source:
  type: guide
  id: fnma-svc-f-1-12
  authority: Fannie Mae Servicing Guide F-1-12 — Preparing to Implement a Workout
    Option
  description: Fannie Mae Servicing Guide F-1-12 — Preparing to Implement a Workout
    Option.
  coverage_tier: operative
obligations:
- id: fnma-svc-f-1-12-full
  canonical_id: fnma-svc-f-1-12-full
  section: Fannie Mae Servicing Guide F-1-12 — Preparing to Implement a Workout Option
  type: do
  tags:
  - regulator-direct
  - fnma
  - servicing-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Servicing Guide F-1-12 — Preparing to Implement a Workout
      Option
    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: 'F-1-12, Preparing to Implement a Workout Option (05/10/2023)
      Introduction This Servicing Guide Procedure contains the following: Calculating
      the Housing Expense-to-Income Ratio for Imminent Default for a Conventional
      Mortgage Loan Modiﬁcation Calculating the Housing Expense-to-Income Ratio for
      Imminent Default for a Fannie Mae Short Sale or Fannie Mae Mortgage Release
      Processing the IRS IVES Form 4506-C Notifying Fannie Mae of Lead-Based Paint
      Citations Calculating the Housing Expense-to-Income Ratio for Imminent Default
      for a Conventional Mortgage Loan Modiﬁcation The servicer must determine the
      borrower’s pre-modiﬁcation housing expense-to-income ratio as outlined in Evaluating
      a Borrower for Imminent Default for Conventional Mortgage Loan Modiﬁcation Eligibility
      in D2-1-01, Determining if the Borrower’s Mortgage Payment is in Imminent Default.
      The borrower’s monthly gross income is deﬁned as the borrower’s monthly income
      amount before any payroll deductions and includes the following items, as applicable:
      wages and salaries; overtime pay; Published May 13, 2026 605 commissions; fees;
      tips; bonuses; housing allowances; other compensation for personal services;
      Social Security payments (including Social Security received by adults on behalf
      of minors or by minors intended for their own support); and monthly income from
      annuities, insurance policies, retirement funds, pensions, disability or death
      beneﬁts, rental income, and other income such as adoption assistance. Note:
      The servicer must not consider unemployment insurance beneﬁts or any other temporary
      sources of income related to employment (such as severance payments) as part
      of the monthly gross income for mortgage loans being evaluated for a mortgage
      loan modiﬁcation. The servicer must then divide the borrower’s pre-modiﬁcation
      monthly housing expense on the property securing the mortgage loan, which includes
      the following items (as applicable), by the borrower’s monthly gross income:
      P&I; property and ﬂood insurance premiums; real estate taxes; ground rent; fees
      paid in accordance with a resale restriction agreement or a shared equity transaction
      agreement, as applicable; special assessments; HOA dues (including utility charges
      that are attributable to the common areas, but excluding any utility charges
      that apply to the individual unit); co-op corporation fee (less the pro rata
      share of the master utility charges for servicing individual units that is attributable
      to the borrower’s unit); and any escrow shortage currently included as part
      of the full monthly contractual payment. Note: The servicer must exclude monthly
      mortgage insurance premiums from the monthly housing expense-to-income calculation.
      Published May 13, 2026 606 Calculating the Housing Expense-to-Income Ratio for
      Imminent Default for a Fannie Mae Short Sale or Fannie Mae Mortgage Release
      The servicer must determine the borrower’s housing expense-to-income ratio as
      outlined in Evaluating a Borrower for Imminent Default for a Fannie Mae Short
      Sale or Fannie Mae Mortgage Release Eligibility in D2-1-01, Determining if the
      Borrower’s Mortgage Payment is in Imminent Default. The borrower’s monthly gross
      income is deﬁned as the borrower’s monthly income amount before any payroll
      deductions and includes the following items, as applicable: wages and salaries;
      overtime pay; commissions; fees; tips; bonuses; housing allowances; other compensation
      for personal services; Social Security payments (including Social Security received
      by adults on behalf of minors or by minors intended for their own support);
      and monthly income from annuities, insurance policies, retirement funds, pensions,
      disability or death beneﬁts, rental income, and other income such as adoption
      assistance. Note: The servicer must not consider unemployment insurance beneﬁts
      or any other temporary sources of income related to employment (such as severance
      payments) as part of the monthly gross income for mortgage loans being evaluated
      for a mortgage loan modiﬁcation The servicer must then divide the borrower’s
      monthly housing expense on the property securing the mortgage loan, which includes
      the following items (as applicable), by the borrower’s monthly gross income:
      P&I; property and ﬂood insurance premiums; real estate taxes; ground rent; fees
      paid in accordance with a resale restriction agreement or a shared equity transaction
      agreement, as Published May 13, 2026 607 applicable; special assessments; HOA
      dues (including utility charges that are attributable to the common areas, but
      excluding any utility charges that apply to the individual unit); co-op corporation
      fee (less the pro rata share of the master utility charges for servicing individual
      units that is attributable to the borrower’s unit); and any escrow shortage
      currently included as part of the full monthly contractual payment. Note: The
      servicer must exclude monthly mortgage insurance premiums from the monthly housing
      expense-to-income calculation. Processing the IRS IVES Form 4506-C The servicer
      must obtain the IRS IVES Request for Transcript of Tax Return (IRS IVES Form
      4506-C) in accordance with Determining Whether a Borrower Response Package is
      Complete in D2-2-05, Receiving a Borrower Response Package. The servicer must
      submit the form to the IRS to obtain a copy of the borrower’s tax transcript
      in the following instances: to reconcile inconsistencies between other information
      the borrower provided [e.g., information the borrower provided in the Mortgage
      Assistance Application (Form 710)] and the income documentation; when the borrower
      is self-employed, and they do not provide the documentation that is outlined
      in the Form 710; or if Fannie Mae requests it. The servicer is encouraged to
      use the IRS Income Veriﬁcation Express Service, which uses secure email to deliver
      tax return transcripts to servicers. Note: For borrowers in the USTs (also known
      as U.S. Possessions), IRS IVES Form 4506-C may not be accepted. Depending on
      the borrower’s UST classiﬁcation of residency, the borrower may be required
      to ﬁle in the UST or the U.S or may have to ﬁle in both the UST and U.S. The
      servicer must adhere to all applicable processes for eligible borrowers ﬁling
      tax returns in UST and obtain all applicable forms when required. Notifying
      Fannie Mae of Lead-Based Paint Citations The following table lists the documentation
      that the servicer must provide when notifying Fannie Mae of lead- based paint
      citations in accordance with D2-3.1-06, Notifying Fannie Mae of Lead-Based Paint
      Citations. Published May 13, 2026 608 ✓ The servicer must provide to Fannie
      Mae… A copy of any document related to lead-based paint law violations or threatened
      or pending lead- based paint litigation. The current value of the property.
      The amount of the outstanding debt secured by the property. The number and exact
      age of each child under eight years of age who are residing in the property.
      Recent Related Announcements The table below provides references to recently
      issued Announcements that are related to this topic. Announcements Issue Date
      Announcement SVC-2023-03 May 10, 2023 Announcement SVC-2020-02 June 10, 2020
      F-1-13, Processing a Fannie Mae Mortgage Release (Deed-In-Lieu of Foreclosure)
      (05/10/2023) Introduction This Servicing Guide Procedure contains the following:
      Verifying Clear and Marketable Title Calculating the Borrower’s Housing Expense-to-Income
      Ratio Obtaining a Property Valuation Processing a Mortgage Release Transition
      Option Verifying Clear and Marketable Title The servicer must adhere to General
      Requirements When Processing a Fannie Mae Mortgage Release in D2-3.3-02, Fannie
      Mae Mortgage Release (Deed-in-Lieu of Foreclosure). Published May 13, 2026 609
      The servicer must order a title search. In addition to the title search, the
      servicer must review the following to determine if the borrower will be able
      to deliver clear and marketable title: readily available information provided
      by the borrower, the borrower’s credit report, the mortgage loan servicing ﬁle,
      and other sources identifying subordinate liens and other claims on title. Calculating
      the Borrower’s Housing Expense-to-Income Ratio The servicer must determine the
      borrower’s housing expense-to-income ratio as outlined in Evaluating a Borrower’s
      Ability to Make a Cash Contribution in D2-3.3-02, Fannie Mae Mortgage Release
      (Deed-in-Lieu of Foreclosure). The borrower’s monthly gross income is deﬁned
      as the borrower’s monthly income amount before any payroll deductions and includes
      the following items, as applicable: wages and salaries; overtime pay; commissions;
      fees; tips; bonuses; housing allowances; other compensation for personal services;
      Social Security payments (including Social Security received by adults on behalf
      of minors or by minors intended for their own support); and monthly income from
      annuities, insurance policies, retirement funds, pensions, disability or death
      beneﬁts, rental income, and other income such as adoption assistance. Note:
      The servicer must not consider unemployment insurance beneﬁts or any other temporary
      sources of income related to unemployment (such as severance payments), as part
      of the monthly gross income for mortgage loans being evaluated for a Mortgage
      Release. The servicer must then divide the borrower’s monthly housing expense
      on the property securing the mortgage loan, which includes the following items
      (as applicable), by the borrower’s monthly gross income: P&I; property and ﬂood
      insurance premiums; Published May 13, 2026 610 real estate taxes; ground rent;
      fees paid in accordance with a resale restriction agreement or a shared equity
      transaction agreement, as applicable; special assessments; HOA dues (including
      utility charges that are attributable to the common areas, but excluding any
      utility charges that apply to the individual unit); co-op corporation fee (less
      the pro rata share of the master utility charges for servicing individual units
      that is attributable to the borrower’s unit); and any escrow shortage currently
      included as part of the full monthly contractual payment. Note: The servicer
      must exclude monthly mortgage insurance premiums from the monthly housing expense-to-income
      calculation. Obtaining a Property Valuation The servicer must obtain a property
      valuation for a Mortgage Release or a Mortgage Release transition option in
      accordance with Obtaining a Property Valuation and Evaluating the Condition
      of the Property in D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure).
      The property valuation for a Mortgage Release can be an interior and exterior
      inspection of the property in the form of a BPO; an interior and exterior inspection
      of the property in the form of a an appraisal, which must be performed in accordance
      with USPAP; or an AVM. Note: For a Mortgage Release transition option, the property
      valuation must be an interior and exterior inspection of the property in the
      form of a BPO; or an appraisal, which must be performed in accordance with USPAP.
      The property valuation must be dated or have been refreshed by Fannie Mae within
      90 calendar days of the servicer approving the borrower for a Mortgage Release.
      The following table provides additional requirements for all property valuations
      for a Mortgage Release. Published May 13, 2026 611 ✓ The servicer must… Request
      the property valuation order through the Fannie Mae''s servicing solution system.
      Include the cost of the property valuation order in the MI claim, when applicable.
      Obtain the results of the property valuation order through Fannie Mae''s servicing
      solutions system within 10 calendar days from the date the servicer submits
      the request. Note: Property valuation results may take longer in the event of
      unusual market conditions or if access to the property is delayed. Processing
      a Mortgage Release Transition Option The servicer must evaluate the borrower
      for Mortgage Release transition options and refer the case to Fannie Mae in
      accordance with Evaluating a Borrower for Fannie Mae Mortgage Release Transition
      Options in D2-3.3-02, Fannie Mae Mortgage Release (Deed-in-Lieu of Foreclosure).
      When the servicer refers the case to Fannie Mae, it must provide the applicable
      form as outlined in the following table. If the servicer is referring the borrower
      for the Mortgage Release transition option that allows the borrower to execute…
      Then the servicer must submit a… a three-month transition option with no rent
      payment required Mortgage Release Program Transition Option Referral Form (Form
      193). a twelve-month lease with a market rent payment Mortgage Release Program
      Lease Option Referral Form (Form 187). Fannie Mae, or its designee, will take
      the steps necessary to further verify subject property and occupant eligibility.
      The following table provides the subject property eligibility criteria for a
      Mortgage Release transition option. Published May 13, 2026 612 ✓ Subject Property
      Eligibility There are no zoning or HOA rental limitations that would prevent
      a Mortgage Release transition option. If a property inspection or property valuation
      reveals damage to the subject property, the estimated total cost to repair the
      subject property must be less than 10% of its estimated market value (estimated
      “As Is” sales price). Note: If the estimated total cost to repair the subject
      property is between 10% and 15% of its estimated market value, the servicer
      must submit the Mortgage Release transition option to Fannie Mae to obtain prior
      written approval. A subject property with an estimated total cost for repairs
      greater than 15% of the estimated market value is not eligible. The subject
      property does not have any environmental contaminations or pose any potential
      legal risk. The subject property is in compliance with local rules and laws,
      or can be brought into compliance within 30 days. The subject property is not
      within a target area for any corporate, government, or community neighborhood
      stabilization plan which may need the property as part of the plan for purposes
      other than residential. The rental income, if applicable, is anticipated to
      cover ongoing maintenance and management costs. The following table provides
      the occupant eligibility criteria for a Mortgage Release transition option.
      ✓ Occupant Eligibility Income is suﬃcient to cover rental payments of not more
      than 31% of the borrower/tenant’s monthly gross income. Note: If the current
      market rent, which will be set by Fannie Mae’s property management company,
      is greater than 31% of the borrower/ tenant''s monthly gross income, a lease
      agreement will not be oﬀered. For the Mortgage Release three-month transition
      option with no rent payment required, this income requirement is not applicable.
      Published May 13, 2026 613 ✓ Occupant Eligibility The occupant agrees to • be
      responsible for regular maintenance, • keep the property in good condition,
      and • permit marketing of the property for sale. Note: For the Mortgage Release
      three-month transition option with no rent payment required, the borrower must
      agree to allow the property to be marketed for sale beginning on the 30th day
      of the use and occupancy agreement. The number of occupants is appropriate for
      the home and in compliance with local laws and HOA rules, if applicable. If
      pets are present, renter''s insurance is obtained, if required. The occupants
      signing the lease agreement must agree to a credit review, and all residents
      over 18 years of age must have an acceptable background check, including receiving
      clearance from OFAC. There are no signs or reports of illegal activities conducted
      at the property. The property is to be used as a principal residence. Fannie
      Mae will inform the servicer whether or not a lease was ﬁnalized and whether
      the Mortgage Release is contingent on the property being vacant. The servicer
      must then ﬁnalize the Mortgage Release accordingly. Note: The servicer must
      notify Fannie Mae if a Mortgage Release is not successfully executed for any
      case that was approved for Mortgage Release transition options consideration.
      The servicer must use the Mortgage Release Program Cancellation Form (Form 188).
      Prior to acceptance of a Mortgage Release in connection with the Mortgage Release
      transition options, the servicer must ensure that the borrowers execute (in
      favor of Fannie Mae, the servicer, and their agents) a general release of all
      claims arising prior to the acceptance of the Mortgage Release which relate
      in any way to the mortgage loan or the subject property. For non-delegated cases,
      where Fannie Mae makes the decision, the servicer has ﬁve weeks from Fannie
      Mae’s approval of the Mortgage Release to complete the transaction to allow
      enough time for the lease approval process. Delegated servicers that might have
      a shorter processing time frame are instructed to allow time for the lease approval
      process when the borrower states an interest in the Mortgage Release transition
      options. Recent Related Announcements Published May 13, 2026 614 The table below
      provides references to recently issued Announcements that are related to this
      topic. Announcements Issue Date Announcement SVC-2023-03 May 10, 2023 Announcement
      SVC-2022-04 June 8, 2022 Announcement SVC-2021-03 June 9, 2021 Announcement
      SVC-2020-02 June 10, 2020'
  judgment: false
