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FHFA: Missed Mortgage Payments Can Be Paid Back at Sale, Refinancing, or Maturity

May 14, 2020 by Marc Rapport
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The federal government continues refining the lifelines it's extending to the troubled housing market through the government-sponsored enterprises (GSEs) that buy trillions of dollars in mortgages and back them in the investor market.

The Federal Housing Finance Agency (FHFA) announced Wednesday, May 13, that Fannie Mae and Freddie Mac are offering payment deferrals as a new option for borrowers whose mortgages are in forbearance because of the coronavirus pandemic.

Mortgage servicers will begin offering the deferral option on July 1. It allows borrowers who are able to resume making normal monthly payments to choose to make up their missed payments when the home is sold or refinanced or the mortgage note matures.

An obligation deferred is an obligation that remains

"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," FHFA Director Mark Calabria said in the announcement.

"This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers," Calabria said. "Borrowers who can pay their mortgage should, because missed payments remain an obligation that will ultimately have to be repaid."

That July 1 date appears to have been chosen because it's approximately when many of the forbearance agreements lenders have granted borrowers will be at or near expiration.

Millions of mortgages could go this route

Nearly 8% of all mortgage loans, or about 4 million of them, are in forbearance, according to this week's survey report from the Mortgage Bankers Association (MBA). That includes 6.1% of all Fannie Mae and Freddie Mac loans, the MBA said.

Forbearance allows the borrower to make reduced or no payments for a set period of time. The FHFA already has said the GSEs will not require lump-sum catchup payments when the individual forbearances end.

Servicers and investors also catch a break

The servicers, meanwhile, have been given their own liquidity lifeline in the form of a four-month limit on how long they have to cover missed payments that pass through them to the GSEs and the holders of the securities-backed mortgages. In addition, the GSEs were given permission to buy loans heading into forbearance.

Real estate investors also got a break when owners of multifamily properties who agreed not to evict tenants unable to pay their rent because of the pandemic were added to the FHFA's forbearance guidelines.

Fannie Mae and Freddie Mac each have web pages that lay out options and offer sources for help for financially struggling homeowners. They also joined with other agencies, including the Consumer Finance Protection Bureau, in launching a joint mortgage and housing assistance website earlier this week.

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