Operations,
Asset Management
and
Loss Mitigation
Date:
August 29, 2007
To:
Fannie Mae Lenders
From:
Bonnie Collins, Senior Vice President – HCD Operations
Caroline Blakely, Vice President – HCD Credit Risk Management
Richard Wolf, Vice President – Flow Channel
Larry LaGrone, Director Loss Mitigation
Subject:
DUS Lender Memo 07-10 (CORRECTED)
3MaxExpress Lender Memo 07-07 (CORRECTED)
Termination of 3MaxExpressSM Streamlined Mortgage Loan Manual for all
Servicing Functions; New Multifamily Master Trust Agreement for MBS
and DMBS, and Revised Servicing Requirements
(CORRECTED)
HIGHLIGHTS
Announcing:
o Termination of the 3MaxExpressSM Streamlined Mortgage Loan
Manual (“3Max”)for all servicing functions, including asset
management and reporting and remitting, for all Mortgages (Cash or
MBS)
o A new Multifamily Master Trust Agreement for fixed and adjustablerate MBS Pools and non-interest-bearing DMBS Pools
o Servicing clarifications for Mortgage Loans, whether owned by Fannie
Mae or in a Fannie Mae DUS MBS or DMBS or 3Max MBS
o Multifamily Master Trust Agreement Training scheduled for September
(further information will be provided)
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TERMINATION OF THE 3MAX MANUAL FOR SERVICING FUNCTIONS
Pursuant to 3Max Lender Memo 07-02, dated February 22, 2007, Fannie Mae
announced that certain provisions of the DUS Guide were applicable to mortgage loans
originated and serviced under the 3Max Manual. That Lender Memo incorporated by
reference the DUS Guide’s Part V, Chapters 5 and 6 (Nonperforming Loans and
Watchlist, respectively), all of Part VII (Loss Sharing) and Part XI, Chapter 10
(MBS/DUS Nonperforming Loans) into the 3Max Manual. As Fannie Mae implements a
new Trust Agreement (defined and discussed below) and continues its work in making
its processes more streamlined and industry standard, as of the Effective Date (defined
below) of this Lender Memo we are terminating the application and use of certain
portions of the 3Max Manual as follows:
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3Max Lender Memo 07-02
Part Five (Accounting), and
Part Six (Servicing and Asset Management).
All 3Max Loans, from and after the Effective Date of this Lender Memo, will be governed
by the DUS Guide and the applicable Lender Contracts for all loss sharing, accounting
and servicing and asset management functions (for performing and nonperforming
Mortgage Loans), whether purchased by Fannie Mae for cash or MBS. Notwithstanding
the requirements currently specified in the DUS Guide for these functions, any servicing
forms associated with 3Max Loans and the servicing enhancements announced in
3Max Lender Memo 07-04 dated May 29, 2007, remain applicable for 3Max Loans. All
references to “DUS” while reading the DUS Guide for the purpose of servicing 3Max
Loans should be interpreted as if such reference did not exist.
DUS 3Max and MFlex Lenders continue to be able to utilize the small loan
enhancements announced in 3Max Lender Memo 07-04 in conjunction with any
contractual variances that may have been previously negotiated with Fannie Mae.
NEW MULTIFAMILY MASTER TRUST AGREEMENT
Introduction
Fannie Mae is pleased to announce the introduction of a Multifamily Master Trust
Agreement (the "Trust Agreement") that will be used for both fixed and adjustable-rate
MBS pools and non-interest bearing DMBS pools issued for all business channels
within HCD. We are also announcing servicing clarifications and requirements that will
generally apply to all Mortgage Loans, whether such Mortgage Loans are owned by
Fannie Mae or held in a Fannie Mae MBS or DMBS or 3Max MBS, and regardless of
whether the security is based on the previous Fixed-Rate or ARM Trust Indenture
(either or both, the "Trust Indenture") or the new Trust Agreement.
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Trust Agreement and Effective Date of Trust Agreement
The effective date for the Trust Agreement will be September 1, 2007. All DUS MBS or
DMBS or 3Max MBS issued on or after that date will be issued under the new Trust
Agreement.
A Trust Indenture or Trust Agreement is the legal document that contains the terms and
conditions of an MBS trust and describes the roles of various parties relating to each
trust. Our Trust Indentures have been in use for many years and have relied on the
DUS or 3Max Guides for key servicing requirements. Accordingly, we have been
working on a comprehensive review of our MBS documents and related servicing
requirements. As is the case under the existing Trust Indentures, under the new Trust
Agreement, Fannie Mae acts as each Trust’s master servicer, and the servicers under
contract with Fannie Mae will service MBS and DMBS Mortgage Loans to Fannie Mae
specifications, including the delegation of certain administrative decisions to the
servicer. The new Trust Agreement accomplishes several objectives:


It provides certain key servicing requirements;
It more clearly describes Fannie Mae's roles as issuer, master servicer,
guarantor, and trustee;
 It clarifies the servicer's role as the "Primary Servicer;" and
 Overall, it better reflects current market practices.
The executed Trust Agreement is available on our Web site, www.fanniemae.com.
Updated Multifamily MBS Prospectus and Multifamily DMBS Prospectus also will be
available through that site on or before September 1, 2007.
Servicing Requirements
We are clarifying certain servicing-related policies to ensure that all Mortgage Loans,
whether held in Fannie Mae’s portfolio or in MBS and DMBS pools, are serviced in a
consistent manner. Some of the following changes and clarifications addressed in this
Lender Memo include:
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Eligible Custodial Depositories
Funds in Custodial Accounts
Full Payoffs
Forbearance
Foreclosure
Due-on-Transfer Clauses
Mortgage Loan Modifications
Mandatory Repurchase of MBS Mortgage Loans
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DUS Guide Changes
Attached to this Lender Memo is Attachment 1 – DUS Guide Revisions that reflect
changes to the DUS Guide. The changes shown are intended to clarify certain
servicing duties and establish consistency between the Guides and the Trust
Agreement. In most instances, the revised Guide sections are restated in their entirety
in Attachment 1. If a section is entirely new, that section has been marked with the
reference “NEW”.
Lenders will find that certain Guide provisions are more restrictive than corresponding
provisions contained in the Trust Agreement. Fannie Mae’s election to make the
Guides more restrictive was purposeful. In developing the Trust Agreement to comply
with legal, securities and accounting constraints governing grantor trusts and to
anticipate future needs, Fannie Mae drafted the Trust Agreement broadly in order to
achieve as much flexibility as possible to accommodate future products and
transactions within those constraints. The Lenders’ servicing obligations are outlined in
and governed by the Loan Documents, the DUS Guide and any applicable Lender
Contract, as those servicing obligations may have been modified in the Lender’s
Contract.
Roles of Fannie Mae and Servicers
The Trust Agreement clarifies the relationships between Fannie Mae and
servicers of MBS and DMBS Mortgage Loans. Generally, the Trust Agreement
provides that:

Mortgage Loans and the proceeds of those Mortgage Loans are held by
Fannie Mae as trustee for the benefit of the MBS or DMBS Trusts and their
beneficial owners, the MBS or DMBS investors; the servicer is responsible for
servicing MBS or DMBS Mortgage Loans for the MBS or DMBS Trust that
owns the related Mortgage Loans.

Fannie Mae is the master servicer for the MBS or DMBS Trusts, and, in that
capacity, contracts with the Lender or other servicer as the primary servicer
and has the responsibility for assuring that servicing is performed in
accordance with the Trust Agreement or the Trust Indenture, as applicable.

Daily servicing operations are performed by primary servicers pursuant to the
Mortgage Selling and Servicing Contracts, the Guides, the DUS Agreements,
any applicable Pool Purchase Contract or other agreement between the
Lender, as servicer, and Fannie Mae applicable to the purchase and servicing
of loans in MBS or DMBS.
By servicing MBS and DMBS Mortgage Loans, the Lender or other servicer agrees that
(1) a successor to Fannie Mae as master servicer for the MBS Trusts automatically will
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succeed to the rights of Fannie Mae under any Servicing Contract and will have
authority to enforce the terms and conditions of the applicable Servicing Contract,
including the authority to terminate the servicer (in accordance with the terms of the
Servicing Contract) and to appoint a replacement servicer, and (2) the trustee (on behalf
of the Trusts) and Fannie Mae as guarantor are third-party beneficiaries of the Servicing
Contract between that servicer and Fannie Mae, with the authority to enforce such
contract.
Base MBS Prospectus and DMBS Prospectus and Tier Dropping
With the publication of the Trust Agreement, new base MBS Prospectus and DMBS
Prospectus have also been prepared and will be published on our Web site,
www.fanniemae.com, on or before September 1, 2007.
Under the new Trust Agreement, MBS issued on or after September 1, 2007 are free
from the tier-dropping restriction previously in place with respect to Tier 3 and Tier 4
loans. Tier 2 loans remain ineligible for tier dropping. Use of Form 4077-TD
(Modification to Instrument, Supplemental Liens – Tier Dropping) is no longer required
for MBS deliveries. Any Mortgage Loan in a MBS having an issue date prior to
September 1, 2007, is still subject to tier-dropping restrictions. Tier dropping restrictions
with respect to cash deliveries are unchanged.
Disclosing Non-Public Information
From time to time Lenders may be contacted directly by investors of Fannie Mae MBS
and/or DMBS for information regarding the performance of Mortgage Loans, Properties,
Borrowers, or Key Principals. Lenders are reminded that providing information to
investors may violate certain securities laws. To avoid that risk and remain in
compliance with Fannie Mae servicing requirements, Lenders are not permitted to
provide any information to investors of Fannie Mae MBS or DMBS that is not already
available on Fannie Mae’s web site and must immediately refer any such inquiries to its
Fannie Mae representative for a response.
EFFECTIVE DATE AND TRAINING
Except for adherence to the Custodial Account requirements, the Effective Date of this
Lender Memo is September 1, 2007. For Custodial Account requirements, the Effective
Date is December 31, 2007.
Training sessions regarding the requirements for Fannie Mae MBS or DMBS will occur
in September. Additional information regarding the scheduling of the training sessions
will be provided at a later date.
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Servicers should contact:
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Bob Schmid, HCD Operations at 301-204-8546
(Robert_m_schmid@fanniemae.com),
Michael Dick, HCD Asset Management at 301-204-8008
(Michael_w_dick@fanniemae.com),
Doug Higgs, HCD Operations at 301-204-8020
(Douglas_g_higgs@fanniemae.com),
Larry LaGrone, HCD Loss Mitigation at 972-773-7948
(Larry_lagrone@fanniemae.com), or
Rick Wolf, HCD Small Loans at 215-575-1576
(Richard_w_wolf@fanniemae.com)
if they have any questions on the information contained in this Lender Memo or its
attachment.
Attachment 1 – DUS Guide Changes
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