Announcement SVC-2025-02 – Servicing Guide Update
Clarification of Fannie Mae Flex Modification calculation methodology for borrowers with principal curtailments
Advisory Assessment
Impact. This update clarifies how servicers must calculate remaining mortgage loan terms for Fannie Mae Flex Modifications when borrowers have made principal curtailments, requiring you to base calculations on the interest-bearing unpaid principal balance rather than the original loan amount. The guidance also updates contact procedures for Rural Development claim inquiries, which takes effect immediately.
Risk. Examination focus will center on loan modification calculation accuracy, particularly for files where borrowers made voluntary principal payments before entering modification. Your modification team faces the highest exposure if they continue using outdated calculation methods that ignore principal curtailments.
Recommended Action. Have your servicing operations team review current Flex Modification calculation workflows and update procedures to incorporate the interest-bearing UPB methodology before the August implementation date. Update Rural Development contact procedures in your servicing manual immediately since that change is already in effect.
Watch. Monitor for additional Fannie Mae servicing guide updates through summer 2025 that may further refine modification calculation requirements or introduce related changes to loss mitigation workflows.
Classification
- Regulatory Program
- GSE Servicing Standards
- Doc Type
- Guidance
- Effective Date
- 2025-08-01
- Days to Action
- -349
- Comment Deadline
- —
- Published
- 2025-04-09
Urgency Basis
Primary effective date of August 1, 2025 is beyond 180 days from today (May 19, 2026). Document appears to be from 2025 based on content but reference date suggests this is historical.
Operational Context
Impact by Category
Key Requirements
Scoring Rationale
This is a routine servicing guide update with limited operational impact. The primary change clarifies existing calculation methodology rather than creating new obligations. The effective date timing and technical nature of the changes support low impact scores across categories.