A3-2-01, Compliance With Laws (09/04/2024)

• establish appropriate policies and procedures for monitoring (and monitor) applicable legal developments,

• demonstrate it has complied with applicable laws and regulations upon Fannie Mae’s request, 

• advise its Fannie Mae customer account team if an applicable law or regulation conflicts with Fannie Mae’s requirements, and

• establish policies and procedures to monitor appraisals for prohibited language to eliminate discriminatory practices and appraisals bias.

For whole loans acquired on or after November 20, 2014 and for loans delivered into MBS with pool issue dates on and after December 1, 2014.

Fannie Mae considers the following to be significant defects and may require a repurchase for a breach of the seller/servicer’s representation and warranty regarding compliance with laws when:

• the seller/servicer’s failure to comply could be expected to either

  • impair Fannie Mae’s or its servicer’s ability to enforce the note or mortgage, or

  • impose assignee liability on Fannie Mae; or

• a court or regulatory authority has found the loan to be in violation, or Fannie Mae has made a finding based on the facts available to it that a violation may have occurred.

• A violation may involve any one of the following:

  • laws administered or regulations implemented by the Department of the Treasury’s Office of Foreign Assets Control (OFAC);

  • the Fair Housing Act or related regulations;

  • the anti-discrimination provisions of the Equal Credit Opportunity Act or related regulations;

  • federal or state prohibitions on unfair, deceptive, or abusive acts or practices (UDAAP); or

  • the Securities Exchange Act of 1934 or regulations thereunder.

With respect to UDAAP, Fannie Mae will consider published federal and state announcements of interpretations as well as all published judicial and administrative decisions and will not enforce a repurchase if:

• the seller/servicer cures the matter by remediation to the injured party; or

• after the third anniversary of the acquisition (or MBS pool issue date) of a loan (unless the seller/servicer self-reports), a federal or state enforcement authority has indicated, asserted, or claimed that such practice violates (or may) violate UDAAP, or a federal or state court has held that a specific practice violates UDAAP.

Fannie Mae will not make legal a determination of whether a loan complies with or is exempt from TILA, ATR, or the Revised Qualified Mortgage Rule, or whether a lender's designation of the status of a loan is correct except as required in judicial or regulatory proceedings in which Fannie Mae is a party. 

For noncompliance with the ability to repay (ATR) requirements in the TILA and its implementing regulations, which could impose assignee liability on Fannie Mae, Fannie Mae will not issue a repurchase demand on such grounds unless a court, regulator, or other authoritative body concludes that a specific loan did not comply with ATR, including the Qualified Mortgage Rule.

Fannie Mae’s determination that a violation has occurred must be consistent with the facts provided by the seller/servicer and any other information obtained by Fannie Mae as part of its evaluation of the situation.

If Fannie Mae issues a repurchase demand involving a failure to comply with laws when there is pending litigation underway for that same issue, or when a government agency with authority to make a determination regarding the issue has publicly stated that it is reviewing the issue, the seller/servicer is not required to repurchase the loan until 30 days after the litigation is

• dismissed,

• settled, or

• concluded at trial in an adjudication, or

• the government agency has made a final determination (collectively, the “Resolution”).

After the Resolution, the seller/servicer may request that Fannie Mae review the appropriateness of the repurchase demand in light of the Resolution. Fannie Mae will withdraw the repurchase demand where appropriate.

• must establish and maintain an effective OFAC compliance program;

• must report all instances of penalties (civil or criminal) or enforcement actions for compliance failures or violations related to OFAC requirements to Fannie Mae's Ethics division;

• may not deliver a loan to Fannie Mae if any borrower is on one of the sanctions lists maintained by OFAC; and

• must periodically screen the loans that it services for Fannie Mae against OFAC’s sanctions lists. If the servicer identifies a valid match, the servicer must

  • notify Fannie Mae Ethics via email within 24 hours of blocking or rejecting a mortgage transaction (see E-1-02, List of ContactsE-1-02, List of Contacts), including in the notice the borrower’s name, Fannie Mae loan number, and a point of contact at the servicer. Upon receipt of the notice, a representative from Fannie Mae will contact the servicer to discuss the match and any potential next steps.

  • take steps to ensure that any funds from the individual or entity on an OFAC sanctions list are blocked and segregated, including any escrow funds.

  • take steps to ensure that all servicing activities on the loan cease. This includes, but is not limited to,

    • remittance of P&I payments to Fannie Mae,

    • payments to taxing authorities,

    • payments to property and flood insurers,

    • payments to mortgage insurers,

    • collection activities, including performing property inspections,

    • loss mitigation activities, and

    • foreclosure.

If the seller/servicer is not subject to the anti-money laundering provisions of the BSA, it must develop internal policies, procedures, and controls to identify suspicious activities that may involve money laundering, fraud, terrorist financing, or other crimes similar to those required by the anti-money laundering provisions of the BSA and its implementing regulations.

All sellers and servicers must report all instances of suspicious activity related to Fannie Mae loans using the self-report functionality in Loan Quality Connect or those related to Fannie Mae’s business activities to Fannie Mae’s Mortgage Fraud Reporting division (see E-1-02, List of ContactsE-1-02, List of Contacts) .

Fannie Mae reserves the right to make additional inquiries to the seller/servicers of any owner, including any direct, indirect, or beneficial owner that is a foreign party.

• must comply with the Housing and Economic Recovery Act of 2008 and its regulations (together, "HERA") and specifically the Minority and Women Inclusion Rule reporting requirements and:

  • provide data regarding the diversity status of the servicer, its agents, subcontractors, and vendors;

  • complete a Fannie Mae supplier registration profile that accurately reflects its ownership status, regardless of whether it is “HERA-Inclusive, and its team composition report;

  • update its profile to reflect such ownership changes within 30 days of any change of ownership;

  • provide ownership and team composition information described in the  Existing Suppliers guidance on Fannie Mae’s website annually by November 1; and

  • provide any such additional information that Fannie Mae reasonably requests for purposes of complying with HERA, the Minority and Women Inclusion Rule, or any other diversity and inclusion requirements.

• may develop a process to collect the ownership status of the agents, subcontractors, and vendors used by the servicer in servicing loans for Fannie Mae;

• must commit to practice the principles of equal employment opportunity and non-discrimination in all its business activities; and

• as required by the Minority and Women Inclusion Rule, must include, as a material condition of each contract with its agents, subcontractors, and vendors that provide services or goods to Fannie Mae, a provision that each such entity commit to practice the principles of equal employment opportunity and non-discrimination in all their business activities.

• must comply with all applicable requirements in a state Address Confidentiality Program. This includes, when required by applicable state law, giving notice to loan purchasers or assignees, and providing notice to Fannie Mae's Privacy Office (see  E-1-02, List of ContactsE-1-02, List of Contacts).

For a loan in which a borrower is enrolled in a state Address Confidentiality Program, the seller/servicer must

• include both a property address and a legal substitute mailing address at loan delivery,
• report Special Feature Code 877,
• for a loan that it services, complete the post-purchase adjustment process within 5 days of receiving notification that a borrower has enrolled in, or has unenrolled in, one of these programs, and
• provide notice of program enrollment and the borrower mailing address to any transferee servicer upon the transfer of servicing rights.

The Servicing Guide also includes the post-delivery servicing transfer requirements.

• must comply with all requirements that FHA, VA, HUD, and RD, or the mortgage insurance companies have for loans they insure or guarantee;

• must take all actions necessary to ensure that Fannie Mae recovers the full amount due under the guaranty or the full claim under the insurance contract; and

• must not enter into any agreement with insurers or guarantors which has the potential to modify loss claim settlements under the terms of the guaranty or insurance contract.

• must include in its policies and procedures appropriate safeguards to prevent the possibilities of violating Fannie Mae’s prohibitions against questionable or prohibited refinancing practices;

• may promote the terms it has available for refinancings by sending promotional if the servicer targets

  • borrowers of all loans in its servicing portfolio,

  • all borrowers who have specific types of loans, or

  • borrowers of loans that fall within specific interest rate ranges.

• affects 10 or more borrowers,

• requires notice to state agencies or other regulatory bodies designated by privacy and data security breach laws, or

• involves the intentional unauthorized access or misuse of borrower NPI.