The Federal Housing Finance Agency [1] (FHFA) has announced the revision of treatment of Fannie Mae [2] and Freddie Mac [3] (the GSEs) backed single-family mortgages for which borrowers elected to enter into a COVID-19 forbearance under the GSEs representations and warranties framework.
Under the updated rep and warrant policies, loans for which borrowers elected a COVID-19 forbearance will be treated similarly to loans for which borrowers obtained forbearance due to a natural disaster. As a result, loans with a COVID-19 forbearance will remain eligible for certain rep and warrant relief based on the borrower's payment history over the first 36 months following origination.
"Forbearance was an invaluable tool for borrowers experiencing financial hardship due to the COVID-19 pandemic," said FHFA Director Sandra L. Thompson [4]. "Servicers went to great lengths to implement forbearance quickly amid a national emergency, and the loans they service should not be subject to greater repurchase risk simply because a borrower was impacted by the pandemic."
The Enterprises' existing rep and warrant policies with respect to natural disasters allow the time the borrower is in forbearance to be included when demonstrating a satisfactory payment history in the first 36 months following origination. These policies will now extend to loans for which borrowers elected a COVID-19 forbearance.
These updates will be implemented beginning October 31, 2023.