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Financial Services Law Insights and Observations

FHFA: Fannie, Freddie to temporarily buy mortgages in forbearance due to Covid-19

Federal Issues Agency Rule-Making & Guidance FHFA Mortgages Fannie Mae Freddie Mac GSE Forbearance CARES Act Covid-19

Federal Issues

On April 22, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (GSEs) will purchase “certain single-family mortgages in forbearance that meet specific eligibility criteria” for a limited period in an effort to provide liquidity to ensure continued lending. Current policies dictate that the GSEs do not purchase loans that are in forbearance; however, due to the economic effects of Covid-19, FHFA will begin allowing the GSEs to buy certain mortgages that enter forbearance within the first month after loan closing, prior to delivery to the GSEs. The temporary selling requirements in Freddie Mac Bulletin 2020-12 allow lenders to sell to the GSE mortgages in forbearance only on mortgages for home purchases or “no cash-out” mortgage refinances. Further, the mortgages must have note dates between February 1, 2020 and May 31, 2020, the dates of settlement must be after May 1, and the mortgages must not be more than 30 days delinquent. Fannie Mae Lender Letter 2020-06 follows most of the same guidelines provided in the Freddie Mac bulletin, but Fannie Mae will also buy mortgages for limited cash-out refinances. To limit losses, the GSEs will charge sellers loan-level price adjustments of 5 percent for loans to first-time homebuyers, and 7 percent for all others.

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