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Excerpt from "Federal Issues"

Fannie Mae Announces Changes and Clarifications to Several Servicing Policies. On October 29, Fannie Mae announced changes or clarifications to several of its servicing policies, including the following:

• Retirement of the Payment Reduction Plan (PRP) program. The PRP program, introduced in 2009, was designed to provide a borrower with temporary payment relief while the servicer and borrower worked together to find an appropriate permanent foreclosure prevention solution. Effective December 31, 2010, the PRP program will be retired. All PRPs must be initiated on or before that date and must end by July 1, 2011, or within 6 months of commencement, if earlier. Servicers will continue to report PRP data on a monthly basis and servicer incentives will continue to be paid on eligible PRPs upon the successful completion of a permanent foreclosure prevention alternative.

• Restricting waiver of escrow deposits for certain borrowers. Effective on October 29, a servicer must not grant a request to discontinue escrow requirements for a borrower who has previously defaulted on the related mortgage loan, has a blemished credit history on other credit obligations, or few cash reserves. Additionally, the servicer must establish and assume full responsibility for administering an escrow deposit account in connection with all mortgage modifications in accordance with the mortgage documents and all applicable laws and regulations. The new escrow payment effective date must be the same date as the effective date of the modification, and for loan modifications involving trial payment periods, the effective date shall be the effective date of the trial period.

• Clarification of Pre-filing Mediation Policy for Mortgage Loans in Florida. Fannie Mae is clarifying that, following a successful mediation session for a Florida loan in which the borrower accepts an offer and executes the applicable documents, the servicer must complete all

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