Fannie Mae Raises Caps on Foreclosure Attorney Fees.

Fannie Mae has announced a policy adjustment raising the maximum allowable legal fees for foreclosure and bankruptcy work and has revised servicer access to the Do Not Send 1099-C list. The fee cap increases are intended to better align allowable compensation with prevailing market rates for legal services that support loss mitigation and enforcement actions, reflecting cost pressures in the legal supply chain. The change is presented as a measure to preserve the viability of foreclosure and bankruptcy processes while maintaining oversight over reasonableness and documentation of attorney billing. At the same time, changes to access and use of the Do Not Send 1099-C list aim to reduce erroneous tax reporting tied to debt cancellation and to sharpen servicer controls around tax form issuance.

Operationally, servicers will need to update policies, vendor contracts, and system parameters to reflect the new fee ceilings and the revised Do Not Send 1099-C access protocols. The adjustments will prompt reviews of budgeting, loss severity modeling, and foreclosure timelines; servicers should also strengthen audit trails and governance to justify fee expenditures and to show compliance with the updated guidance. Investor relations and loan servicing vendors must coordinate on reporting impacts, and counsel may renegotiate engagement terms under the new allowances. Overall, the changes seek to balance fair compensation for legal work, minimize tax-reporting errors, and preserve appropriate safeguards for borrowers and investors.

– Increased legal fee caps: Raises allowable maximums for attorney fees in foreclosure and bankruptcy cases, aiming to reflect current market costs while maintaining fee reasonableness standards.
– Do Not Send 1099-C access update: Alters servicer access to the list used to prevent erroneous issuance of debt-cancellation tax forms, reducing the risk of improper tax reporting.
– Servicer operational impacts: Requires updates to servicer policies, vendor contracts, systems, and budgeting processes to implement the new fee limits and access protocols.
– Compliance and investor considerations: Necessitates strengthened documentation, audit trails, and coordination with investors and counsel to manage financial and regulatory effects.

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