This topic contains information on maintaining seller/servicer eligibility, including:
To maintain eligibility as a seller/servicer, the seller/servicer must comply with the minimum financial requirements described in this topic. If a seller/servicer fails to maintain any of these requirements or fails to comply with its Lender Contract, such failure is a breach of the Lender Contract.
In addition, the circumstances and qualifications that were in place for Fannie Mae’s consideration at the time of the seller/servicer’s approval generally must not adversely change after approval.
If a seller/servicer has not sold any loans to Fannie Mae in the previous calendar year or is not servicing any loans for Fannie Mae as of December 31, its seller/servicer status may be deactivated. Once deactivated as a seller or a servicer, the entity must go through the applicable reactivation process in order to be eligible to sell or service. Fannie Mae will review the applicable documentation and determine whether the seller/servicer meets eligibility requirements.
Sellers/servicers are not required to purchase or own Fannie Mae stock as a condition of eligibility.
Sellers/servicers must comply with the minimum financial requirements described in the following table.
|Eligible Seller/Servicer Maintenance Fee||
Sellers/servicers must pay a maintenance fee $1,000 per calendar year; billed in the first quarter of the calendar year by Fannie Mae. Fannie Mae will waive the maintenance fee if during the previous calendar year, the seller/servicer either:
|Reactivation fee||Reactivated sellers/servicers must pay a reactivation fee of $2500. Fannie Mae will waive this fee under the following circumstances:
|Minimum Net Worth||The seller/servicer must maintain a Lender Adjusted Net Worth of at least $2.5 million, plus an amount equal to 0.25% of the outstanding UPB of its portfolio of 1- to 4-unit residential loans the seller/servicer is contractually obligated to service for the owner of the loan. The minimum Lender Adjusted Net Worth requirement for subservicers does not include loans serviced under a subservicing arrangement.
Lender Adjusted Net Worth is defined as:
|Minimum Capital Requirements||Sellers/servicers that are depository institutions are required to meet the minimum regulatory capital requirements of their primary regulator. All other entities must have a minimum Lender Adjusted Net/Total Assets ratio of 6%, or equivalent, as determined by Fannie Mae.|
|Minimum Liquidity (applicable only to non-depository sellers/servicers)||Non-depository sellers/servicers must maintain liquidity at the levels described below:
The Agency SDQ Rate is:
100 multiplied by (the UPB of loans 90 days or more delinquent or in foreclosure for Fannie Mae, Freddie Mac, and Ginnie Mae divided by the total UPB of loans serviced for Fannie Mae, Freddie Mac, and Ginnie Mae).
The minimum liquidity requirement for subservicers does not include loans serviced under a subservicing arrangement.
Availability liquidity includes:
|Servicer Rating||If the servicer has external servicer ratings as a primary servicer for prime residential loans, at least one of the following minimum ratings is required:
Rating Agency - Minimum Required Rating
The servicer of Alt-A or non-prime products must maintain ratings equivalent to the ratings for prime servicers. If the servicer ratings are available from fewer than three agencies, all available ratings must comply with the standards above.
Fannie Mae may, at any time based on its view of a seller/servicer’s financial strength or its assessment of market conditions or other relevant factors, impose additional financial requirements, including enhanced net worth, capital, or liquidity requirements, as well as provisions related to the items in the Additional Financial Requirements table below.
Any additional requirements Fannie Mae imposes may apply to a particular seller/servicer, a defined group or type of seller/servicer, or all sellers/servicers. A seller/servicer’s failure to comply with any additional requirements may result in Fannie Mae declaring a breach of the Lender Contract.
Fannie Mae may declare a breach of the Lender Contract if any of the circumstances described in the following table occur.
|ADDITIONAL FINANCIAL REQUIREMENTS|
|Material Decline in Lender Adjusted Net Worth||Typically, a decline is material if Lender Adjusted Net Worth declines by more than 25% over a quarterly reporting period or by more than 40% over two-consecutive quarterly reporting periods.|
|Decline in Profitability||Four or more consecutive quarterly losses accompanied by a decline in Lender Adjusted Net Worth of 30% or more during the same period.|
|Cross-Default Provisions||The occurrence of any of the following (to the extent not cured within any applicable cure period in the applicable agreement):
The seller/servicer must provide Fannie Mae with written notification in the form of an updated Lender Record Information (Form 582) submitted electronically within in 30 days of the occurrence of any of the foregoing.
Fannie Mae may permit a seller/servicer to take on credit recourse obligations, provided the seller/servicer meets certain requirements. Fannie Mae will assess the financial strength of the seller/servicer to determine whether the seller/servicer can take on credit recourse obligations and, if permitted, whether the seller/servicer must post collateral or provide other forms of risk reduction measures to secure the additional obligations.
The following table describes business continuity and disaster recovery requirements.
|✓||The seller/servicer must...|
|ensure it and any subservicers, third-party originators, outsourcing firms, and third-party vendors used by the seller/servicer implement and maintain disaster recovery and business continuity procedures to ensure their ability to regain critical business operations if there is a disruption or disaster.|
|have processes in place to ensure business continuity and disaster recovery procedures are both updated and tested on a regular basis.|
|confirm they have the ability to regain critical business operations in the event that subservicers, third-party originators, outsourcing firms, or third-party vendors used by the seller/servicer fail to maintain business continuity or disaster recovery procedures, suffer complete business failure, or dissolution.|
Business Continuity Procedures
Business continuity procedures are defined as plans to continue operations if adverse conditions occur, such as a storm, a fire, or a crime. The plan must include moving operations or recovering operations in another location if a disaster occurs at a worksite or data center.
All sellers/servicers must have business continuity procedures in place that include:
identification of critical functions and resources required to continue operations in the event of a business disruption or disaster, and
alternate processing facilities.
Disaster Recovery Procedures
Disaster recovery is defined as a documented process or set of procedures to recover and protect a business information technology infrastructure in the event of a disaster.
All sellers/servicers must have disaster recovery procedures in place that include:
identification of critical functions and resources required to continue operations in the event of a business disruption or disaster,
provisions for off-site retention of critical systems and data file resources, and
alternate network and telecommunication capabilities.
The seller/servicer must have internal audit and management control procedures to evaluate and monitor the overall quality of its loan production and servicing processes, as applicable. At a minimum:
The procedures must be independent of all key functions of the loan manufacturing process and the servicing processes that they review, so that such procedures provide an objective and unbiased evaluation that adds value and improves the seller/servicer’s operations.
The seller/servicer’s lines of reporting must reflect the independence of the audit process at all levels, resulting in activities that are conducted in an unbiased manner and without quality compromises resulting from internal influences or conflicts of interest.
The audit function must not share any reporting lines with the functional areas that it reviews.
The audit function must report directly to the seller/servicer’s senior management and/or board of directors. Exceptions are permitted in situations in which the size of the seller/servicer’s organization is insufficient to support adequate resources to allow for separation of these functions. In those situations, the seller/servicer’s audit plan must include the rationale for the lack of separation as well as the controls that have been established to mitigate the risks associated with the lack of separation of these functions.
The procedures must be consultative, so that they help the seller/servicer accomplish its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, control, and governance processes.
Lenders must have written procedures for the approval and management of vendors and other third-party service providers.