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FHFA Updates Policy on Single-family Mortgages in Forbearance

The Federal Housing Finance Agency (FHFA) has announced a one-month extension of its temporary policy of allowing the purchase of certain single-family mortgages in forbearance that meet specific eligibility criteria as set by Fannie Mae and Freddie Mac.

The policy, which covered loans originated through Oct. 31, will now encompass loan originations through Nov. 30. The Oct. 31 deadline was also an extension from a previously announced Sept. 30 cutoff date.

Prior to the COVID-19 pandemic, mortgage loans that were either in forbearance or in a state of delinquency were ineligible for delivery under the government-sponsored enterprises’ (GSEs) requirements. In April, when the pandemic was disrupting the economy and millions of Americans were either furloughed or laid off from their jobs, the FHFA announced a temporary policy of allowing certain single-family mortgages in forbearance to be delivered.

“Eligible loans will continue to be priced to mitigate the heightened risk of loss to the Enterprises from said loans,” said the FHFA in a press statement. “These prudential measures also ensure fulfillment of the Enterprises' charter requirements to only purchase loans that meet the purchase standards imposed by private, institutional mortgage investors.”

The FHFA also stated it would continue the Borrower Protection Program with the Consumer Financial Protection Bureau (CFPB) that shares aggregated data on loans that enter forbearance before being delivered to Fannie Mae and Freddie Mac. The FHFA noted this data sharing fulfills its obligation under the Qualified Mortgage Patch that ensures loans sold to ensure that loans sold to the GSEs comply with the intent of Dodd-Frank's ability to repay provisions.

Earlier this week, the FHFA announced that the GSEs would extend several loan origination flexibilities designed to support borrowers impacted by the pandemic from Oct. 31 to Nov. 30. Those flexibilities include alternative appraisals on purchase and rate term refinance loans, alternative methods for documenting income and verifying employment before loan closing, and expanding the use of power of attorney to assist with loan closings.