FNMA Servicing Changes YTD

Written By SCA

Below represents a summary of the year to date updates published in the various announcements and Lender Letters by FNMA related to Servicing.

1. System & Process Modernization

  • Advance Notice of Servicing Process and System Changes (Lender Letter LL-2026-05 - June 24, 2026): Fannie Mae provided early notice of a multi-year initiative aimed at simplifying servicer reporting, enhancing risk management, and building operational efficiencies. These updates will be rolled out via a phased approach, and the testing window is currently open (until November 13, 2026). All escrow day-of-event based reporting is required to be live by December 1, 2026.

  • Custodial Bank Account Digital Transition (SVC-2026-04 - May 13, 2026): Fannie Mae launched a new Custodial Bank Account Management application, converting Letters of Authorization for P&I (Form 1013) and T&I (Form 1014) to a digital format. It also introduced a new Data Access Authorization Agreement (Form 101) to grant sub-servicers access to master servicer data. (Mandatory by August 1, 2026).

  • Custodial Account Reconciliation Form Updates (SVC-2026-01 - Feb. 18, 2026): Forms 496 (P&I analysis) and 496A (T&I analysis) were redesigned and transitioned to Excel formats to streamline month-end reconciliation.

2. Property & Project Insurance Requirements

  • Single-Family Project Standards and Property Insurance Updates (Lender Letter LL-2026-03 – March 18, 2026): Rolled out sweeping structural changes on insurance requirements for residential properties and Condo/HOA developments.

    • Standard 1-to-4 Unit Properties (Mandatory: January 1, 2027): Servicers are now formally required to send borrowers an annual reminder urging them to review policy limits (note: this can be embedded in escrow statements or web portal notifications). Additionally, servicers must immediately trigger lender-placed insurance upon notification of a policy lapse, cancellation, or non-renewal.

    • Condo & HOA Master Policies (Mandatory: January 1, 2027): Master property insurance must cover at least 100% of the project's replacement cost value (RCV), verified annually. The master policy must include wind coverage alongside fire, lightning, and water damage. Long-standing requirements for roofs to be insured on a replacement cost basis and mandates for inflation-guard coverage have been officially retired to help lower premium costs, while the rest of the structure remains required to be covered on the RCV basis.

    • Condo Deductibles & Individual (HO-6) Policies: Sets a $50,000 maximum for master policy per-occurrence, per-unit deductibles (Mandatory for loans with application dates on or after July 1, 2026). If a per-unit deductible exists, or if a portion of the unit interior is uncovered by the master policy, the unit owner must obtain an individual HO-6 policy with a limit matching or exceeding the master deductible (Effective immediately as of March 18, 2026).

3. Compliance

  • Artificial Intelligence (AI)/Machine Learning Governance (Lender Letter LL-2026-04 - April 8, 2026): Established a formal framework regarding how Seller/Servicers can utilize AI and ML within their daily servicing and loan origination operations. Specifically, the letter defines core requirements for data integrity, algorithmic bias monitoring, and human-in-the-loop oversight to ensure any automated decisions comply with fair lending laws and operational safety standards.

4. Investor Reporting & Financial Remittances

  • Reporting Error Policy for Paid-Off Loans (SVC-2026-03 - April 8, 2026): To streamline month-end accounting, Fannie Mae removed the ability to request reactivation of a paid-off loan if a reporting error is found after the reporting period closes. Servicers must now advance or remit funds to liquidate the loan instead of reactivating it.

  • Guaranty Fee Remittance Changes (SVC-2026-02 - March 11, 2026): Servicers are no longer required to advance guaranty fees for mortgage loans actively going through the Stop Delinquency Advance process.

5. Loss Mitigation, Delinquency, & Disaster Policy

  • Retention Workout and Disaster Policies (LL-2026-01 & SVC-2026-03 - Feb 11, 2026): This update reorganized and clarified term-structuring and extensions for Forbearance Plans (specifically for borrowers dealing with disaster-related hardships) which went into effect May 1, 2026. It also refined evaluation frameworks for Fannie Mae Flex Modifications and updated terms regarding referrals to foreclosure proceedings for properties directly impacted by disasters.

  • Government Mortgage Loan Modifications (SVC-2026-01 - Feb. 18, 2026): Clarified the process for removing an MBS mortgage loan from a pool when a government modification program requires transferring the loan to an insurer or guarantor to collect benefits.

6. Technology & Administration

  • Remote Online Notarization (RON) Recordkeeping (SVC-2026-04 - May 13, 2026): Eliminated the long-standing requirement for servicers/lenders to maintain the actual video recording of a RON ceremony. However, servicers are still required to keep the official RON audit trail within the electronic loan file.

  • Administrative Routing Details (SVC-2026-04 - May 13, 2026): Updated operational contact details for inquiries related to Deferred Payment Obligations (DPO), claim denials, or cancellations, and revised the physical lockbox address used when filing FHA Mortgage Insurance claims.

  • Government Shutdown Contingencies (Lender Letter LL-2026-02 - March 3, 2026): Provided temporary, flexible servicing guidance to account for disruptions caused by the brief federal government shutdown earlier in the year.

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