B2-1.5-05, Principal Curtailments (11/03/2021)

A principal curtailment is the application of funds that are used to reduce the unpaid principal balance of the mortgage loan. Fannie Mae permits certain curtailments prior to loan delivery provided that the delivery data reflects the curtailment as described below.

Acceptable Curtailments

Fannie Mae permits curtailments for the following reasons:

Lenders must apply these curtailments prior to delivery of the loan to Fannie Mae. Such curtailments may not be held until after whole loan delivery or for application in the month subsequent to issuance of an MBS. Curtailments received after loan delivery must be applied in accordance with the Servicing Guide.

Documentation

If the curtailment is made at the time of closing, the amount must be clearly documented on the settlement statement. If the curtailment is applied after closing, but before delivery, the mortgage loan file (or servicing file) must be documented with the amount of the curtailment and the reason or source of the curtailment (for example, lender refund or borrower-initiated), and include any modification agreement used to reduce the monthly payment following the application of the curtailment.

Delivery Instructions

Refer to the Loan Modifications Job Aid for the delivery of loans impacted by a curtailment applied prior to the delivery of the loan to Fannie Mae.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SEL-2021-10 November 03, 2021

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(Published: September 04 2024)

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