FHFA Extends Temporary Provisions to Address COVID-19
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) has extended a pair of COVID-19-related provisions that were set to expire at the end of the month.
Last week, FHFA announced that Fannie Mae and Freddie Mac will continue buying qualified loans in forbearance through September 30. This is an additional month beyond the previous deadline for the temporary policy, which was introduced in April.
FHFA also extended the moratoriums on single-family foreclosures and real estate owned (REO) evictions until at least December 31, 2020. This provision was also set to expire on August 31.
The agency said that the extension of buying forbearance loans is designed to ensure continued support for borrowers during COVID-19.
In adding to buying loans in forbearance, the extended provision also includes:
Using alternative appraisals on purchase and rate term refinance loans
Using alternative methods for documenting income and verifying employment before loan closing
Expanding the use of power of attorney to assist with loan closings
To ensure that borrowers are qualifying for mortgages they can afford, FHFA has been sharing data on loans that enter forbearance with the Consumer Financial Protection Bureau (CFPB). FHFA said the data sharing enables FHFA to fulfill its obligation under the so-called “QM Patch” to ensure that loans sold to Fannie and Freddie are complying with the intent of Dodd-Frank’s ability to repay provisions.
During the pandemic, some borrowers have sought payment forbearance shortly after closing on their single-family loan and before the lender could deliver the mortgage loan to the enterprises. Normally, mortgage loans in either forbearance or delinquency are ineligible for delivery under enterprise requirements.
Eligible loans will continue to be priced to mitigate the heightened risk of loss to Fannie and Freddie from these loans.
The foreclosure moratorium applies to enterprise-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by Fannie or Freddie through foreclosure or deed-in-lieu of foreclosure transactions.
Under the enterprise guidelines for single-family mortgages:
Homeowners who are adversely impacted by the COVID-19 national emergency may request mortgage assistance by contacting their mortgage servicer.
Foreclosure-related activities (except as to vacant or abandoned properties) and evictions of occupants from real estate owned by Fannie Mae are suspended until December 31, 2020.
Homeowners impacted by COVID-19 are eligible for a forbearance plan to reduce or suspend their mortgage payments for up to 12 month.
Servicers must report the status of the mortgage loan to the credit bureaus in accordance with the Fair Credit Reporting Act, including as amended by the CARES Act, for homeowners impacted by COVID-19.
Homeowners in a forbearance plan will not incur late fees.
After forbearance, a servicer must work with the borrower on a permanent plan to help maintain or reduce monthly payment amounts as necessary, including a loan modification.
FHFA projects additional expenses of $1.1 billion to 1.7 billion will be borne by Fannie and Freddie due to the foreclosure moratorium. The agency said it will continue to monitor the effect of coronavirus on the mortgage industry and update its policies as needed.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
