The Federal Housing Finance Agency (FHFA) this week announced that Fannie Mae and Freddie Mac will enhance their payment deferral policies to allow borrowers facing financial hardship to defer up to six months of mortgage payments.
The enhanced payment deferral policies will promote sustainable homeownership and further support the safety and soundness of the government-sponsored enterprises, the agency said.
“The enterprises completed more than 1 million COVID-19 payment deferrals during the pandemic, helping borrowers nationwide to stay in their homes,” FHFA Director Sandra L. Thompson said. “Based on the success of the COVID-19 payment deferral, we are making this solution a key part of our standard loss-mitigation toolkit that is available to all borrowers with eligible hardships.”
Payment deferral allows borrowers who are able to resolve a financial hardship to keep the same monthly mortgage payment by moving past-due amounts to the end of the loan as a non-interest bearing balance, due and payable at maturity, sale, refinance, or payoff, the FHFA said.
During the pandemic, the enterprises’ payment-deferral policies were expanded to allow borrowers with COVID-19 hardships to use this solution. Given the success of the COVID-19 payment deferral, FHFA and the enterprises are enhancing the standard payment-deferral policies available to borrowers experiencing other eligible hardships.
Borrowers facing financial hardship should contact their servicer to discuss whether this is an appropriate solution for their unique circumstances, FHFA said. Servicers may offer borrowers one of several solutions to resolve a delinquency depending on their individual situations, including:
- The enhanced payment deferral,
- Reinstatement,
- Repayment plan, or
- Loan modification.
Since 2011, FHFA and the enterprises have worked to develop policies to help servicers better resolve mortgage payment delinquencies, with the goal of keeping struggling borrowers in their homes whenever possible while minimizing losses to the enterprises and taxpayers.
Fannie Mae and Freddie Mac will work with servicers to implement the enhanced payment-deferral policies, with a voluntary adoption date of July 1, and mandatory adoption by October 1, FHFA said.
The Mortgage Bankers Association (MBA) praised the decision.
“MBA commends FHFA for applying lessons learned from the COVID-19 pandemic by making payment deferrals a key part of Fannie Mae’s and Freddie Mac’s loss mitigation toolkit,” said MBA President and CEO Bob Broeksmit. “The use of payment deferrals during the pandemic helped struggling borrowers stay in their homes.”
Broeksmit said the MBA recommended in a recent white paper on the future of loss mitigation that FHFA and FHA resolve temporary hardships through payment deferrals and partial claims.
“Better alignment — regardless of the reason for hardship or who insures or guarantees the loan — will improve the consumer experience and lead to consistency and simplicity when addressing future adverse market conditions, national emergencies, and natural disasters,” he said. ”We will continue to work with FHFA on efficient, scalable home retention options for distressed borrowers, while protecting taxpayers and ensuring secondary market certainty and liquidity.”
