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The Fannie Mae Servicing Agreement: What You Need to Know

Fannie Mae is a government-sponsored enterprise (GSE) created to help increase homeownership in the United States. One of the ways Fannie Mae supports the housing market is by purchasing loans from lenders, packaging them into mortgage-backed securities, and selling them to investors.

However, Fannie Mae doesn`t service these loans. Instead, it contracts with loan servicers, who collect payments from borrowers and distribute them to investors. The Fannie Mae Servicing Agreement governs the relationship between Fannie Mae and its servicers.

What is the Fannie Mae Servicing Agreement?

The Fannie Mae Servicing Agreement is a contractual agreement that sets out the rights, responsibilities, and obligations of Fannie Mae and its servicers. The agreement covers everything from loan servicing standards to compensation for the servicer.

Here are some of the key provisions of the Fannie Mae Servicing Agreement:

1. Servicer compensation: The servicer is entitled to a fee for each loan it services. The fee is based on a percentage of the outstanding principal balance of the loan.

2. Loan servicing standards: The servicer must follow certain standards when servicing Fannie Mae loans. These include requirements around loan modifications, delinquency management, and foreclosure prevention.

3. Reporting requirements: The servicer is required to provide regular reports to Fannie Mae on loan performance, delinquencies, and other servicing-related matters.

4. Auditing: Fannie Mae has the right to audit the servicer`s books and records to ensure compliance with the agreement.

Why is the Fannie Mae Servicing Agreement important?

The Fannie Mae Servicing Agreement is important because it helps ensure that loans are serviced properly and that borrowers are protected. The agreement sets out clear standards for loan servicing, which can help prevent issues such as improper foreclosures or mishandling of borrower funds.

In addition, the agreement provides a framework for compensation for servicers. This helps ensure that servicers are incentivized to provide quality service to borrowers and investors.

If you`re a borrower with a Fannie Mae loan, understanding the Fannie Mae Servicing Agreement can help you understand what to expect from your servicer. If you`re a loan servicer, understanding the agreement is essential to ensure compliance with Fannie Mae`s requirements.

In conclusion, the Fannie Mae Servicing Agreement is an important document that governs the relationship between Fannie Mae and its servicers. By setting out clear standards for loan servicing and compensation, the agreement helps ensure that loans are serviced properly and that borrowers and investors are protected.