By Jeffrey J. Hardiman, Esq.

Brock &Scott, PLLC*

USFN Member (CT, NC, RI, AL, FL, GA, KY, ME, MD, MA, MI, NH, NJ, OH, PA, SC, TN, VT, VA)

Fannie Mae’s updated servicing guide published October 11, 2023[1], in particular, Part F, Chapter F-2, Section F-2-04 (Firm Minimum Requirements) revises some of the requirements of law firms who are Fannie Mae approved to provide “greater flexibility to operate in post-pandemic hybrid and remote work environments.” The new version reduces some of the operational requirements imposed on firms in the prior Servicing Guide, which went unchanged from 2014. The prior version may be found in the Fannie Mae Servicing Guide published December 21, 2022.

The special rules afforded to some states (AK, DC, ID, NH, RI, MT, WV, and WY) were expanded to include the Dakotas, American Samoa, Guam, Puerto Rico, and USVI. While Fannie Mae still expects servicers to prefer firms who have qualifying attorneys who physically reside in those jurisdictions (and devote more than 50% of time in that jurisdiction), servicers may engage firms without resident attorneys in those states as long as the other requirements are met, i.e., they are licensed and in good standing in those jurisdictions and practice law full time.

Previously, firms must have had an appropriately staffed office in each jurisdiction where the firm is retained by Fannie Mae (with the exception of special rule states). The new rule requires that firms have an appropriately equipped office in at least one of the jurisdictions where the firm has been selected and retained, or for which the firm submitted a Servicer Selection Form 200.  An approved office means a brick-and-mortar place of business that is not a place of abode and contains the usual and sundry equipment and facilities to practice law.

Firms must have at least two qualifying attorneys (one with at least eight years of experience in jurisdiction-specific default servicing and the other with at least five years). If the firm does NOT have an office in the jurisdiction, then the two qualifying attorneys must reside in the relevant jurisdiction, be licensed and in good standing, practice law full time, and devote more than 50% of their work in the relevant jurisdiction.

If the firm does have an office in the relevant jurisdiction, then one or both qualifying attorneys may reside outside the jurisdiction, provided that the attorneys ordinarily work at the office, excepting national or regional emergencies, weather-related travel restrictions, or health-related pandemics, or other situations where it is not reasonable for in-office work.

Many firms incurred significant expenses to maintain and staff brick-and-mortar locations outside of their primary location to accommodate the prior requirement. The new rule alleviates at least some of the costs of owning or leasing commercial space to maintain the physical presence. As technology is improved, perhaps the rules for special states will be further expanded, especially for states and regions that have their borders in close proximity.

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USFN e-Update - October