source:
  type: guide
  id: fnma-svc-b-1-01
  authority: Fannie Mae Servicing Guide B-1-01 — Administering an Escrow Account and
    Paying Expenses
  description: Fannie Mae Servicing Guide B-1-01 — Administering an Escrow Account
    and Paying Expenses.
  coverage_tier: operative
obligations:
- id: fnma-svc-b-1-01-full
  canonical_id: fnma-svc-b-1-01-full
  section: Fannie Mae Servicing Guide B-1-01 — Administering an Escrow Account and
    Paying Expenses
  type: do
  tags:
  - regulator-direct
  - fnma
  - servicing-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Servicing Guide B-1-01 — Administering an Escrow Account
      and Paying Expenses
    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: 'B-1-01, Administering an Escrow Account and Paying Expenses
      (09/11/2024) Introduction This topic contains the following: Overview Paying
      Interest on an Escrow Account Waiving Escrow Account Requirements Administering
      an Escrow Account in Connection With a Payment Deferral Administering an Escrow
      Account in Connection With a Mortgage Loan Modiﬁcation Manufactured Home Tax
      Requirements Paying Assessments and Related Expenses to Protect the Priority
      of Fannie Mae’s Mortgage Lien Advancing Funds to Cover Expenses Overview Without
      regard to whether the mortgage loan has an escrow account, the servicer must
      protect Fannie Mae’s mortgage lien and the property securing the mortgage loan
      by monitoring the status of all escrow and related charges, which may include
      but are not limited to property and ﬂood insurance premiums; mortgage insurance
      premiums; real estate taxes; ground rents; regular and special assessments for
      condominiums, homeowners’ associations (HOA), and Planned Unit Developments
      (PUD); co-op corporation fees and assessments; local government and public utility
      assessments; and any other charges, ﬁnes, and imposition attributable to the
      property which can attain priority over Fannie Mae’s mortgage lien; and maintaining
      accurate records on the status of all escrow and related charges. Published
      May 13, 2026 164 Unless otherwise noted, the requirements in this section apply
      whether the mortgage loan is a ﬁrst lien mortgage loan that has an escrow account
      or a second lien mortgage loan where the servicer chooses to require an escrow
      account. When the mortgage loan has an escrow account, the servicer must ensure
      the timely payment of all escrow and related charges before any applicable penalty
      or termination date, and make payments for escrow-related expenses early enough
      to take advantage of any discount period to obtain the maximum discounts allowed
      whenever funds are available in the escrow account. Paying Interest on an Escrow
      Account Fannie Mae will not reimburse the servicer when the servicer pays interest
      on an escrow account, whether required by law or voluntary. Waiving Escrow Account
      Requirements The servicer must not solicit a borrower with an oﬀer to waive
      the escrow account requirements but is authorized to evaluate a borrower’s request
      subject to the requirements in the following table. ✓ The servicer must... Evaluate
      whether it is appropriate to waive the escrow account requirement based on the
      mortgage loan documents and applicable law. Deny a request to waive escrow requirement
      for a mortgage loan if • the borrower has received a prior mortgage loan modiﬁcation,
      or previously been approved for an escrow waiver and failed to make all payments
      timely, as required, • the borrower has experienced any delinquency in the 12
      months immediately preceding the request, • the borrower has experienced a 60+
      day delinquency in the 24 months immediately preceding the request, or • the
      principal balance for the mortgage loan is greater than or equal to 80% of the
      original appraised value. Maintain the basis for the waiver decision and any
      disclosures provided to the borrower, if applicable, in the mortgage loan servicing
      ﬁle. The servicer must make this information available to Fannie Mae upon request.
      The servicer may not waive the individual escrow requirement for MIPs when the
      premiums are paid monthly. Published May 13, 2026 165 Administering an Escrow
      Account in Connection With a Payment Deferral When a borrower is eligible for
      a payment deferral and the servicer was not collecting escrows on the existing
      mortgage loan, the servicer is not required to revoke any escrow deposit account
      waiver and establish an escrow deposit account as a condition of the payment
      deferral if the servicer conﬁrms the borrower is current on the payments for
      taxes, special assessments, property and ﬂood insurance premiums, premiums for
      borrower-purchased MI, ground rents, and similar items. Prior to oﬀering a payment
      deferral, the servicer must analyze an existing escrow account to estimate the
      periodic escrow deposit required to ensure adequate funds are available to pay
      future charges, taking into consideration T&I payments that may come due during
      the processing month, if applicable. In the event the initial escrow analysis
      identiﬁes an escrow shortage, the servicer must spread any escrow shortage repayment
      amount in equal monthly payments over a period of 60 months, unless the borrower
      decides to pay the escrow shortage amount in a lump sum up-front or over a shorter
      period, not less than 12 months. Any subsequent escrow shortage that may be
      identiﬁed in the next annual analysis cycle must be spread out over either the
      remaining term of the initial escrow shortage repayment period or another period
      of up to 60 months. See Performing an Escrow Analysis in D2-3.2-04, Payment
      Deferral and Performing an Escrow Analysis in D2-3.2-05, Disaster Payment Deferral
      for additional information. Administering an Escrow Account in Connection With
      a Mortgage Loan Modiﬁcation The following table outlines the escrow requirements
      when a servicer is evaluating a borrower for a mortgage loan modiﬁcation. ✓
      The servicer must... Revoke any escrow deposit account waiver and establish
      an escrow deposit account prior to the beginning of the trial payment period
      in accordance with Fannie Mae’s requirements, unless the borrower is current
      on the payments for taxes, special assessments, property and ﬂood insurance
      premiums, premiums for borrower-purchased MI, ground rents, and similar items
      and the mortgage loan modiﬁcation is a Fannie Mae Flex Modiﬁcation in accordance
      with Evaluating or Soliciting a Borrower with a Disaster-Related Hardship for
      a Fannie Mae Flex Modiﬁcation in D2-3.2-06, Fannie Mae Flex Modiﬁcation. Published
      May 13, 2026 166 ✓ The servicer must... Analyze an existing escrow account to
      estimate the periodic escrow deposit required to ensure adequate funds are available
      to pay future charges, taking into consideration T&I payments that may come
      due during any Trial Period Plan. In the event the initial escrow analysis identiﬁes
      an escrow shortage, the servicer must spread any escrow shortage repayment amount
      in equal monthly payments over a period of 60 months, unless the borrower decides
      to pay the escrow shortage amount in a lump sum up-front or over a shorter period,
      not less than 12 months. Any subsequent escrow shortage that may be identiﬁed
      in the next annual analysis cycle must be spread out over either the remaining
      term of the initial escrow shortage repayment period or another period of up
      to 60 months. Ensure the borrower’s monthly mortgage loan payments, including
      trial period payments, include an escrow payment. See the applicable mortgage
      loan modiﬁcation program in Section D2–3.2, Home Retention Workout Options for
      additional information. See Performing an Escrow Analysis in D2-3.2-06, Fannie
      Mae Flex Modiﬁcation for additional information. Manufactured Home Tax Requirements
      When the property securing the mortgage loan is a manufactured home, the servicer
      must ensure the manufactured home and land are taxed as real property and a
      single tax bill is issued. If this is not possible, the dwelling must be taxed
      separately as personal property and the servicer must adjust its system to escrow
      for both real and personal property taxes. Fannie Mae’s requirements for real
      estate taxes apply equally to personal property taxes applicable to the dwelling.
      Paying Assessments and Related Expenses to Protect the Priority of Fannie Mae’s
      Mortgage Lien The following table outlines the servicer’s responsibilities for
      addressing a regular or special assessment, including for an HOA, PUD, or condo
      association or a related expense, prior to the foreclosure sale date when applicable
      law creates a lien that is superior in priority over Fannie Mae’s mortgage lien
      and that if foreclosed, would extinguish Fannie Mae’s mortgage lien. ✓ The servicer
      must... Determine the minimum amount necessary to clear the association’s claim
      of lien in order to prevent the extinguishment of Fannie Mae’s mortgage lien.
      Published May 13, 2026 167 ✓ The servicer must... Negotiate with the association,
      as needed and with reasonable eﬀort, to minimize the amount necessary to clear
      the association’s lien against the property. Pay the necessary amount prior
      to the foreclosure sale date or closing of a Mortgage Release. Note: The servicer
      must notify Fannie Mae’s Legal department by submitting a Non-Routine Form (Form
      20) when the association refuses to issue a statement of the amount due showing
      only the priority amounts, the association continues to assert lien priority
      after the servicer has paid the priority amounts, litigation is ﬁled by the
      association to foreclose a Fannie Mae-owned mortgage lien or to establish lien
      priority, or eﬀorts to settle a dispute with the association fail. The servicer
      must follow the procedures in General Expense Reimbursement Requirements in
      F-1-05, Expense Reimbursement to determine the timing and amount of advances,
      if any, Fannie Mae will reimburse. The servicer must follow the procedures in
      Allowable Payments to Subordinate Lienholders in D2-3.3-01, Fannie Mae Short
      Sale to determine the type and amount of payments to subordinate lienholders,
      if any, Fannie Mae will allow to be paid from the short sale proceeds. The servicer
      must follow the procedures in accordance with D1-1-02, Evaluating a First Lien
      Mortgage Loan for Charge-Oﬀ and Release of Lien and D1-1-03, Evaluating a Second
      Lien Consideration of a Second Lien Mortgage Loan to determine if the loan is
      eligible for charge-oﬀ prior to advances. Advancing Funds to Cover Expenses
      The servicer must promptly advance the funds to cover an expense when an escrow
      account has insuﬃcient funds to pay an expense in a timely manner. The servicer
      must require the borrower to reimburse it for advances because the escrow deposit
      account did not have suﬃcient funds to cover an expense or emergency repairs
      to the property. Any funds the servicer advances must stay in the T&I custodial
      account until the borrower remits funds suﬃcient to cure the deﬁcit. The following
      table outlines the requirements when the servicer waives the escrow account
      requirement and the borrower fails to pay the insurance premiums, taxes, or
      other related charges. ✓ The servicer must... Advance the payment, including
      any late payment penalties, from its own funds. Published May 13, 2026 168 ✓
      The servicer must... Revoke any escrow waiver and establish an escrow account
      in accordance with Fannie Mae’s requirements to collect funds to repay the advances
      and pay future bills. The servicer must follow the procedures in General Expense
      Reimbursement Requirements in F-1-05, Expense Reimbursement to determine how
      to obtain reimbursement from future payments, and how to obtain reimbursement
      from Fannie Mae. Recent Related Announcements The table below provides references
      to recently issued Announcements that are related to this topic. Announcements
      Issue Date Announcement SVC-2024-05 September 11, 2024 Announcement SVC-2023-05
      October 11, 2023 Announcement SVC-2023-03 May 10, 2023 Announcement SVC-2022-04
      June 8, 2022 Announcement SVC-2022-01 February 9, 2022 Announcement SVC-2020-04
      September 9, 2020 Announcement SVC-2019-05 July 10, 2019 Chapter B-2, Property
      Insurance Requirements Introduction This chapter describes requirements relating
      to property insurance. Published May 13, 2026 169'
  judgment: false
