As an investor, the Federal National Mortgage Association (FNMA) has stipulated standard policies and procedures for mortgage service providers to claim their expenses. A mortgage servicer processing a foreclosure can file a claim with FNMA for the reimbursement of expenses incurred between the borrower’s date of default and the foreclosure sale date. The claim can be filed once the foreclosure sale of the property is complete. Typical expenses that can be reimbursed include taxes, insurance, property preservation expenses, and costs incurred in connection with the foreclosure activity. Once the property is sold, the servicer can file a final claim to reimburse all outstanding recoverable expenses.
Once all claims (initial, interim, final, and supplemental) are submitted to and processed by the investor, the servicer analyzes its losses and accounts for the expenses that have not been reimbursed. The servicer may have to bear any expense not reimbursed by FNMA due to lack of approvals, insufficient documents, or lack of compliance with the investor’s guidelines.
This paper enumerates areas where servicers can incur losses on account of not meeting investor guidelines. It also discusses the steps that a servicer can take to prevent or mitigate these losses.