source:
  type: guide
  id: fnma-svc-e-3.2-03
  authority: Fannie Mae Servicing Guide E-3.2-03 — Initiating Foreclosure Proceedings
    on a Second Lien Conventional Mortgage Loan
  description: Fannie Mae Servicing Guide E-3.2-03 — Initiating Foreclosure Proceedings
    on a Second Lien Conventional Mortgage Loan.
  coverage_tier: operative
obligations:
- id: fnma-svc-e-3.2-03-full
  canonical_id: fnma-svc-e-3.2-03-full
  section: Fannie Mae Servicing Guide E-3.2-03 — Initiating Foreclosure Proceedings
    on a Second Lien Conventional Mortgage Loan
  type: do
  tags:
  - regulator-direct
  - fnma
  - servicing-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Servicing Guide E-3.2-03 — Initiating Foreclosure Proceedings
      on a Second Lien Conventional Mortgage Loan
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/servicing-guide
    snapshot_id: cf63a82bbb4adfba
    fetched_at: '2026-05-22T23:53:19Z'
    content_hash: sha256:89df66c43baad07f8a8dd9d224492fff7d15e8839edba02ad0e74c7e50fe5da3
    paragraph_quote: E-3.2-03, Initiating Foreclosure Proceedings on a Second Lien
      Conventional Mortgage Loan (11/12/2014) Once a ﬁnal determination has been made
      to initiate foreclosure for a second lien mortgage loan, the servicer’s next
      actions will depend on whether both the ﬁrst and second lien mortgage loans
      are in default and whether Fannie Mae has an interest in only one mortgage loan
      or both the ﬁrst and second lien mortgage loans. A. Insured second lien mortgage
      loan in default. If an insured second lien mortgage loan is in default, but
      the ﬁrst lien mortgage loan is current, the servicer may be instructed to foreclose
      on the second lien mortgage loan; acquire title to the property subject to the
      ﬁrst lien mortgage loan; and ﬁle a claim with the mortgage insurer. (During
      the course of the foreclosure proceedings, the mortgage insurer may instruct
      the servicer to advance funds to satisfy the ﬁrst lien mortgage loan. In such
      cases, the servicer must do so and include the advanced funds in the insurance
      claim it ﬁles.) If the mortgage insurer does not accept conveyance and take
      title to the acquired property, the second lien mortgage loan servicer must
      notify Fannie Mae’s SF CPM division (see F-4-02, List of Contacts) of this and
      advise Fannie Mae of the eﬀect of any due-on-sale clause in the ﬁrst lien mortgage
      loan. The following table provides additional requirements based on Fannie Mae’s
      ownership interest in the ﬁrst lien mortgage loan. If Fannie Mae… Then the servicer…
      does not have an ownership interest in the ﬁrst lien mortgage loan must advance
      funds to ensure the ﬁrst lien mortgage loan remains current while the property
      is on the market. has an ownership interest in the ﬁrst lien mortgage loan must
      not advance funds to keep the ﬁrst lien mortgage loan current since eventually
      Fannie Mae will need to foreclose to acquire clear title to the property. B.
      Insured ﬁrst and second lien mortgage loans in default. If both the ﬁrst and
      second lien mortgage loans are in default, the second lien mortgage loan servicer
      must assume control over the foreclosure process to ensure that Fannie Mae’s
      interest in the second lien mortgage Published May 13, 2026 444 debt will be
      fully protected. However, when Fannie Mae has an ownership interest in both
      mortgage loans, there may be occasions when Fannie Mae decides that the most
      eﬃcient liquidation method is to instruct the ﬁrst lien mortgage loan servicer
      to bid both the ﬁrst and second lien mortgage debts at the foreclosure sale
      and to acquire title on Fannie Mae’s behalf. If Fannie Mae pursues this alternative,
      the ﬁrst lien mortgage loan servicer can still ﬁle a claim under the MI policy
      for that mortgage loan, and Fannie Mae will assume the responsibility for disposing
      of the acquired property if the mortgage insurer does not accept title to it.
      If during foreclosure the mortgage insurer instructs the servicer to reinstate
      the ﬁrst lien mortgage loan (or does not issue instructions to the contrary
      before the date of the foreclosure sale), the servicer must advance the funds
      necessary to reinstate the ﬁrst lien mortgage loan, proceed with the foreclosure
      of the second lien mortgage loan, and acquire title to the property subject
      to the ﬁrst lien mortgage loan. If the mortgage insurer instructs the servicer
      to satisfy the mortgage loan, the servicer must do so. If the mortgage insurer
      does not accept conveyance and take title to the acquired property, the second
      lien mortgage servicer must notify Fannie Mae’s SF CPM division (see F-4-02,
      List of Contacts). At the same time, the servicer must also advise Fannie Mae
      about the eﬀect of any due-on-sale (or transfer) clause in the ﬁrst lien mortgage
      loan. Fannie Mae will be responsible for marketing the property. The servicer
      must not pay oﬀ the ﬁrst lien mortgage loan unless the mortgage insurer or Fannie
      Mae has issued speciﬁc instructions to do so. Recent Related Announcements There
      are no recently issued Announcements related to this topic.
  judgment: false
