The Federal National Mortgage Association (FNMA) has defined guidelines that allow mortgage service providers to claim reimbursement of expenses incurred between a borrower’s date of default and foreclosure sale date. However, the FNMA (or Fannie Mae, as it’s often referred to) frequently revises these guidelines. It is essential for service providers to stay on top of these changes, so they do not incur losses by missing out on their claims.
Service providers generally analyze their losses and expense accounts for unpaid reimbursements only after their claims (initial, interim, final, and supplemental) are submitted to and reimbursed by the FNMA. It is important to understand why most claims are rejected, so servicers can address those issues better in the future.
Here are 10 measures that can help servicers reduce losses by complying with investor guidelines:
- Follow the defined limit during the default period.
- Check the approved fee limit before processing the attorney’s invoice. If the fee exceeds the prescribed limit, ensure that the attorney submits additional expense documents to the FNMA for approval.
- If more than one attorney has been assigned, explain the reasons for this in the initial claim.
- Submit backup documents from various departments, including accounting and billing, before the filing date of the initial claims.
- Monitor tax due dates through an online tracking tool or a reminder service for timely payment of taxes.
- Retrieve the tax receipt or pay the tax office to obtain a tax receipt, and submit this with the initial claim.
- Check the FNMA’s guidelines on property preservation and claim relevant expenses by providing detailed information such as lot size, square footage, and date of completion.
- Request the vendor to get the FNMA’s approval for any additional unauthorized preservation work.
- Provide accurate credit to the FNMA while filing the claim, after checking the correct escrow balance, tax, and insurance refund.
- Request reimbursement of any excess credit given on prior claims, after a thorough review, when filing the final claim.
Adopting a disciplined approach and following this checklist can help servicers adhere to FNMA guidelines better and minimize losses. For more information, read the paper: ‘Tightening the mortgage claims reimbursement process to reduce losses to service providers’.