by Christy Bieber | Aug. 28, 2020
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No foreclosures or evictions will take place until after the end of the year
Many would-be homeowners have benefited from the low mortgage rates caused by COVID-19 and the pandemic-driven lockdown. Sadly, even as people flock to purchase homes, a lot of current owners are struggling to pay the bills due to financial hardship.
For those who are finding it hard to cover their mortgage payments, Fannie Mae and Freddie Mac have just announced they will provide additional mortgage assistance and relief options, as well as suspending foreclosures and evictions through the end of the year.
Here's what you need to know.
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Fannie Mae and Freddie Mac are government-sponsored entities (GSEs) that purchase mortgages from many lenders throughout America. Visit Fannie Mae and Freddie Mac's loan lookup websites to determine if either of them own your mortgage.
If your mortgage is owned or backed by either of these GSEs, their newly-announced coronavirus relief could help if you're having a hard time.
On August 27, Fannie Mae and Freddie Mac indicated they would extend the temporary moratorium on foreclosures for loans they back to the end of the year. Prior to this announcement, foreclosures were halted only through August 31, 2020.
The GSEs said that those who are having trouble making mortgage payments due to COVID-19 should call their loan servicer to explore options for mortgage assistance. Homeowners may be eligible to pause or reduce payments on their mortgage loans for up to 12-months. And those who put their loans into forbearance will not be subject to any late fees or damage to their credit score.
It is important to be aware, however, that forbearance and foreclosure protections do not absolve you of your responsibility to ultimately pay your loan in full. You cannot be removed from your home now or face late payment penalties if you enter into a forbearance program. But eventually you will be required to become current on your loan.
However, Fannie Mae and Freddie Mac also indicated in its announcement that servicers must work with borrowers coming out of forbearance to help them maintain or reduce monthly payments as needed. Servicers could be required to provide loan modifications to help borrowers who have had to pause payments make them up by repaying their loan over a longer time.
If you have a Fannie Mae or Freddie Mac backed mortgage or live in real estate owned by either entity, you won't have to worry about being removed from your home if you can't pay the bills -- at least until next year. You should take swift action if you are facing financial hardship though, so you can apply for forbearance and potentially become eligible for a subsequent loan modification.
If your mortgage is not backed by either Fannie Mae or Freddie Mac, the GSEs are still providing some assistance. This includes a personalized recovery plan through their Disaster Response Network and help in requesting relief from insurers or loan servicers. Many mortgage lenders who provide loans that are not backed by Fannie Mae are also offering relief of their own, so you should call your loan servicer if you're struggling.
Finally, even those who are current on their mortgages and who can remain that way will be helped by Fannie Mae's actions, as foreclosures can bring down real estate values as well as fray the fabric of neighborhoods.
This action on the part of Fannie Mae and Freddie Mac is good news -- in sharp contrast to their earlier move this month where they attempted to impose a new fee on mortgage refinance loans but had to back off after public outcry.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
The Ascent's in-house mortgages expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn't influence our opinions of products, we do receive compensation from partners whose offers appear here. We're on your side, always. See The Ascent's full advertiser disclosure here.
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