Have a forbearance agreement with Fannie Mae or Freddie Mac? You can breathe a big sigh of relief. The Federal Housing Finance Agency (FHFA) has announced that homeowners in COVID-19 related forbearance programs with Fannie and Freddie can defer their missed payments until “the home is sold, refinanced, or at maturity,” they said in a news release.
The release spelled out the details of the new deferment plan. “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.”
Previously, there was some question as to whether borrowers would have to make a lump sum payment at the end of their forbearance period or enter into some other type of agreement that would potentially increase their monthly payments.
“Payment deferral is one of the repayment options,” they said. “Servicers will begin offering the payment deferral repayment option starting July 1, 2020. In addition to the new payment deferral option, borrowers with COVID-19 related hardships can still utilize other options that include reinstatement, repayment plan, or loan modifications based on their individual situations.”
Up to 12 months of deferred payments can be added to the end of the loan term. “The deferred sums to be repaid include principal, interest and escrow advances,” said National Mortgage News. Borrowers will not have to make the missed payments in a lump sum.
And now for the bad news
There is one piece of not-so-good news related to forbearance. “U.S. homeowners hurt by coronavirus were told they could delay their mortgage payments without facing consequences. Now, some are learning they’re at risk of being shut out of the housing market,” said Yahoo Finance.
The stimulus bill contained language that was meant to protect borrowers from credit issues related to their forbearance agreement. “But the law didn’t address long-standing policies that restrict consumers from getting new loans for a year after their forbearances end,” they said. “For instance, Fannie Mae and Freddie Mac…won’t buy such mortgages. Some borrowers who took advantage of the relief lawmakers provided are now being told that they will have to wait before they can refinance or obtain a fresh mortgage to purchase a home. That’s true even for those who ultimately make their payments on time, as the forbearances are still being noted on some consumers’ credit reports.”