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FHFA extends GSEs’ ability to buy mortgages in forbearance
On November 12, the FHFA announced an extension of a temporary policy related to the Covid-19 pandemic that allows Fannie Mae and Freddie Mac (GSEs) to purchase qualified single-family mortgages in forbearance that meet specific eligibility criteria. The policy is now extended for loans originated through December 31. As previously covered by InfoBytes, in an effort to provide liquidity to ensure continued lending during the Covid-19 pandemic, FHFA is allowing the GSEs to buy certain mortgages that enter forbearance within the first month after loan closing, prior to delivery to the GSEs.
FHFA extends policy allowing GSEs to buy mortgages in forbearance
On October 21, FHFA announced an extension of a temporary policy related to the Covid-19 pandemic that allows Fannie Mae and Freddie Mac (GSEs) to purchase qualified single-family mortgages in forbearance that meet specific eligibility criteria. The policy is now extended for loans originated through November 30. As previously covered by InfoBytes, in an effort to provide liquidity to ensure continued lending during the Covid-19 pandemic, FHFA is allowing the GSEs to buy certain mortgages that enter forbearance within the first month after loan closing, prior to delivery to the GSEs.
The extensions are implemented in updates to Fannie Mae Lender Letter LL-2020-06, and Freddie Mac Guide Bulletin 2020-41.
FHA extends deadline for Covid-19 loss mitigation options
On October 20, FHA announced that homeowners experiencing a Covid-19 financial hardship with FHA-insured mortgages can request an initial forbearance or a Home Equity Conversion Mortgage (HECM) extension through December 31. Specifically, Mortgagee Letter 2020-34 extends the date by which mortgagees must approve the initial Covid-19 forbearance or Covid-19 HECM extension originally provided for in ML 2020-06 and expanded in ML 2020-22 (covered by InfoBytes here and here). FHA notes that due to the continued Covid-19 pandemic and its impact on borrowers around the country, the agency is extending the deadline through December 31 from the original deadline of October 30.
GSEs give more Covid-related guidance
On October 14, Fannie Mae and Freddie Mac (collectively, “GSEs”) clarified that a borrower will not lose any future “pay for performance” HAMP incentives if the borrower: (i) immediately reinstates the mortgage loan upon expiration of the Covid-19-related forbearance plan; or (ii) transitions directly from a Covid-19 related forbearance plan to a repayment plan. The GSEs previously clarified that if a mortgage loan was modified pursuant to a HAMP modification and the borrower remains in good standing, the borrower will not lose any pay for performance incentives if the borrower had a Covid-19 related hardship immediately preceding the Covid-19 payment deferral (covered by InfoBytes here and here). The updates are reflected in Fannie Mae’s Lender Letters LL-2020-02, LL-2020-07, and Freddie Mac’s Guide Bulletin 2020-39.
CSBS discusses CARES Act response in congressional letter
On October 9, the Conference of State Bank Supervisors (CSBS) wrote to the ranking members of the Senate Banking Committee and the House Financial Services Committee with an update on the organization’s efforts regarding the CARES Act and oversight of nonbank mortgage servicers. CSBS notes that state regulators are the primary authority over nonbank mortgage servicers, and during the early stages of the Covid-19 pandemic, the state regulators “identified liquidity as a supervisory priority.” Thus, according to CSBS, state regulators have been actively monitoring liquidity and other business operations by seeking real time data and other updates from nonbank mortgage servicers. Moreover, CSBS discusses the efforts made in response to the CARES Act, including consumer and servicer guidance issued in conjunction with the CFPB (covered by InfoBytes here and here), as well as examination procedure guidance. Lastly, the letter highlights the organization’s recent release of proposed regulatory prudential standards for nonbank mortgage servicers. As previously covered by InfoBytes, the proposal includes baseline standards that would apply to all covered servicers and enhanced standards—covering capital, liquidity, stress testing, and living will/recovery and resolution planning—that would apply to certain larger servicers. CSBS concludes the letter with a commitment for “continued coordination and information exchange with federal agencies.”
Fannie Mae updates Covid-19 Seller FAQs
On October 8, Fannie Mae updated its Covid-19 Seller FAQs to include new guidance covering, among other things, (i) general standards for audited profit and loss statements; (ii) when a mortgage loan is considered to be reinstated; (iii) reusing desktop and exterior-only appraisals for subsequent refinances; and (iv) using credit supplements as a form of due diligence to determine whether a borrower’s existing mortgage payments are current. Additionally, Fannie Mae updated previous questions related to refinancing an existing loan in forbearance and timely payments in certain repayment plans.
HUD OIG: FHA mortgage servicers’ Covid-19 information still misleading
On September 30, the HUD, Office of the Inspector General (HUD OIG) issued a follow-up study examining the information on mortgage loan servicers’ websites about the CARES Act loan forbearance provisions. As previously covered by InfoBytes, in April, HUD OIG issued consumer guidance noting that among the top 30 FHA mortgage servicers, information on forbearance options under the CARES Act was found to be incomplete, outdated, inconsistent, or unclear. On August 11, HUD OIG reviewed the “readily available” Covid-19 pandemic information on the websites of the same top 30 FHA mortgage servicers, noting that some of the servicers still provided misleading forbearance information. Among other things, HUD OIG found that certain mortgage servicers (i) did not offer clear information on the length of the initial forbearance period; (ii) did not make it clear that borrowers could qualify for forbearance extensions after the initial 180 day period; and (iii) did not clearly state that forbearance is an option for borrowers.
FHFA extends Covid-19 flexibilities until October 31
On September 24, the FHFA announced the extension of several loan origination guidelines put in place to assist borrowers during the Covid-19 pandemic. Specifically, FHFA has extended until October 31 existing guidelines related to: (i) GSE purchases of qualified single-family mortgages in forbearance that meet specific eligibility criteria; (ii) alternative appraisal requirements on purchase and rate term refinance loans; (iii) alternative methods for documenting income and verifying employment before loan closing; and (iv) expanding the use of power of attorney to assist with loan closings. The extensions are implemented in updates to Fannie Mae Lender Letters LL-2020-03, LL 2020-04, LL-2020-06, and Freddie Mac Guide Bulletin 2020-37.
Fannie Mae updates Covid-19 selling FAQs
On September 17, Fannie Mae updated its Covid-19 FAQs for sellers to include a new question about whether federal student loan payments that are placed in a Covid-related forbearance should count towards a borrower’s debt-to-income ratio. Additionally, Fannie Mae updated previous questions covering the purchase of loans that are in forbearance, including whether a lender owes the loan level pricing adjustment (LLPA). Specifically, the FAQs state that if a forbearance begins any time on the sale date of the loan, lenders owe the LLPA to Fannie Mae.
VA issues circular on loss mitigation options for CARES Act forbearance cases
On September 14, the Department of Veterans Affairs issued Circular 26-20-33, which clarifies whether, due to the impact of Covid-19, servicers may offer deferment as a Covid-19 loss mitigation option. Deferment may be used if the veteran is able to resume making monthly payment as scheduled under the loan contract after the conclusion of the forbearance period. However, for the VA’s purposes, servicers do not need to, and should not, enter into a modification agreement that modifies the terms of the existing loan for the purpose of applying a deferment. To accommodate the deferment option, the VA has temporarily waived the usual requirement that the final installment on any loan not be in excess of two times the average of the preceding installments. This waiver applies only where the servicer offers a deferment as a Covid-19 loss mitigation option to a borrower who requested CARES Act forbearance, among other conditions in the circular. The circular is rescinded October 1, 2021.