source:
  type: guide
  id: fnma-svc-f-1-19
  authority: Fannie Mae Servicing Guide F-1-19 — Processing a Military Indulgence
  description: Fannie Mae Servicing Guide F-1-19 — Processing a Military Indulgence.
  coverage_tier: operative
obligations:
- id: fnma-svc-f-1-19-full
  canonical_id: fnma-svc-f-1-19-full
  section: Fannie Mae Servicing Guide F-1-19 — Processing a Military Indulgence
  type: do
  tags:
  - regulator-direct
  - fnma
  - servicing-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Servicing Guide F-1-19 — Processing a Military Indulgence
    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-1-19, Processing a Military Indulgence (12/20/2023) Introduction
      This Servicing Guide Procedure contains the following: Determining the Monthly
      Mortgage Payment Amount Determining the Servicing Fee Amount Reporting Military
      Indulgence to Fannie Mae Requesting Reimbursement for Advances Determining the
      Monthly Mortgage Payment Amount The servicer must grant a reduction in the interest
      rate to 6% in accordance with Reducing the Interest Rate in D2-3.4-01, Military
      Indulgence. The two methods for determining monthly mortgage loan payment amounts
      owed for mortgage loans for which the interest rate is reduced to 6% are described
      in the following table. Published May 13, 2026 630 Method Rationale Standard
      Amortization Method and Payments This method is based upon a recalculated amortization
      schedule with interest at the rate of 6% and the actual remaining term of the
      mortgage loan. Interest Subsidy Amortization Method and Payments This method
      is based on the amortization schedule (or schedules, in the case of an ARM)
      that would have applied if the servicemember had remained a civilian. Each new
      payment is calculated as the sum of the next monthly principal installment called
      for by the applicable amortization schedule plus monthly interest at the rate
      of 6% based on the prior period''s scheduled ending UPB (i.e., the principal
      balance scheduled to be outstanding immediately prior to the applicable due
      date). This method results in an amount that increases each month, usually in
      a minimal amount. Accordingly, the servicer must adjust the payment periodically
      (at least annually) to ensure that the payment is suﬃcient to cover, in full,
      both the monthly principal installments called for by the applicable amortization
      schedule and interest accruing at 6%. Fannie Mae requires that payments be applied
      ﬁrst to principal, rather than interest, so that amortization stays on the schedule
      that would have applied if the servicemember had remained a civilian. Failure
      to recalculate the payment periodically will result in a servicemember interest
      payment at less than 6%. The servicer must perform the action in the following
      table in order to advance the LPI date depending upon the mortgage loan type.
      If the mortgage loan was delinquent when the servicemember entered active duty
      status and the mortgage loan is… Then the servicer must... a portfolio mortgage
      loan or a PFP mortgage loan take the following steps: 1. Capitalize the delinquent
      interest by increasing the UPB and advancing the LPI date to bring the mortgage
      loan to a current status. 2. Use this balance to calculate the new monthly payment,
      based on the 6% interest rate and using the standard amortization method. Published
      May 13, 2026 631 If the mortgage loan was delinquent when the servicemember
      entered active duty status and the mortgage loan is… Then the servicer must...
      an MBS mortgage loan take the following steps: 1. Hold the payments collected
      at the recalculated interest rate of 6% as unapplied funds. 2. Apply the funds
      when they are suﬃcient to pay the oldest delinquent installment (P&I) in full,
      with interest at the rate that was in eﬀect when the installment came due. 3.
      Repeat this process until all the delinquent installments have been paid. 4.
      Apply payments to installments that came due after the amount owed was recalculated,
      based on the 6% interest rate and either the standard or the interest subsidy
      amortization method. Fannie Mae, as the mortgage holder, will absorb the cost
      of this interest rate reduction. Note: ARM loans placed under military indulgence
      require special treatment while an eligible servicemember is on active duty.
      Pursuant to the SCRA, the mortgage loan must be treated as a ﬁxed- rate mortgage
      loan bearing interest at 6%, unless the applicable adjustable rate would be
      lower. This occurs with either the standard amortization method or the interest
      subsidy amortization method, in determining payments that come due after the
      date on which the servicemember reports for active U.S. military duty. Any scheduled
      interest rate adjustments that would result in a rate in excess of 6% must be
      forgiven during the period of active duty. However, the servicer must never
      charge the servicemember a higher rate than they would have been charged if
      they had remained a civilian. The servicer must change the installment to reﬂect
      the contractual interest rate for any period after active duty ends in which
      the SCRA requires an interest rate reduction to 6% to either the pre-military
      ﬁxed rate, or the latest applicable interest rate for an ARM loan. This will
      ensure that the servicemember is charged interest at 6% during whatever portion
      of the month they were on active duty. The following table provides requirements
      for recalculating the servicemember’s monthly mortgage loan payment after military
      service. Published May 13, 2026 632 If... And the mortgage loan is... Then the
      servicemember’s monthly mortgage loan payment after service will be... the standard
      amortization method was used a ﬁxed-rate mortgage loan the payment they had
      before the interest rate reduction. an ARM loan calculated by re-amortizing
      the UPB that is scheduled to be outstanding immediately following the last payment
      that is owed at the reduced rate of 6% at the latest applicable interest rate.
      the interest subsidy amortization method was used a ﬁxed-rate mortgage loan
      the payment they had before the interest rate reduction. an ARM loan the full
      payment as calculated and reported to Fannie Mae as of the scheduled interest
      change date that most recently precedes the servicemember’s release from active
      duty. Determining the Servicing Fee Amount The servicer must grant a reduction
      in the interest rate to 6% in accordance with Reducing the Interest Rate in
      D2-3.4-01, Military Indulgence. Once the servicer has reduced the interest rate
      to 6%, it must calculate its servicing fee on the UPB of the mortgage loan at
      the beginning of each month and not use a percentage-of-interest factor to determine
      the fee to ensure that it will continue to receive the same, or nearly the same,
      servicing fee that it would have received had the interest rate not been reduced
      to 6%. Note: With the standard amortization method, there will be a slight diﬀerence
      because principal will amortize faster. Reporting Military Indulgence to Fannie
      Mae The servicer must notify Fannie Mae when it places a mortgage loan under
      military indulgence in accordance with the Servicing Guide. The servicer must
      notify Fannie Mae by completing the actions shown in the following table. Published
      May 13, 2026 633 If the mortgage loan is.... Then the servicer must… a portfolio
      mortgage loan or a PFP mortgage loan • Complete the SCRA Reporting and Disbursement
      Request Form (Form 1022) when the servicer ⚬ reduces the servicemember’s interest
      rate; ⚬ puts other forms of military indulgence into eﬀect that changes the
      servicemember’s payment; ⚬ changes the servicemember’s payment, if the interest
      subsidy amortization method is used; or ⚬ changes the interest rate back to
      its pre-military interest rate (or the applicable adjusted rate, for an ARM);
      and • Send an email with the completed Form 1022 to the Exceptions Transaction
      Management Unit at sailors_and_soldiers@fanniemae.com. Note: The servicer must
      submit Form 1022 no later than the ninth business day of the month. Requests
      received after the ninth business day of the month will be processed the following
      month. an MBS mortgage loan Submit the notiﬁcation via a ﬁle upload on the Fannie
      Mae investor reporting system. Note: The servicer must complete the upload no
      later than the 15th calendar day of the month. Uploads received after the 15th
      calendar day of the month will be processed the following month. If military
      indulgence (in addition to reduction of the interest rate to 6%) is granted
      in connection with a delinquency, the servicer must also report the granting
      of military indulgence in the ﬁrst delinquency status information report it
      transmits to Fannie Mae after the date the additional military indulgence was
      granted. Note: If the mortgage loan is an ARM, the servicer must report through
      Fannie Mae''s investor reporting system a Transaction Code 83: Monthly Rate/Payment
      Change, as each scheduled interest rate adjustment is due. Also see the Investor
      Reporting Manual. Requesting Reimbursement for Advances The servicer may request
      reimbursement for advances made under a military indulgence in accordance with
      the Servicing Guide. The process for requesting reimbursement for advances made
      under a military indulgence varies according to whether the mortgage loan is
      a portfolio mortgage loan or an MBS mortgage loan, as shown in the following
      table. Published May 13, 2026 634 If the mortgage loan is… Then... a portfolio
      mortgage loan Fannie Mae will adjust its investor reporting system records to
      reﬂect the 6% interest rate and new P&I payments (calculated in accordance with
      either the standard method or the interest subsidy method) upon receipt of Form
      1022. The servicer will not have to advance any interest and no request for
      reimbursement is necessary. Note: If the interest subsidy amortization method
      is used, the servicer must notify Fannie Mae by submitting Form 1022 to sailors_and_soldiers@fanniemae.com
      to notify Fannie Mae of any change in the monthly installment while the mortgage
      loan is under military indulgence. a PFP mortgage loan • regardless of remittance
      type, Fannie Mae will not adjust its investor reporting system records. • the
      servicer must submit Form 1022 to sailors_and_soldiers@fanniemae.com by the
      ninth business day in order to request an adjustment be made to the servicer’s
      shortage surplus account for the current month. Note: Requests received after
      the ninth business day will be processed the following month. an MBS mortgage
      loan • regardless of remittance type, Fannie Mae will not adjust its investor
      reporting system records; • the servicer must submit the mortgage loan information
      through Fannie Mae’s investor reporting system; and • once the mortgage loan
      has been submitted through Fannie Mae’s investor reporting system, the servicer
      must only resubmit if ⚬ corrections are needed, ⚬ there is an early release,
      or ⚬ service has been extended. Fannie Mae will continue to make disbursements
      for the amount of the interest rate reduction through the military indulgence
      end date plus one year. The disbursements will be funded two days prior to the
      end of the month in the custodial account that the servicer has assigned for
      military indulgence funds. Once a mortgage loan is reclassiﬁed from the MBS
      pool, the servicer must submit Form 1022 to have the rates updated eﬀective
      the month after the reclassiﬁcation. The servicer’s request for reimbursement
      will also diﬀer based on the type of amortization method used. The following
      table provides additional instructions depending on amortization method. Published
      May 13, 2026 635 If the servicer uses… Then... the standard amortization method
      there will be a discrepancy between Fannie Mae''s records and the servicer''s
      records, not only with respect to the interest rate, but also between principal
      scheduled to be collected from the servicemember versus the principal scheduled
      to be paid to MBS investors. To correct this principal discrepancy, each month
      the servicer must • remit a reconciling principal curtailment in the amount
      of the diﬀerence between the principal scheduled to be applied to the mortgage
      note (which is based on re-amortization with 6% interest over the remaining
      term), compared to the scheduled principal that is due to security holders (which
      is based on the amortization schedule, or schedules in the case of an ARM, that
      would have applied if the servicemember had remained a civilian); Note: Since
      this principal is collected from the mortgagor, it is not necessary to submit
      a reimbursement request for principal to Fannie Mae. (The sum of the interest
      reduction advanced by the servicer and reimbursed by Fannie Mae, plus the reduced
      servicemember payment, is more than the amount that would have been advanced
      to Fannie Mae had the servicemember remained a civilian by an excess amount
      that Fannie Mae applies on its records as the principal curtailment.) • identify
      the principal curtailment on all pool reconciliations; and • report the principal
      curtailment as unscheduled principal during security balance reporting period.
      (No reconciling principal curtailment is needed with the interest subsidy method
      because the principal portion of each monthly servicemember payment is the amount
      speciﬁed by the amortization schedule, or schedules in the case of an ARM, that
      would have applied if the servicemember had remained a civilian.) Note: If the
      servicer fails to report the reconciling principal curtailment at the MBS pool
      level, it will have a pool-to-security balance reconciliation problem. Published
      May 13, 2026 636 If the servicer uses… Then... the interest subsidy method no
      reconciling principal curtailment needs to be reported. The servicer must, however,
      adhere to the following: • apply payments to principal before interest (so that
      amortization stays on the applicable schedule).The amount necessary to cover,
      in full, both the monthly principal installments called for by the applicable
      amortization schedule and the interest accruing at 6% will increase each month,
      although usually by an immaterial amount; and • recalculate the payment at least
      annually, to avoid a material underpayment of interest. Note: Request for reimbursement
      is not required. Fannie Mae is not required to reimburse for interest insofar
      as the payment the servicemember owes is insuﬃcient to pay interest at the rate
      of 6% in full. Recent Related Announcements The table below provides references
      to recently issued Announcements that are related to this topic. Announcements
      Issue Date Announcement SVC-2023-06 December 20, 2023'
  judgment: false
