Fannie Mae Provides Guidance Regarding Chicago Vacant Property Ordinance and Payment of Homeowners’ Association Dues and Condo Assessments

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On April 11, Fannie Mae published Servicing Guide Lender Letter LL-2012-04, which follows up on a previous notice regarding the City of Chicago’s (the City) vacant property ordinance. Effective May 1, 2012, servicers will be required to submit expense reimbursement requests using the Cash Disbursement Request and updated expense designations for all expenses related to the ordinance that are not otherwise required by the Servicing Guide. The Letter attaches a list of the expense designations. Fannie Mae reminds servicers that payments to the City in connection with the ordinance must be made “under protest” by sending a written communication to the City with the registration fee. Further, (i) all ordinance-related expenses must be submitted to Fannie Mae within 10 business days of the date they are paid by the servicer, (ii) ordinance-related expenses incurred from November 19, 2011 through April 30, 2012 must be submitted for reimbursement using the new expense categories no later than May 31, 2012, (iii) servicers will not be reimbursed for any penalties, fines, expenses or interest assessed by the City for failure to comply with the ordinance, and (iv) servicers must submit a request for pre-approval for ordinance expenses that exceed the allowable limits on or after May 1, 2012.

Also on April 11, Fannie Mae published Servicing Guide Announcement SVC-2012-05 to provide guidance regarding payment of homeowners’ association (HOA) dues and condo assessments. Effective July 1, 2012, servicers must ensure that any priority liens for delinquent HOA dues and assessments on acquired properties are cleared immediately, but no later than 30 days, after the foreclosure sale or acceptance of a deed-in-lieu of foreclosure. The Announcement also revises the reimbursement policy to align with the amount a servicer must pay to protect the lien position and ensure properties are clear of any liens for HOA dues and condo assessments. The Announcement further reminds servicers of their responsibility to continue (i) advancing funds to pay HOA dues and property taxes as they become due following a foreclosure sale and (ii) performing certain property management duties.