FHFA Announces Enhanced Payment Deferral Policies for Borrowers

The Federal Housing Finance Agency (FHFA) today announced that Fannie Mae and Freddie Mac (the Enterprises) will enhance their payment deferral policies to allow borrowers facing financial hardship to defer up to six months of mortgage payments. The enhanced payment deferral policies will promote sustainable homeownership and will further support the safety and soundness of the Enterprises.

“The Enterprises completed more than one million COVID-19 payment deferrals during the pandemic, helping borrowers nationwide to stay in their homes,” said FHFA Director Sandra L. Thompson. “Based on the success of the COVID-19 payment deferral, we are making this solution a key part of our standard loss mitigation toolkit that is available to all borrowers with eligible hardships.”

Payment deferral allows borrowers who are able to resolve a financial hardship to keep the same monthly mortgage payment by moving past-due amounts to the end of the loan as a non-interest bearing balance, due and payable at maturity, sale, refinance, or payoff. During the pandemic, the Enterprises’ payment deferral policies were expanded to allow borrowers with COVID-19 hardships to utilize this solution. Given the success of the COVID-19 payment deferral, FHFA and the Enterprises are enhancing the standard payment deferral policies available to borrowers experiencing other eligible hardships.

“MBA commends FHFA for applying lessons learned from the COVID-19 pandemic by making payment deferrals a key part of Fannie Mae’s and Freddie Mac’s loss mitigation toolkit," said Mortgage Bankers Association President and CEO Bob Broeksmit, CMB. "The use of payment deferrals during the pandemic helped struggling borrowers stay in their homes."

Borrowers facing financial hardship should contact their servicer to discuss whether this is an appropriate solution for their unique circumstances. Servicers may offer borrowers one of several solutions to resolve a delinquency, including the enhanced payment deferral, reinstatement, repayment plan, or loan modification, depending on their individual situations.

“MBA recommended in our recent white paper on the future of loss mitigation that FHFA and FHA resolve temporary hardships through payment deferrals and partial claims," said Broeksmit. "Better alignment – regardless of the reason for hardship or who insures or guarantees the loan – will improve the consumer experience and lead to consistency and simplicity when addressing future adverse market conditions, national emergencies, and natural disasters."

Since 2011, FHFA and the Enterprises have worked to develop policies to help servicers better resolve mortgage payment delinquencies with the goal of keeping struggling borrowers in their homes whenever possible, while minimizing losses to the Enterprises and taxpayers.

“We will continue to work with FHFA on efficient, scalable home retention options for distressed borrowers, while protecting taxpayers and ensuring secondary market certainty and liquidity," said Broeksmit.

The Enterprises will work with servicers to implement the enhanced payment deferral policies, with a voluntary adoption date of July 1, 2023, and mandatory adoption by October 1, 2023.

To read the full release, click here.