The Federal Housing Finance Agency (FHFA) announced on May 14 that Fannie Mae and Freddie Mac (the GSEs) are extending their moratorium on foreclosures and evictions until at least June 30, 2020. We had discussed the original moratorium, which was set to expire on May 17, in a previous blog post. The foreclosure moratorium applies to GSE-backed, single-family mortgages only.
Separately, the day before, the FHFA announced a new payment deferral option for borrowers with a financial hardship that have been able to receive forbearance due to the coronavirus (COVID-19) pandemic. Specifically, such borrowers who are able to return to making their normal monthly mortgage payment will be provided the ability to repay their missed payments at the time the home is sold, refinanced, or upon loan maturity. The borrower's monthly mortgage payment will not change. Mortgages that exercise the payment deferral option will remain in GSE mortgage-backed securities (MBS), subject to the terms of the trust agreements. Mortgage servicers will begin offering the payment deferral repayment option starting July 1, 2020.
All borrowers receiving forbearance due to the COVID-19 pandemic ultimately will still be required to pay those missed mortgage payments. Servicers are required to evaluate borrowers for one of several repayment options, generally referred to as an “hierarchy" of repayment and loan modification options. The option to defer repayment into a payment due at the sale or refinancing of the home, or the end of the loan, is among several repayment options that will be offered to borrowers by their mortgage servicers. Other borrower options may include reinstatement, repayment plan, or loan modifications based on their individual situations. FHFA and the GSEs do not require lump sum repayment at the end of the forbearance.
We discussed previous steps that the FHFA was taking in response to the COVID-19 pandemic in previous blog posts. For more information about what servicers should know about managing COVID-19 mortgage loan forbearances, please see our recent LawFlash. Visit our Coronavirus COVID-19 resource page for more information on COVID-19 and other helpful industry resources.
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