On April 22, 2020 Fannie Mae in Lender Letter 2020-06 and Freddie Mac in Bulletin 2020-12 address the temporary eligibility for sale of mortgage loans in a COVID-19 forbearance.
While the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides for mortgage loan forbearance relief with federally-backed mortgage loans, Fannie Mae and Freddie Mac do not expressly refer to a CARES Act forbearance. Rather, under the temporary sale eligibility a loan is considered to be in forbearance if the borrower (1) attested to or otherwise informed the lender or servicer that, after the note date, the borrower suffered financial hardship caused directly or indirectly by COVID-19 and requested forbearance or (2) was approved for a forbearance plan based on a COVID-19 related financial hardship that occurred after the note date.
Fannie Mae and Freddie Mac advise that a borrower inquiry about forbearance without an actual request for forbearance does not itself result in the loan being considered to be in forbearance. The enterprises also caution that lenders should not in any way discourage borrowers from contacting them or encourage borrowers to delay notifying them, either before or after the note date if they are experiencing a COVID-19 related financial hardship.
To be eligible for sale on or after May 1, 2020, a loan in forbearance must have a note date on or after February 1, 2020, and on or before May 31, 2020, and must meet submission or settlement date timeframes outlined in the guidance. Additionally, the loan must be either a purchase loan or limited cash-out refinance loan, and must not be delinquent more than 30 days.
An additional pricing adjustment will be applied to the loans. The amount is five percent if the borrower is a first-time homebuyer and seven percent for other loans.
Fannie Mae and Freddie Mac advise that they expect loans in forbearance that are sold to them under this temporary eligibility will be representative in both profile and volume of a lender’s agency-eligible loans that are typically sold to the enterprises.
Fannie Mae also issued related guidance entitled Scenarios: Loans in Forbearance Due to COVID-19 and Representations and Warranties. The guidance addresses whether a loan is eligible for sale in various scenarios and how various situations affect seller representations and warranties.