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Financial Services Law Insights and Observations

Fannie updates Covid-19 payment deferral lender letters

Federal Issues Covid-19 FHFA Fannie Mae Freddie Mac Loan Modification Loss Mitigation Forbearance Mortgages

Federal Issues

On May 27, Fannie Mae issued technical updates to Lender Letter LL-2020-07 and LL-2020-05 to include operational requirements related to reporting and completing a Covid-19 payment deferral, as well as the process for obtaining reimbursement for expenses related to the Covid-19 payment deferral. Among other things, servicers are required to pay any expenses associated with the execution of a Covid-19 payment deferral, such as required notary fees, recording costs, and title costs, but Fannie Mae will reimburse allowable expenses in accordance with F-1-05: Expense Reimbursement, in the Fannie Mae Servicing Guide.

As previously covered by InfoBytes, Fannie Mae and Freddie Mac announced the new Covid-19 payment deferral option to “help borrowers impacted by a hardship related to Covid-19 return their mortgage to a current status after up to 12 months of missed payments.” The new option is for borrowers who (i) are on a Covid-19 related forbearance plan, or (ii) have a resolved financial hardship due to Covid-19. If a borrower is eligible for the Covid-19 payment deferral, the servicer must allow the borrower to resume their contractual monthly payments; however, the delinquency amount must be deferred as a non-interest bearing balance, due and payable at liquidation, refinance, or maturity.

Servicers must begin evaluating borrowers for the Covid-19 payment deferral beginning July 1.

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