On May 29, 2020, Fannie Mae and Freddie Mac updated their COVID-19 FAQs related to the servicing of mortgage loans. The FAQs cover various topics addressed in the agencies’ more recent updates to their COVID-19 servicing guidance. Among other issues, the agencies address the issues noted below.
Eligibility for COVID-19 Payment Deferral. Fannie Mae includes the following three items in the updated FAQs, and Freddie Mac has substantially similar FAQs:
“Q25. Some borrowers may have experienced a hardship prior to the COVID-19 pandemic but resolved their delinquency related to that hardship in a way that leaves them ineligible per policy for a COVID-19 payment deferral. For instance, a borrower may have successfully completed a modification Trial Period Plan in March and been brought current in April, but then was impacted by COVID-19 in May. Can the servicer consider that borrower current as of Mar. 1, 2020 so that he or she meets the delinquency eligibility requirements for a COVID-19 payment deferral or post-forbearance mortgage loan modification?
This borrower would not be considered current under the terms of the COVID-19 payment deferral requirements released in Lender Letter 2020-07, COVID-19 Payment Deferral. However, the servicer must submit a request for a COVID-19 payment deferral through Fannie Mae’s servicing solutions system for review and obtain prior approval from Fannie Mae.
Q26. COVID-19 payment deferral requires that the borrower must be current or less than 31 days delinquent as of the effective date of the National Emergency declaration. Does this mean that as of Mar. 1, 2020, the borrower can be due for their Feb. 1, 2020 payment?
Yes, the borrower may be due for his or her Feb. 1, 2020 payment (an LPI of Jan. 1, 2020).
Q27. COVID-19 payment deferral does not have an origination requirement. However, some borrowers impacted by COVID-19 may have mortgage loans that were originated after Mar. 1, 2020, the effective date of the National Emergency declaration related to COVID-19. Can these borrowers still qualify for a COVID-19 payment deferral?
For these borrowers, the servicer must submit a request for a COVID-19 payment deferral through Fannie Mae’s servicing solutions system for review and obtain prior approval from Fannie Mae.”
Borrower Makes Monthly Payment Late and Pays Late Charge. When a borrower with a COVID-19-related hardship makes a monthly mortgage payment late and pays a late charge, Freddie Mac advises that to apply the late charge as a curtailment the servicer would have to obtain the consent of the borrower. However, Freddie Mac also advises that the late charge could not be applied as a curtailment unless the loan is current. If the borrower is delinquent and the borrower wants the fee applied as a curtailment, the servicer could place the funds in suspense until the loan becomes current.
Prior Forbearance Plan or Other Option. The agencies advise that borrowers are not restricted from eligibility for a COVID-19 forbearance based on prior hardships or completed workout options.
Prior Delinquency. The agencies advise that a prior delinquency does not impact forbearance plan eligibility for a borrower with a COVID-19 related hardship.
Escrow Advances. The agencies advise that if a loan has an escrow account, the servicer must ensure the timely payment of all escrow and related charges in accordance with applicable law. The agencies also state that regardless of whether a loan has an escrow account, the servicer must protect the agencies’ mortgage lien and the security property.
Borrower Making a Payment During Forbearance. The agencies confirm that the making of a payment by the borrower during a forbearance does not end the forbearance, and advise there is no effect on the length of the forbearance period. If the borrower requests, the servicer must shorten the forbearance period.
Borrower Who Becomes Ill With COVID-19. The agencies confirm that any financial hardship that impacts the homeowner’s ability to make mortgage payments as a result of COVID-19, including illness of the borrower or a dependent, is an eligible hardship that qualifies the borrower for forbearance and/or consideration for other workout options.
Eligible Disaster Policies. The agencies confirm that their pre-existing policies for eligible disasters do not apply to loans impacted by COVID-19, even though they are aware that certain declarations by the Federal Emergency Management Agency would potentially lead to the COVID-19 national emergency being considered an eligible disaster. Servicers must follow the specific requirements laid out by the agencies for the COVID-19 national emergency.