Earlier this month, Fannie Mae and Freddie Mac (the GSEs) unveiled plans to aid servicers assisting borrowers experiencing COVID-19 related hardship or coming out of COVID-19 related forbearance.
As announced by Freddie Mac in Bulletin 2020-15, borrowers attributing their delinquency to COVID-19, who are current or less than 31 days delinquent on their monthly payments as of March 1, 2020, and who meet other eligibility criteria, may qualify under Freddie Mac’s loss mitigation solution. Upon executing a COVID-19 Payment Deferral, a borrower’s servicer must defer all delinquent principal and interest payments. These amounts will create a non-interest bearing balance that will be due by the borrower on the earlier of the mortgage’s maturity date, the payoff date, or the date the property securing the loan is sold or transferred. Servicers must begin evaluating eligible borrowers for this option on and after July 1, 2020.
A similar plan under Fannie Mae allows qualifying borrowers, who experienced COVID-19 related hardship but are ready to resume making normal payments, to either temporarily reduce or suspend mortgage payments. The borrowers will not be required to repay their forbearance in full all at once, and may instead pick from three repayment options. While borrowers may choose full repayment, they may also choose a short-term repayment plan that allows them to catch up on their payments over several month. Similar to the payment deferral available under Freddie, borrowers may elect to move their missed payments to the end of the loan’s term (which servicers must begin offering as an option on and after July 1, 2020). Finally, borrowers may also choose to modify their existing loans, making monthly payments more manageable for those expected to experience ongoing financial hardship.