The Federal Housing Finance Agency has announced that Fannie Mae
and Freddie Mac
are making available a new payment deferral option. It allows borrowers who are in forbearance due to COVID-19 and can return to making their normal monthly mortgage payment, the ability to repay their missed payments at the time the home is sold, refinanced or at maturity.
Servicers will begin offering the payment deferral repayment option as of July 1, 2020.
“For homeowners in forbearance due to COVID-19, payment deferral allows them to make up missed forbearance payments when they sell their home or refinance,” said FHFA Director Mark Calabria. “This new forbearance repayment solution responsibly simplifies options for homeowners, while providing an additional tool for mortgage servicers. Borrowers who can pay their mortgage should because missed payments remain an obligation that will ultimately have to be repaid.”
FHFA and the GSEs do not require lump sum repayment at the end of the forbearance. Servicers are required to evaluate borrowers for one of several repayment options, generally referred to as a “hierarchy" of repayment and loan modification options.
Payment deferral is one of the repayment options. It takes the missed mortgage payments and puts them into a payment due at the sale, or refinancing of the home, or the end of the loan. The borrower's monthly mortgage payment will not change. Mortgages that exercise the payment deferral option will remain in Enterprise Mortgage-Backed Securities, subject to the terms of the trust agreements.
“A primary benefit of this option is that a homeowner’s mortgage payment will not change once the forbearance period ends,” said Mortgage Bankers Association President and CEO Robert D. Broeksmit. “MBA has advocated strongly for additional options to assist homeowners, and we appreciate FHFA taking the industry’s feedback in making payment deferrals available. We appreciate the efficiency this process will bring as it benefits borrowers, mortgage servicers, investors and the GSEs.”