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The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac are making new payment deferral options available for borrowers in COVID-19-related forbearance plans.
The plan allows homeowners, who are able to return to making their normal monthly mortgage payments, the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity.
“For homeowners in forbearance due to COVID-19, payment deferral allows them to make up missed forbearance payments when they sell their home or refinance,” said FHFA Director Dr. Mark A. Calabria. “This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers. Borrowers who can pay their mortgage should because missed payments remain an obligation that will ultimately have to be repaid.”
Servicers will begin offering deferral payment options beginning July 1, 2020.
The FHFA and the GSEs, in response to COVID-19, allowed borrowers facing financial hardship to go into mortgage forbearance programs—a pause or reduction in their monthly payments.
As of May 7, nearly 4.1 million homeowners are in forbearance plans, representing 7.7% of all active mortgages, according to the latest forbearance data from Black Knight.
They account for $890 billion in unpaid principal and include 6.4% of all GSE-backed loans and 11% of all FHA/VA loans. At today’s level, mortgage servicers need to advance a combined $4.5 billion/month to holders of government-backed mortgage securities on COVID-19-related forbearances. Another $2.1 billion in lost funds will be faced each month by those with portfolio-held or privately securitized mortgages (some 7.2% of these loans are in forbearance as well).
This policy on forbearance plans comes after the FHFA extended several loan origination flexibilities offered by the GSEs. These flexibilities are extended until at least June 30 and include:
- Alternative appraisals on purchase and rate term refinance loans;
- Alternative methods for verifying employment before loan closing;
- Flexibility for borrowers to provide documentation (rather than requiring an inspection) to allow renovation disbursements (draws); and
- Expanding the use of the power of attorney and remote online notarizations to assist with loan closings.
Last month, the FHFA announced that borrowers in forbearance plans with a GSE-backed mortgage are not required to repay the missed payments in one lump sum.
“During this national health emergency, no one should be worried about losing their home," said Calabria. “No lump sum is required at the end of a borrower's forbearance plan for Enterprise-backed mortgages. To help homeowners navigate the forbearance process, FHFA partnered with CFPB on the Borrower Protection Program to provide homeowners accurate information about forbearance and address concerns noted in some consumer complaints. While today's statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all mortgage lenders to adopt a similar approach."
