Jump to Content
ABA: The American Bankers Association
Skip Section Navigation

Under the Homeowner’s Protection Act, borrowers may request termination of their private mortgage insurance if they meet certain criteria. Being “current” on the loan is one of the criteria. Was consideration of late fees a Fannie Mae requirement that it has now rescinded?

Under the Homeowner’s Protection Act, borrowers may request termination of their private mortgage insurance if they meet certain criteria. Being “current” on the loan is one of the criteria. Federal National Mortgage Association’s (Fannie Mae or FNMA) recent Announcement SVC-2016-07 states, “Effective immediately, the servicer is no longer required to consider outstanding late charges when determining whether a mortgage loan is current for purposes of [mortgage insurance] termination for Fannie Mae mortgage loans.” Was consideration of late fees a Fannie Mae requirement that it has now rescinded?

Yes. Fannie Mae’s policy had been that a loan was not considered “current” it there were any outstanding late fees. Its recent announcement changed this policy, so that a mortgage account may be considered “current,” even if there are outstanding late fees. FNMA explained that the Homeowner’s Protection Act, which lays out the lender notification and termination requirements for private mortgage insurance, does not address late fees. It further explained in response to our question, “Since the servicer is the beneficiary of any late charges and late charges may be the sole reason why mortgage insurance is not cancelled, our policy created potential reputational risk to Fannie Mae and its servicers. Removing the late charge requirement from our Servicing Guide allows the servicer to interpret the security instrument to determine whether a loan is current for purposes of mortgage insurance termination.”

Thus, under Fannie Mae’s policy, outstanding late fees may, but do not have to be, a reason to disqualify a loan as current. (October 2019)

Compliance Hotline

Have a compliance-related question? We're here to help. Members, reach us by phone or email.