x Fannie Mae's Percentage Interest = Payoff Interest Note: The interest calculation for FHA Title I loans that are the scheduled/actual remittance type is the same as the calculation for FHA Title I loans that are the actual/actual remittance type (as discussed in the preceding table). one full month's interest, the servicer must calculate this amount as follows: (Prior Month's Scheduled UPB x Pass-through Rate) 12 x Fannie Mae's Percentage Interest = Scheduled Payoff Interest (also see Servicing Guide C-3-02, Remitting Payoff Proceeds. Calculating Interest Repurchased When an actual/actual remittance type mortgage loan is repurchased, Fannie Mae is due interest from the LPI date up to, but not including, the repurchase date. However, when a scheduled/actual or a scheduled/scheduled remittance type mortgage loan is repurchased, Fannie Mae is due a full month of interest in all cases. A full month of interest will be based on a 360-day year, while a partial month's interest will be based on a 365-day year. The following table provides additional instructions for calculating the repurchase interest due Fannie Mae based on the remittance type of the mortgage loan. If the mortgage loan is Then the servicer must calculate repurchase interest as follows an actual/actual remittance type (Prior Month's UPB x Pass-through Rate) 12 = One Month's Interest (Prior Month's UPB x Pass-through Rate) 365 = One Day's Interest One Month's Interest x Number of Full Months of Interest Due (if mortgage loan is delinquent) = Accrued Monthly Interest Due One Day's Interest x Number of Days of Partial Month of Interest Due = Accrued Daily Interest Due (Accrued Monthly Interest Due + Accrued Daily Interest Due) x Fannie Mae's Percentage Interest = Total Repurchase Interest a scheduled/actual remittance type (Prior Month's UPB x Pass-through Rate) 12 x Fannie Mae's Percentage Ownership = Repurchase Interest Fannie Mae s Investor Reporting Manual 49

57 If the mortgage loan is a scheduled/scheduled remittance type portfolio or MBS mortgage loan Then the servicer must calculate repurchase interest as follows (Prior Month's Scheduled UPB x Pass-through Rate) 12 x Fannie Mae's Percentage Interest = Scheduled Repurchase Interest 4-04, Calculations Related to Pass-through Rates (11/12/2014) Generally, the pass-through rate for a mortgage loan is established when Fannie Mae purchases or securitizes the mortgage loan and remains in effect for the life of the mortgage loan. However, this is not true for ARMs since the servicer must determine a new pass-through rate at any time the interest rate of the mortgage loan changes (including a change related to the conversion of the mortgage loan to a fixed interest rate). In addition, some MBS pools require interest to be passed through at a weighted-average pass-through rate, rather than the pass-through rate of the individual mortgage loans, which means that the weighted-average pass-through rate for any given pool could change as often as monthly. Calculations for determining the applicable passthrough rates in these situations are included in this Section. Determining Pass-through Rates for Converted ARMs When an ARM in Fannie Mae's portfolio converts to a fixed-rate mortgage loan, the servicer must determine: a new interest rate, and a new pass-through rate. The calculation for these rates is the same regardless of whether the mortgage loan has an actual/actual or a scheduled/actual remittance type. The servicer must calculate the new interest rate and pass-through rate for the converted ARM loan by completing the steps shown in the following table. Step Servicer Action 1 Increase the applicable Fannie Mae required yield by 0.625% (or 0.875% if the property is a co-op unit). 2 Round the result to the nearest 0.125%. 3 Reduce this new interest rate by a servicing fee of 0.375% (or the applicable negotiated servicing fee percentage) to develop the new pass-through rate for the converted mortgage loan. Determining Pass-through Rates for ARM Adjustments There are two methods for determining the new pass-through rate when the interest rate for an ARM changes: the top-down method, and the bottom-up method. Both methods can be used for actual/actual and scheduled/actual remittance type portfolio mortgage loans. Fannie Mae s Investor Reporting Manual 50

58 The top-down method must be used for mortgage loans in most weighted-average structure MBS pools (excluding ARM Flex Plus pools), while the bottom-up method must be used for mortgage loans in statedstructure MBS pools and ARM Flex Plus MBS pools. A. Top-down method. The following table illustrates the top-down method of determining the new passthrough rate for an ARM after an interest rate change: New Interest Rate - Servicing Fee Rate - Guaranty Fee Rate (for MBS Mortgage Loans only) - Excess Yield (if applicable) = New Pass-through Rate B. Bottom-up method. The calculation for determining the new pass-through rate for an ARM after an interest rate change under the bottom-up method involves six steps. The servicer must complete the steps as shown in the following table. Step Servicer Action 1 Determine the net mortgage loan margin by subtracting the servicing fee (and, if the mortgage loan is in an MBS pool, the guaranty fee) from the mortgage loan margin. 2 Verify Fannie Mae's required margin (as reflected on the Trial Balance Report). 3 Determine the uncapped pass-through rate by adding the lesser of: Fannie Mae's required margin, or the net mortgage loan margin, or (in the case, of an MBS mortgage loan, by adding the required margin) to the index value used to determine the new mortgage loan interest rate. 4 Determine the minimum pass-through rate by subtracting the per adjustment downward cap from the current pass-through rate and comparing the result to the pass-through rate floor (as reflected on the Trial Balance Report). If the result is higher than the pass-through rate floor, it is the new minimum pass-through rate; otherwise, the pass-through rate floor is the new minimum pass-through rate. 5 Determine the maximum pass-through rate by adding the per adjustment upward cap to the current passthrough rate and comparing the result to the pass-through rate ceiling (as reflected on the Trial Balance Report). If the result is lower than the pass-through rate ceiling, it is the new maximum pass-through rate; otherwise the pass-through rate ceiling is the new maximum pass-through rate. Fannie Mae s Investor Reporting Manual 51

59 Step Servicer Action 6 Determine the new pass-through rate by comparing the uncapped pass-through rate to the minimum and maximum pass-through rates. If the uncapped pass-through rate is less than the minimum pass-through rate, the minimum pass-through rate will be the new pass-through rate. If the uncapped pass-through rate is greater than the minimum pass-through rate and less than the maximum pass-through rate, it will be the new pass-through rate. If the uncapped pass-through rate is greater than the maximum pass-through rate, the maximum pass-through rate will be the new pass-through rate. Determining Weighted-Average Pass-through Rates ARM Flex MBS pools and ARM Flex Plus MBS pools (and any other weighted-average coupon MBS pools) require that interest be passed to Fannie Mae based on the weighted-average of the accrual rates for all of the mortgage loans in the pool at the time the pass-through takes place. The servicer must calculate the weighted-average pass-through rate as shown in the following table. Step Servicer Action 1 Multiply the prior scheduled UPB for each mortgage loan in the pool by the net interest rate (the pass-through rate) for that mortgage loan to obtain a product, then separately sum both the prior scheduled UPBs for all of the mortgage loans in the pool and the products for all of the mortgage loans in the pool. 2 Divide the sum of the products for all of the mortgage loans in the pool by the sum of the prior scheduled UPBs for all the mortgage loans in the pool, rounding to three decimal places, to determine the weighted-average pass-through rate for the pool for the current month. Example: Loan Prior Month's Scheduled UPB Pass-through Rate Product A $94, % B $85, % C $105, % D $54, % Total $340, (e) (f) (f) / (e) / $340, Weighted Average PTR = (rounded to 3 decimal places) 5.102% Fannie Mae s Investor Reporting Manual 52

60 4-05, Calculations Related to Servicing Fee/Excess Yield (11/12/2014) All mortgage loans have a servicing fee that is specified at the time the mortgage loan is purchased or securitized and that generally remains constant over the life of the mortgage loan (although it may change when an ARM is converted to a fixed-rate mortgage loan). Some ARM MBS pools allow variances in the individual servicing fee for a mortgage loan from time to time to achieve a fixed margin for the MBS pool. In addition, some mortgage loans have excess yield because the mortgage loan interest rate is higher than the sum of Fannie Mae's required yield and the minimum required servicing fee. Excess yield is not always guaranteed over the life of the mortgage loan. To calculate the servicing fee for an ARM in an MBS pool that has a fixed MBS margin, the servicer must use the formula shown in the following table. Mortgage Loan Margin - Fixed MBS Margin - Guaranty Fee Rate = Servicing Fee Rate To calculate excess yield for any mortgage loan, the servicer must use the calculation shown in the following table. Note Rate - Pass-through Rate - Servicing Fee Rate - Guaranty Fee Rate (for MBS Mortgage Loan only) = Excess Yield 4-06, Calculations Related to Weighted-Average Guaranty Fee (11/12/2014) Some MBS pools include mortgage loans that have different guaranty fee rates so that a single guaranty fee cannot apply to the entire pool. In this case, the servicer must calculate a weighted-average guaranty fee each month to determine the amount of the guaranty fee remittance due Fannie Mae. The servicer must calculate the weighted-average guaranty fee in four steps as shown in the following table. Step Servicer Action 1 Multiply the prior scheduled UPB for each mortgage loan in the pool by the applicable guaranty fee rate for that mortgage loan to obtain a product, then separately sum both the prior scheduled UPBs for all of the mortgage loans in the pool and the products for all of the mortgage loans in the pool. 2 Divide the sum of the products for all of the mortgage loans in the pool by the security balance for the pool to develop a weighted-average guaranty fee rate. Fannie Mae s Investor Reporting Manual 53

61 Step Servicer Action 3 Divide the weighted-average guaranty fee rate by 12 to determine the guaranty fee factor. 4 Multiply the security balance for the pool by the guaranty fee factor to determine the guaranty fee amount for the pool for the current month. Example: Loan Prior Month's Scheduled UPB Guaranty Fee Rate Product A $94, % B $85, % C $105, % D $54, % Total $340, (e) (f) Wgtd. Ave. Guar Fee (f) / (e) = (g) $ (g) Guar Fee Rate Factor (g) / 12 = (h) Guar Fee for Pool for Current Month (rounded to 2 decimal places) (e) * (h) $37.06 Fannie Mae s Investor Reporting Manual 54

62 4-07, Exhibits (11/12/2014) Exhibit 1: Monthly Fixed Installment Formula Step 1 Determine the monthly interest rate factor by dividing the annual interest rate by 12. Carry the quotient out to 10 decimal places and then round to 9 decimal places by adding Step 2 Calculate the payment for each $1,000 of the loan amount. The calculation is carried out to 7 decimal places, and then rounded to 6 decimal places by adding Note: This formula cannot be used to determine the monthly payment per $1,000 for GPM loans. HUD publishes factors for the FHA GPM loans. Those factors are also used for VA GPM loans. Fannie Mae s Investor Reporting Manual 55

63 Step 3 Divide the original loan amount by 1,000 and multiply by the payment per $1,000 of loan amount. Round the result to 2 decimal places by adding.005. The final answer is the monthly fixed installment. Note: When calculating a new payment for an ARM, use the UPB instead of the original loan amount. Fannie Mae s Investor Reporting Manual 56

64 Example: The monthly fixed installment for a $70, year mortgage loan with an interest rate of 15.5% would be determined as follows: Note: Calculation of the actual/actual biweekly mortgage loan is different than that of a regular amortizing loan. The following represents the actual/actual biweekly mortgage loan installment formula. Fannie Mae s Investor Reporting Manual 57

65 Example: The monthly fixed installment for a $100, year actual/actual biweekly mortgage loan with an interest rate of 7% would be determined as follows: Actual/Actual biweekly loans are amortized every 14 days using a 365-day basis year for interest calculation. Fannie Mae s Investor Reporting Manual 58

66 Exhibit 2: Regular Amortization Formula Step 1 Determine the monthly interest rate factor by dividing the annual interest rate by 12. Carry the quotient out to 10 decimal places and then round to 9 decimal places by adding Step 2 Calculate the interest portion of the monthly payment by multiplying the UPB by the monthly interest rate factor. Add.005 for rounding. Step 3 Determine the principal portion of the monthly payment by subtracting the interest portion from the monthly fixed installment. Fannie Mae s Investor Reporting Manual 59

67 Step 4 Reduce the present unpaid balance by the principal portion of the monthly payment to determine the UPB after amortizing for one payment. Example: The first month's amortization for a $70, year mortgage loan with an annual interest rate of 15.5% and a monthly fixed installment of $ would be computed as follows: Fannie Mae s Investor Reporting Manual 60

68 Exhibit 3: Negative Amortization Formula Step 1 Determine the monthly interest rate factor by dividing the annual interest rate by 12. Carry the quotient out to 10 decimal places and then round to 9 decimal places by adding Step 2 Calculate the interest portion of the monthly payment by multiplying the UPB by the monthly interest rate factor. Add.005 for rounding. Step 3 Determine the monthly payment shortage by finding the difference between the calculated interest and the monthly fixed installment. Fannie Mae s Investor Reporting Manual 61

69 Step 4 Develop the new UPB by increasing the present UPB by the amount of the monthly payment shortage. Example: The first month's amortization for a $70, year GPM loan (or an ARM that has negative amortization under the first payment) with an interest accrual rate of 15.5% and a monthly fixed installment of $ would be computed as follows: Fannie Mae s Investor Reporting Manual 62

70 Exhibit 4: Reverse Amortization Formula Step 1 Determine the monthly interest rate factor by dividing the annual interest rate by 12. Carry the quotient out to 10 decimal places and then round to 9 decimal places by adding Step 2 Develop the UPB that will result from the reversal of the payment. Step 3 Subtract the new UPB from the old UPB to determine the amount of principal that was reversed. Fannie Mae s Investor Reporting Manual 63

71 Step 4 Subtract the amount of principal that was reversed from the fixed installment to determine the amount of interest that was reversed. Example: The reversal of one month's amortization for a loan that has a UPB of $69,991.01, an annual interest rate of 15.5%, and a monthly fixed installment of $ would be determined as follows: Fannie Mae s Investor Reporting Manual 64

72 Exhibit 5: Servicing Fee/Yield Differential Adjustment Formula Step 1 Divide the annual servicing fee rate by the annual interest rate to determine the monthly servicing fee factor. Carry the quotient out to 7 decimal places and round to 6 by adding Step 2 Determine the calculated monthly interest amount by multiplying the UPB by the annual interest rate and dividing by 12. Limit the answer to 3 decimal places. Step 3 Multiply the calculated monthly interest amount by the monthly servicing fee factor to determine the amount of the monthly servicing fee due the servicer. Add.005 for rounding. Note: Always use calculated interest instead of interest collected to ensure a servicing fee on any deferred interest that is capitalized. Fannie Mae s Investor Reporting Manual 65

73 Example: The first month's servicing fee for a $70, year mortgage loan that has an annual interest rate of 15.5% and an annual servicing fee of 0.375% would be determined as follows: Note: Use this same method to calculate yield differential due the servicer. Just substitute the monthly yield differential rate for the servicing fee rate in Step 1. Fannie Mae s Investor Reporting Manual 66

74 Chapter 5, Using Fannie Mae Generated Reports Fannie Mae's investor reporting system has the ability to update each servicer's reports individually; therefore, Fannie Mae continuously produces reports summarizing activity reported by a servicer. This means that a servicer has some control over the amount of time it has to review and reconcile its Fannie Mae investor reporting system reports the sooner it submits its reports to Fannie Mae, the more time it has to review and reconcile the activity reports Fannie Mae returns following the update of the Fannie Mae investor reporting system records for the servicer. After Fannie Mae processes the servicer's information into its computer system, Fannie Mae produces reports to highlight the reported activity. These reports are designed to assist the servicer in reconciling the monthly information generated from the Fannie Mae investor reporting system with its internal records. They are sent in time to reach the servicer by the 25th day of each month. To ensure the accuracy of Fannie Mae's records, the servicer must reconcile all of the reports Fannie Mae generates to its internal records monthly. Occasionally, Fannie Mae may ask the servicer to submit these reconciliations to Fannie Mae. 5-01, The Lender Recap Report (11/12/2014) The Lender Recap Report, which consists of four sections, provides a summary of the transactions processed for the previous month's activity. Section I, which is called the Portfolio Summary Report, lists (by remittance type) the beginning and ending portfolio totals for loan count, monthly P&I payment, actual UPB, scheduled UPB, and UPB acquired. It also provides information on activity related to transfers of servicing. Section II compares the amount of P&I reported with a Transaction Type 96 (Loan Activity Record) to the amount of P&I applied according to Fannie Mae's calculations. Section III calculates the shortage or surplus for the current period by comparing the amount of cash applied by Fannie Mae. Section IV, which is called the Error Summary Total Report, provides information about the total number of rejected transactions. It categorizes hard rejects (those that are critical enough to prevent Fannie Mae from updating its records) by remittance type and by reject error message. It also categorizes soft rejects (those that create a shortage/surplus but do not prevent Fannie Mae from updating its records) by remittance type (but not by error message). Fannie Mae s Investor Reporting Manual 67

75 5-02, The Remittance Update Report (11/12/2014) The Remittance Update Report, which consists of five different parts, summarizes the various remittance and delivery types in the servicer's portfolio. Each of the five parts consists of six sections available on Fannie Mae s website. Section A (Portfolio Summary) summarizes the servicer's portfolio by remittance type. Section B (Rejected Transactions, Fannie Mae Lender Changes, Erroneously Coded Transactions), which will be produced monthly, lists hard rejects only. Section B.1 (Rejected Transactions) lists soft rejects for most mortgage loans (although it is not produced for biweekly payment MBS mortgage loans). For the most part, error messages in Sections B and B.1 are shown as encoded values except for the primary reason for the rejection, which appears in words. Each month, Fannie Mae will provide a reject code listing to assist the servicer in interpreting its report. Section C (Accepted Transactions) lists each transaction that was processed and accepted by the investor reporting system. Section D (Loans Added) lists each mortgage loan that has been added to the investor reporting system, and explains the reason for the addition. Section E (Loans Removed) lists each mortgage loan that has been removed from the investor reporting system, and explains the reason for the removal. Section F (Loan Adjustments and Remittance Corrections) isolates Fannie Mae adjustments and remittance corrections. 5-03, The Monthly Payment/Rate Change Report (11/12/2014) The Monthly Payment/Rate Change Report lists all variable-rate or variable-payment mortgage loans for which Fannie Mae is projecting an interest rate and/or monthly payment change. For mortgage loans that have scheduled monthly interest rate changes, the report will reflect the payment change rather than the projected interest rate change. The servicer should transmit a Transaction Type 83 (Payment/Rate Change Record) to notify Fannie Mae that the anticipated change (including a change in the pass-through rate, if applicable) has been made, or Fannie Mae will apply its projected payment/rate change at the scheduled effective change date. 5-04, The Final Maturity Due Report (11/12/2014) The Final Maturity Due Report lists all mortgage loans for which the final maturity date has occurred, or will reach the final maturity date within the next twelve months, without the mortgage loan having been removed from Fannie Mae's investor reporting system. The report also lists any mortgage loans that will reach their final maturity in the next reporting period. Fannie Mae s Investor Reporting Manual 68

76 5-05, The Trial Balance Report (11/12/2014) October 14, 2015 The Trial Balance Report, which is available in a machine-readable format on a cartridge, electronically through a service bureau or on Fannie Mae s website, gives the status of each mortgage loan in the servicer's portfolio after the Fannie Mae investor reporting system activity for the month has been applied. The report consists of three parts loan accounting data, selected ARM loan data, and selected loan static data. The loan accounting data part of the trial balance includes for each mortgage loan within a given remittance type the following information: mortgage loan payment; LPI date; note rate; actual UPB; UPB acquired; pass-through rate; and, for MBS mortgage loans, the scheduled LPI date, UPB, and guaranty fee rates. This part of the report is produced on a monthly basis. The selected ARM loan data part of the trial balance includes, but is not limited to, the following loan attributes: frequency of the payment and interest rate changes; the next payment and interest rate adjustment dates; the mortgage loan margin and Fannie Mae's required margin; the current interest rate, servicing fee, and excess yield; the pass-through rate; the LPI date; the P&I installment; the percentage cap for the rate and payment changes; the note rate ceiling and floor; the look back period for the rate and payment changes; guaranty fee rate; and rate rounding method code. This part of the report is produced only when there are payment/rate changes due or past due. The selected loan static data part of the trial balance includes selected data elements providing key information about a mortgage loan. The servicer may submit this part of the trial balance to Fannie Mae to correct or update the information that Fannie Mae carries in its records. Fields that may be changed or updated include: original LTV ratio, mortgage insurer code, servicing option (for MBS mortgage loans), ARM plan number, number of dwelling units, original note rate, and property type (for PUD, condo, or co-op units). In addition, Fannie Mae will update the deferred interest balance (for negotiated transactions that have this feature) and report it on the trial balance. This part of the report is produced on a monthly basis. 5-06, The Shortage/Surplus Analysis Report (11/12/2014) The Shortage/Surplus Analysis Report, which consolidates information from certain sections of the Lender Recap Report and the Remittance Update Report, is produced monthly. It summarizes (by remittance type) cash received and reported activity, the difference between the current month's shortage/surplus and the previous month's shortage/surplus, and the total dollar differences between the servicer's reported figures and Fannie Mae's records for the current month's rejected transactions. Fannie Mae s Investor Reporting Manual 69

77 5-07, The Pool Deficiency Summary/Guaranty Fees to be Paid Report (11/12/2014) The Pool Deficiency Summary/Guaranty Fees to be Paid Report, which compares the ending scheduled balance for each MBS pool (as computed by the investor reporting system) to the balance the servicer reports, is produced monthly for MBS pools that consist of monthly payment mortgage loans (but not for pools of biweekly payment mortgage loans). The report also computes the guaranty fees that are due based on the balance the servicer reports. 5-08, The Pool-to-Security Reconciliation Detail Report (11/12/2014) The Pool-to-Security Reconciliation Detail Report, which identifies the difference between the adjusted pool balance that is derived from the servicer's reported transactions and the reported security balance for the pool, is produced monthly to assist the servicer with reconciliations for all of the MBS pools it services. Fannie Mae s Investor Reporting Manual 70

78 Chapter 6, Correcting Reporting Errors Generally, two types of transactional errors in servicer reporting may occur: transactions that the system identifies and rejects, and transactions that the system accepts although the servicer reported the transaction by mistake. However, errors in making ARM adjustments also may represent a different type of transactional error one in which the servicer updates Fannie Mae's records with the correct information, but erroneously adjusts the mortgage loan in its records and communicates the incorrect information to the borrower. This type of transactional error could result in the mortgage loan balance in Fannie Mae's records being incorrect (and may require an adjustment to the servicer's previous remittances to Fannie Mae). To correct a transaction that the system rejected, the servicer must only resubmit the transaction in the next reporting period. These transactions may relate to either: payment collection, or mortgage loan status. The Fannie Mae investor reporting system is able to retain selected rejected transactions and recycle them in subsequent update cycles. Rejected transactions that will be recycled include: payment/note rate changes, and liquidation action codes. This recycling means that the servicer will not have to resubmit these transactions unless it is aware that the original information it submitted was incorrect. Fannie Mae will recycle payment/note rate transactions for 6 months; and liquidation transactions, for 12 months. Note: If the rejected transaction involves an ARM adjustment error that has been incorrectly communicated to the borrower, the servicer must discuss the correction of the rejection with its Fannie Mae Investor Reporting Representative (see Servicing Guide F-4-03, List of Contacts) to ensure that the proper corrective action is taken, given the particular circumstances of the adjustment error. To correct a transaction that the servicer reported by mistake, the method of correction depends on the type of transaction. The following table provides additional instructions for correcting these mistakes, depending on the transaction type. If the transaction related to payment status fee collection Then the servicer may resubmit the information in the next reporting period. report in the next reporting period any fees that it failed to report or may reverse any reported fees that should not have been reported. Fannie Mae s Investor Reporting Manual 71

79 If the transaction related to mortgage loan status (and does not involve the correction of an ARM adjustment error) Then the servicer may either: correct the transaction in the current reporting period as long as the correction can be made before the final transactions for the reporting period have to be transmitted to Fannie Mae, or resubmit the transaction in the next reporting period, unless the reported transaction removed the mortgage loan from the Fannie Mae investor reporting system. In this case, the servicer must notify Fannie Mae so it can process an adjustment to correct the error. Note: To correct a transaction that relates to an erroneous ARM adjustment, the servicer must first discuss the error with its Fannie Mae Investor Reporting Representative (see Servicing Guide F-4-03, List of Contacts) before it takes any corrective action to adjust Fannie Mae's records or the servicer's previous remittances. The servicer must not electronically submit a Transaction Type 83 (Payment/Rate Change Record) until after its Fannie Mae Investor Reporting Representative authorizes the correction. 6-01, Correcting Liquidation Transactions (11/12/2014) The servicer must not change either the action code or action date through the regular investor reporting process if a liquidation error is discovered after the final transactions for the reporting period have been transmitted to Fannie Mae. The servicer must report these changes to be processed through either its Fannie Mae Investor Reporting Representative or through Fannie Mae's SF CPM division (or both), (see Servicing Guide F-4-03, List of Contacts), depending on the nature of the change and on whether the mortgage loan has been added to Fannie Mae's Receivable Control File. Correcting an Erroneous Payoff/Repurchase Transaction When an Action Code 60 (payoff) or an Action Code 65 or 67 (repurchase) is reported, the following occur: the mortgage loan is removed from the investor reporting system, the payoff (or repurchase) proceeds are calculated and compared to the servicer's reported remittance, and the resulting difference is added to (or subtracted from) the servicer's shortage/surplus account. A change in the action date for an Action Code 60, 65, or 67 can affect the amount of interest that was calculated and results in the need for an adjustment to the servicer's shortage/surplus account. Therefore, to change an action date for one of these codes, the servicer must submit written notice and justification for the change to its Fannie Mae Investor Reporting Representative (see Servicing Guide F-4-03, List of Contacts). Fannie Mae s Investor Reporting Manual 72

80 A paid-off or repurchased mortgage loan that Fannie Mae held in its portfolio may need to be re-added to the Fannie Mae investor reporting system (or an appropriate adjustment made to Fannie Mae's records) if an Action Code 60, 65, or 67 is being changed to another action code. In these cases, and depending on the action code that is reported, Fannie Mae may also need to take additional steps to: cancel satisfaction documents, re-file custody documents, execute new legal documents, or begin property disposition efforts. For this reason, the servicer must send all requests to change Action Codes 60, 65, or 67 to other codes (or to no code) to Fannie Mae's SF CPM division (see Servicing Guide F-4-03, List of Contacts). Also see, 3-07, Reversing Curtailments/Removals for a discussion regarding the reversal of removal transactions related to MBS mortgage loans. Changing Receivable Control File Transactions to Payoff/Repurchase Transactions When an Action Code 70, 71, or 72 is reported, the mortgage loan is removed from Fannie Mae's investor reporting system and added to a Receivable Control File. If one of these action codes was erroneously reported when an Action Code 60, 65, or 67 should have been used instead to report a payoff or repurchase, the mortgage loan may need to be re-added to the Fannie Mae investor reporting system. In these cases, and depending on the exact nature of the change, Fannie Mae may need to: execute satisfaction documents or warranty deeds, file custody documents, or end property disposition efforts. The servicer must send these change requests to Fannie Mae's SF CPM division (see Servicing Guide F-4-03, List of Contacts). Changing Receivable Control File Transactions to Referral Transactions Erroneously reporting an Action Code 70, 71, or 72 removes the mortgage loan from Fannie Mae's investor reporting system and adds it to the Receivable Control File. Therefore, if one of these action codes needs to be changed to reflect an action that normally precedes the liquidation of a mortgage loan, the servicer must complete the actions listed in the following table. The servicer must Re-add the mortgage loan must to the Fannie Mae investor reporting system database. Send a request to re-add erroneously reported removals of this type to Fannie Mae's SF CPM division (see Servicing Guide F-4-03, List of Contacts) to ensure that any REOgram that was previously submitted is canceled and that Fannie Mae discontinues its property disposition efforts. Return any custody documents it obtained from Fannie Mae when it reported the original removal action code, Fannie Mae s Investor Reporting Manual 73

81 The servicer must if applicable. Report the correct status of the mortgage loan in the next delinquency status information it submits to Fannie Mae. Changing Receivable Control File Transaction to Different Receivable Control File Transaction A reported Action Code of 70, 71, or 72 removes the mortgage loan from the Fannie Mae investor reporting system and adds it to the Receivable Control File. However, corrections can be made to records in that file as long as the correction results in the mortgage loan remaining in the file. The following table provides the servicer with Fannie Mae s requirements for reporting these changes. The servicer must Notify Fannie Mae in writing to adjust the action date or to change one of these action codes to another code in the Receivable Control File. Provide all of the information necessary to make the change. Send the notice to Fannie Mae's SF CPM division (see Servicing Guide F-4-03, List of Contacts) so Fannie Mae can adjust its property disposition efforts (since these action codes relate to acquired properties). The following table provides additional information on requirements for changing the action code. If the original action code was And the new action code is Then the servicer must a 70 or notify Fannie Mae s SF CPM division to cancel any REOgram notice that was submitted previously. a 71 a 70 or 72 submit an REOgram to notify Fannie Mae s SF CPM division about the property acquisition. Fannie Mae s Investor Reporting Manual 74

82 6-02, Correcting ARM Adjustment Errors (11/12/2014) An ARM adjustment error can affect a servicer's Fannie Mae investor reporting system reports or remittances in different ways, depending on whether the information reported to Fannie Mae agrees with the adjustment data provided to the borrower and on whether it passes or fails Fannie Mae's validation edits. Three different situations and the servicer actions needed to correct them are further described in the following table. ARM Adjustment Error The servicer erroneously adjusts a mortgage loan and communicates the incorrect information to the borrower, but updates Fannie Mae's records with the correct information. The servicer erroneously adjusts a mortgage loan and communicates the incorrect information to both the borrower and Fannie Mae. The servicer erroneously adjusts a mortgage loan and communicates the incorrect information to both the borrower and Fannie Mae. Corrective Actions Required To correct the remittance to Fannie Mae the servicer must perform a reconciliation of the P&I remittances at the actual monthly payment and the incorrect interest rate, at the actual monthly payment and the correct interest rate, and at the correct monthly payment and interest rate. With this error, Fannie Mae's validation edits reject the erroneous transaction, which means that Fannie Mae does not update its records for any payments applied after the erroneous adjustment (although Fannie Mae would update the scheduled security balance for an MBS mortgage loan). When the servicer reports correct data to Fannie Mae and Fannie Mae's records for a portfolio mortgage loan are updated for the payments that have been applied, Fannie Mae bills the servicer for the correct interest and principal amounts. If the remittances the servicer makes for the mortgage loan are based on the incorrect adjustment data, the correction of the rejected transaction creates either a shortage or surplus. A rejected transaction for an MBS mortgage loan results in a difference in the pool-to-security balance reconciliation that the servicer must correct. In this instance, the erroneous adjustment data passes Fannie Mae's validation edits, which means that Fannie Mae updates its records for any payments applied after the erroneous adjustments. Because this situation can result in numerous permutations based on the type of error and the number of erroneous payments applied, the servicer must contact its Fannie Mae Investor Reporting Representative (see Servicing Guide F-4-03, List of Contacts) before attempting to make any corrections. A servicer must provide the following information to its Fannie Mae Investor Reporting Representative (see Servicing Guide F-4-03, List of Contacts) to support a request for a correction of any ARM adjustment error: a brief cover letter that explains the exact nature of the error, and supporting documentation for the proposed corrective action (such as copies of the servicer's ARM audit analysis for the mortgage loan, the mortgage note and ARM rider, payment history Fannie Mae s Investor Reporting Manual 75

83 records, corrected amortization schedules, the lender's negotiated contract, purchase advices etc.). See also Servicing Guide F-4-03, List of Contacts for additional information. Correcting Portfolio Mortgage Loans vs. MBS Mortgage Loans October 14, 2015 The effect that an ARM adjustment error has on a servicer's remittances to Fannie Mae or on the preparation of its Fannie Mae investor reporting system reports will vary depending on whether Fannie Mae purchased the mortgage loan to hold in its portfolio or as part of an MBS pool. The differences are further described in the following table. If the ARM adjustment error pertains to a portfolio mortgage loan a mortgage loan in an MBS pool Then the servicer must address only the individual mortgage loan that was incorrectly adjusted. the effect of the error on both: the individual mortgage loan, and the MBS pool (since the error may have resulted in an incorrect security balance and/or pool accrual rate or weighted-average pool accrual rate). The pool accrual rate for a stated-structure MBS pool is determined by adding the MBS margin to the applicable index value on each interest change date. Therefore, it is possible for the servicer to calculate a correct pool accrual rate, even though it incorrectly calculates the new interest rates for individual mortgage loans. On the other hand, the weighted-average pool accrual rate for ARM Flex and ARM Flex Plus MBS pools is based on a weighted average that is determined by using the net mortgage loan interest rates for the individual mortgage loans in the pool. Therefore, an error for an individual mortgage loan could affect the rate for the pool. An adjustment error for a mortgage loan in a stated-structure pool that involved only an incorrect payment amount will not affect the pool accrual rate as long as it is discovered before an interest rate change; however, if the mortgage loan is in an ARM Flex or ARM Flex Plus MBS pool, the weighted-average accrual rate could be affected since the error affects the UPB that is used in determining the weighted average. In some cases, even though the interest rate for an individual mortgage loan may be calculated incorrectly, the servicer may make offsetting errors that result in a correct security balance and/or pool accrual rate (or weighted-average pool accrual rate for an ARM Flex or ARM Flex Plus MBS pool). Correcting Interest Rate and Payment Change Errors When an ARM adjustment error involves an interest rate and payment change error and the error results in the use of a lower interest rate (and related monthly payment, if applicable): the mortgage loan amortizes at a faster pace, and the UPB is lower than it would have been from the amortization of the borrower's actual payment at the correct, higher interest rate. Since Fannie Mae has decided that the borrower will not be required to make up undercharges, the servicer must not change the mortgage loan balance in Fannie Mae's investor reporting system records even though Fannie Mae s Investor Reporting Manual 76

84 too little of the borrower's payment would have been applied to interest and too much to principal. The following table provides additional information depending on mortgage loan type. October 14, 2015 If the interest rate and payment change error pertains to a portfolio mortgage loan a mortgage loan in an MBS pool Then Fannie Mae will treat the over-application of principal as a curtailment that was previously applied and will either adjust the servicer's shortage/surplus account to reflect the servicer's under-remittance of interest, or advise the servicer to increase its next remittance by the amount of additional interest due Fannie Mae. The servicer's principal over-remittance cannot be recovered from the security holder even though the security balance will be lower than it should have been since the over-remittance will have been considered as the remittance of an unscheduled principal payment. The servicer must send Fannie Mae the difference between the interest that was applied using the incorrect balance and, if applicable, weighted-average pool accrual rate and the interest that should have been applied using the correct balance and rate. When an ARM adjustment error involves an interest rate and payment change error and the error results in the use of a higher interest rate (and related monthly payment) than was required the mortgage loan amortizes at a slower pace, and the UPB is higher than it would have been from the amortization of the borrower's actual payment at the correct interest rate. Although the servicer would have applied too much of the borrower's payment to interest and too little to principal, the servicer must not change the mortgage loan balance in Fannie Mae's investor reporting system records since Fannie Mae does not require it to change the borrower's actual UPB. Fannie Mae will recover the principal under-remittance as the higher UPB amortizes. Fannie Mae is not obligated to pay the servicer any interest on the amount of its over-remittance because the servicer is responsible for the accuracy of its ARM adjustments. The following table provides the servicer with additional information on how Fannie Mae will treat the error depending on mortgage loan type. If the interest rate and payment change error pertains to a portfolio mortgage loan a mortgage loan in an MBS pool Then Fannie Mae will either: adjust the servicer's shortage/surplus account to reflect the servicer's over-remittance of interest, or advise the servicer to reduce its next remittance by the amount of the overpaid interest. will not refund the servicer's over-remittance of interest since it is not recoverable from the security holder. Fannie Mae s Investor Reporting Manual 77

85 Correcting an Interest Rate Change Error Only October 14, 2015 When an ARM adjustment error involves an interest rate change error only and the error results in the use of a lower interest rate than was required: the mortgage loan amortizes at a faster pace, and the UPB is lower than it would have been from the amortization of the borrower's actual payment at the correct, higher interest rate. Since Fannie Mae has decided that the borrower will not be required to make up undercharges, the servicer must not change the mortgage loan balance in Fannie Mae's investor reporting system records even though too little of the borrower's payment would have been applied to interest and too much to principal. The following table provides additional information depending on mortgage loan type. If the interest rate and payment change error pertains to a portfolio mortgage loan a mortgage loan in an MBS pool Then Fannie Mae will treat the over-application of principal as a curtailment that was previously applied and will either adjust the servicer's shortage/surplus account to reflect the servicer's under-remittance of interest, or advise the servicer to increase its next remittance by the amount of additional interest due Fannie Mae. The servicer's principal over-remittance cannot be recovered from the security holder even though the security balance will be lower than it should have been since the over-remittance will have been considered as the remittance of an unscheduled principal payment. The servicer must send Fannie Mae the difference between the interest that was applied using the incorrect balance and, if applicable, weighted-average pool accrual rate and the interest that should have been applied using the correct balance and rate. When an ARM adjustment error involves an interest rate error only and the error results in the use of a higher interest rate than was required by the mortgage note: the borrower has not actually paid too much, but his or her actual payment has been misallocated between principal and interest. Fannie Mae s Investor Reporting Manual 78

86 The servicer must report a curtailment to Fannie Mae to reduce the UPB of the mortgage loan by the amount of the interest overcharge, rather than refunding the overcharge to the borrower. The following table provides additional information depending on mortgage loan type. If the interest rate error pertains to a portfolio mortgage loan a mortgage loan in an MBS pool Then the servicer must not remit the funds for the curtailment since it has already over remitted interest to Fannie Mae. However, if the servicer cannot process a curtailment (which is normally a cash transaction) without remitting funds, it must report a noncash adjustment for the amount by which the UPB in Fannie Mae's records needs to be reduced as long as its Fannie Mae Investor Reporting Representative (see Servicing Guide F-4-03, List of Contacts) agrees to this approach. Note: The principal under-remittance and the interest overremittance will be offsetting entries so there is no effect on the servicer's shortage/surplus account and neither Fannie Mae nor the servicer owes the other any money. remit the amount of the principal under-remittance to Fannie Mae as an unscheduled principal payment and to reduce the security balance accordingly. Even though the servicer over remitted interest to Fannie Mae, Fannie Mae will not refund that over-remittance to the servicer since it is not recoverable from the security holder. Fannie Mae is not obligated to pay the servicer any interest on the amount of its over-remittance for either a portfolio mortgage loan or an MBS mortgage loan because the servicer is responsible for the accuracy of its ARM adjustments. Correcting a Payment Change Error Only When an ARM adjustment error involves a payment change error only and the error results in the use of a higher monthly payment than was required: the mortgage loan amortizes at a faster pace, and the UPB is lower than it would have been from the amortization of the mortgage loan using the correct monthly payment. Fannie Mae s Investor Reporting Manual 79

87 In these cases, Fannie Mae treats the over-application of principal as a curtailment that was previously applied and leaves the existing UPB in place. However, if the borrower elected to receive a refund of the principal overcharge (or was otherwise given credit for the overcharge), the servicer must increase the UPB of the mortgage loan by the amount of the overcharge by reporting the reversal of a curtailment. The following table provides additional details depending upon the mortgage loan type. If the payment change error pertains to a portfolio mortgage loan a mortgage loan in an MBS pool Then Fannie Mae will either: adjust the servicer's shortage/surplus account to reflect the previous principal over-remittance, or advise the servicer to decrease its next remittance by the amount of the overpaid principal. The servicer's principal over-remittance (which results from the curtailment reversal) cannot be recovered from the security holder since it will have been considered as the remittance of an unscheduled principal payment. The only way the servicer can recover this principal overremittance is if it subsequently has a curtailment or payoff for a mortgage loan in the same MBS pool. The servicer must send Fannie Mae the difference between the interest that was applied using the incorrect balance and, if applicable, weighted-average pool accrual rate, and the interest that should have been applied using the correct balance and rate. When an ARM adjustment error involves a payment change error and the error results in the use of a lower monthly payment than was required: the mortgage loan amortizes at a slower pace, and the UPB is higher than it would have been from the amortization of the mortgage loan using the correct monthly payment. Although the servicer would have applied too much of the borrower's payment to interest and too little to principal, the servicer must not change the mortgage loan balance in Fannie Mae's investor reporting system records since Fannie Mae will not require the borrower to make up the principal undercharge. The following table provides additional information for correcting the error depending on mortgage loan type. If the payment change error pertains to a portfolio mortgage loan a mortgage loan in an MBS pool Then Fannie Mae will either: adjust the servicer's shortage/surplus account to reflect the servicer's over-remittance of interest, or advise the servicer to decrease its next remittance by the amount of the overpaid interest. will not refund the servicer's over-remittance of interest since it is not recoverable from the security holder. Fannie Mae s Investor Reporting Manual 80

88 Fannie Mae is not obligated to pay the servicer any interest on the amount of its over-remittance for either a portfolio mortgage loan or an MBS mortgage loan because the servicer is responsible for the accuracy of its ARM adjustments. Fannie Mae s Investor Reporting Manual 81