Announcement SVC-2025-02 – Servicing Guide Update

Impact. This Fannie Mae guidance clarifies how servicers must calculate Flex Modification terms when borrowers have made principal curtailments, requiring the remaining loan term calculation to use interest-bearing unpaid principal balance rather than original loan parameters. The update also revises contact protocols for Rural Development guarantee claims, affecting your modification processing workflows and staff training requirements.

Risk. Examination focus will center on modification calculation accuracy and consistency, particularly for loans where borrowers made additional principal payments before entering modification. Servicers using automated systems may face the highest exposure if their platforms haven't incorporated the clarified methodology, potentially generating incorrect modification terms that could trigger investor complaints or regulatory scrutiny.

Recommended Action. Operations should immediately audit current Flex Modification calculation procedures against the updated methodology and verify that staff training covers the principal curtailment scenarios. Compliance should coordinate with your loan servicing platform vendor to confirm system logic aligns with the clarified requirements, documenting any necessary configuration changes.

Watch. Monitor upcoming Fannie Mae servicing announcements for additional clarifications to modification procedures, as this type of operational guidance often signals broader policy refinements ahead. Track any patterns in modification-related findings during your next investor review or regulatory examination.