Fannie Mae recently updated Lender Letter (LL) 2020-13 on the Automatic Reclassification of Delinquent MBS Mortgage Loans. LL-2020-13 was initially published at the end of September and announced that Fannie Mae would change the trigger for automatic reclassification of delinquent MBS mortgage loans from four consecutive months to twenty-four consecutive months delinquent (measured by Last Paid Installment date). The guidance includes the following exceptions to this rule, where the removal of a mortgage loan may be earlier than twenty-four months, for mortgage loans that are:
- paid in full, or where the related lien is released or charged-off;
- repurchased by a seller/servicer under the applicable requirements;
- entering a permanent modification;
- subject to a short sale or Mortgage Release; or
- referred to foreclosure.
The changes will take effect January 2021 for mortgage loans that become greater than four consecutive months delinquent (based on December 2020 and January 2021 reporting activity).
The recent update to LL-2020-13 provided further procedural details on the changes and also included a table outlining key milestones in the January 2021 transition month.