No Lump Sum Repayment Required For GSE Loans In Forbearance
April 27, 2020
The Federal Housing Finance Agency is doubling down on its message that borrowers in forbearance have other repayment options and are not required to repay their Freddie Mac and Fannie Mae-backed mortgages in forbearance in one lump sum. This is yet another notice as Freddie Mac's March announcement highlighted that full repayment was merely one of a few options that borrowers have, not the only one.
“During this national health emergency, no one should be worried about losing their home," said FHFA Director Mark Calabria. “No lump sum is required at the end of a borrower's forbearance plan for Enterprise-backed mortgages. To help homeowners navigate the forbearance process, FHFA partnered with CFPB on the Borrower Protection Program to provide homeowners accurate information about forbearance and address concerns noted in some consumer complaints. While today's statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all mortgage lenders to adopt a similar approach."
In the repayment process, a borrower will choose to either have their monthly payment reduced or paused. The mortgage servicer will then contact the borrower 30 days before the end of the forbearance period to check the status of the hardship the borrower is facing. If the hardship has been resolved, the servicer will work with the borrower to either set up a repayment plan, modify the loan so that the borrowers payments are added to the end of the mortgage or set up a modification that reduces the borrower's monthly mortgage payment.
“Simply put, if you are a homeowner seeking forbearance and Freddie Mac owns your loan, you are never required to make up missed payments in a lump sum," said Freddie Mac CEO David Brickman. "Our policies offer a number of options to bring borrowers current, including repayment plans, resuming normal payments or lowering your monthly payment through a modification. We encourage homeowners facing hardship to work with their servicer to identify the plan that’s appropriate for their unique situation."
Fannie Mae CEO Hugh R. Frater echoed those sentiments.
"We want every homeowner who is struggling because of this pandemic to know they have mortgage options," said Frater. "We do not require a homeowner to repay missed payments all at once at the end of the forbearance plan, unless they choose to do so. We encourage everyone to get the facts–call your mortgage servicer, or go to Fannie Mae's KnowYourOptions.com Web site, which provides a one-stop overview of the various options available to homeowners and renters who might need help due to COVID-19."
David H. Stevens, CEO of Mountain Lake Consulting Inc., said: “Messages like this are important and go a long way to settle concerns of homeowners as they wonder how they might have to repay as much as six months or perhaps a year of unpaid mortgage payments.”
David Luna, president of Mortgage Educators and Compliance, stated: "With all the misinformation in the industry about what is a 'Forbearance' or 'Deferred' loan, it was refreshing to hear accurate information from Director Calabria. With the 'No Lump Sum' payment it should alleviate borrowers minds about: What happens during and after forbearance? Missed payments can be made up over time and there will be no late fees charged during forbearance. If the borrower has the resources and can make a lump sum payment after forbearance good, but it will not be required. If a longer, more permanent solution is needed, a loan modification may be made."
Faith Schwartz, president of Housing Finance Strategies, commented: "This should be shouted from the rooftops! Consumers who lose their jobs or are underemployed and may need three-, six- or 12-months forbearance, are not going to be able to repay in a lump sum. It is impractical to think they will have the resources to do so or they would not be in the forbearance. That said, repaying the amount is required. I applaud the FHFA, Fannie Mae and Freddie Mac for the overdue announcement that borrowers will have the option to modify and defer payments to the back end if they can resume their standard payments after forbearance. We do not need unnecessary hardship further placed on borrowers if they have been displaced by the pandemic through no fault of their own."
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