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Fannie and Freddie: Borrowers eligible for refinance or purchase while in forbearance
On May 19, the FHFA announced that Fannie Mae and Freddie Mac issued temporary guidance that would allow borrowers who are in forbearance, or have recently ended forbearance, to be eligible to refinance or purchase a new home. According to Fannie Mae Lender Letter LL-2020-03 and Freddie Mac Bulletin 2020-17, borrowers are eligible to purchase a new home or refinance their mortgage if they are current on their mortgage—defined as having “made all mortgage payments due in the month prior to the note date of the new loan transaction by no later than the last business day of that month”—or if the mortgage is currently in a loss mitigation solution (the borrower must have made at least three timely payments as of the note date of the new transaction). Lenders are required to apply the guidance to loans with application dates on or after June 2, but may apply them immediately.
On the same day, Fannie Mae also issued an update to LL-2020-06, which extends the effective date for eligible loans in forbearance due to a Covid-19 hardship to June 30 with delivery to Fannie Mae by August 31.
Freddie Mac issues bulletin on servicing relating to Covid-19
On May 14, Freddie Mac issued Bulletin 2020-16 providing temporary servicing guidance related to Covid-19. The bulletin provides clarity in the following areas: (i) the extension of the Covid-19 foreclosure moratorium announced in Bulletins 2020-4 and 2020-10 until June 30, (ii) property inspections for delinquent mortgages, (iii) default reporting for mortgages impacted by Covid-19, (iv) property valuations for short sales and deeds-in-lieu of foreclosure, (v) Home Affordable Modification Program (HAMP) good standing for mortgages on a Covid-19 forbearance plan, repayment plan, or Covid-19 payment deferral, and (vi) the National Emergency Declaration effective date.
Fannie Mae updates guidance on payment deferrals and loan modifications after a forbearance and extends foreclosure moratorium
On May 14, Fannie Mae updated Lender Letter 2020-02 to provide updates regarding the reclassification process for certain pooled loans in response to the CARES Act. The letter (previously discussed here) also provides guidance on evaluating a borrower for a payment deferral or mortgage loan modification after a forbearance and extend its foreclosure moratorium until June 30. The guidance on post-forbearance evaluations provides certain flexibility with respect to achieving quality right party contact (QRPC). Fannie Mae has eliminated the requirement that the servicer determine the occupancy status of the property and will consider the servicer as having achieved QRPC for purposes of evaluating a borrower who has experienced a hardship arising from Covid-19 if the servicer takes certain steps. Fannie Mae also extended the availability of certain post-disaster mortgage loan modifications in the Servicing Guide to borrowers impacted by Covid-19. The letter also extends Fannie Mae’s suspension of foreclosure-related activities until June 30.
Fannie and Freddie offer new Covid-19 payment deferral
On May 13, the FHFA, Fannie Mae, and Freddie Mac, announced a new Covid-19 payment deferral option that will be available starting on July 1. According to Fannie Mae Lender Letter LL-2020-07 and Freddie Mac Bulletin 2020-15, the new Covid-19 payment deferral is “a new workout option specifically designed 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. Specifically, the servicer is required to confirm that the borrower is now able to continue making the full monthly contractual payment of their loan but is unable to reinstate the mortgage loan or afford a repayment plan to cure the previous delinquency. 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 (which includes up to 12 months of past-due principal and interest payments; out-of-pocket escrow advances paid to third parties; and servicing advances paid to third parties in the ordinary course of business) must be deferred as a non-interest bearing balance, due and payable at liquidation, refinance, or maturity. Among other requirements detailed by the Lender Letter and Bulletin, servicers must report the loan in accordance with the Fair Credit Reporting Act, as amended by the CARES Act, which requires lenders to report as current any loans subject to Covid-19 forbearance or other accommodation. Additionally, servicers must waive all late charges, penalties, and fees upon completing the Covid-19 payment deferral.
In addition to the new Covid-19 payment deferral, borrowers will continue to have other hardship options including repayment plans, lump-sum repayment, or permanent modification. Servicers must begin evaluating borrowers for the Covid-19 payment deferral beginning July 1.
Federal agencies launch joint housing assistance website
On May 12, the CFPB, the Federal Housing Finance Agency (FHFA), and the Department of Housing and Urban Development (HUD) announced a new mortgage and housing assistance website, which consolidates the CARES Act mortgage and rent relief protections, tips to avoid Covid-19 related scams, and tools for homeowners and renters to determine if their property is federally backed. The release details the steps the CFPB has taken in response to the Covid-19 pandemic, including informing consumers of their protections under newly created programs and releasing a policy statement concerning the responsibilities of credit reporting companies and furnishers. The release also outlines efforts that FHFA’s regulated entities and HUD have taken to address the national emergency, including forbearance options for homeowners and eviction protections for renters who live in multifamily properties that are backed by Fannie Mae or Freddie Mac.
Agencies jointly release fact sheets for services and consumers regarding CARES Act forbearance
The Federal Housing Administration, the Department of Veterans Affairs, and the Rural Housing Service have jointly issued fact sheets for servicers and for consumers outlining certain requirements and obligations under CARES Act mortgage payment forbearance. The fact sheet for servicers provides guidance for assisting and educating borrowers and explains that loss mitigation options will vary based on the program under which the loan is insured or guaranteed. The fact sheet for consumers provides guidance on requesting forbearance and information on the forbearance program.
Freddie Mac issues bulletin regarding selling requirements and guidance related to Covid-19
On May 5, Freddie Mac issued Bulletin 2020-14 to Freddie Mac sellers to provide guidance relating to selling requirements in light of Covid-19. The bulletin sets out temporary requirements related to mortgage purchase eligibility and self-reporting requirements for mortgages in Covid-19 related forbearance. It also extends certain previously announced temporary requirements for credit underwriting, and appraisal, condominium project, and power of attorney flexibilities until June 30. Further, Freddie Mac provided guidance and reminders relating to, among other things, furloughs and layoffs, unemployment compensation, and automated income assessment with Loan Product Advisor using tax return data.
Massachusetts regulator updates foreclosure moratorium FAQs
On May 1, the Massachusetts Division of Banks issued updated FAQs regarding Chapter 65 of the Acts of 2020, an April 20 state law establishing a temporary moratorium on certain residential foreclosures. The updated FAQs restate that, until the end of the moratorium, which is currently set to expire on August 18, 2020, lenders cannot charge fees other than those contractually scheduled and calculated as if the borrower made all payments in full and on time. The updates also clarify that the foreclosure and forbearance provisions of Chapter 65 do not apply to residential investment properties, residential properties that are not owner-occupied, and residential properties taken in whole or in part as collateral for a commercial loan.
GSEs to cover servicer advances on mortgages in forbearance
On May 1, Fannie Mae and Freddie Mac filed their first quarter 10-Qs, which included statements clarifying that in the coming months Fannie Mae and Freddie Mac, not loan servicers, will assume responsibility for advances on loans in forbearance that meet certain criteria. Fannie Mae’s 10-Q states that effective August 2020 “after four months of missed borrower payments on a loan…we will make the missed scheduled principal and interest payments…so long as the loan remains in the MBS trust.” As previously covered by InfoBytes, FHFA announced on April 21 that servicers are only obligated to advance principal and interest payments for up to four months on single-family loans. Likewise, Freddie Mac’s 10-Q similarly stated, “we expect to advance significant amounts to cover principal and interest payments to security holders for loans in forbearance in the coming months.”
VA announces new reporting code for Covid-19 forbearance requests
On April 29, the Department of Veterans Affairs announced a new reason for default which will assist the VA in identifying borrowers impacted by Covid-19. The VA replaced the reason “Energy/Environmental Cost” with “National Emergency Declaration” in the Electronic Default Notice (EDN). Servicers should use this new reason for default when reporting the EDN. Effective June 1, 2020, this new reason for default will be accepted prior to the 61st day of delinquency.