Many homeowners who needed to refinance their Fannie Mae and Freddie Mac mortgage loan or even buy a new home were all left in limbo because of the COVID-19, Coronavirus pandemic.
Leaving most mortgage borrowers with not knowing what to do next about the uncertainty of refinancing or purchasing a new home.
Fannie Mae and Freddie Mac announced temporary requirements and guidance that apply to borrowers who are currently in forbearance or recently ended their forbearance and wish to take advantage of low mortgage rates to purchase or refinance their home.
Mortgage Forbearance Guidelines
A borrower with outstanding mortgages, including mortgages in forbearance, may qualify for a new purchase or refinance a mortgage that will be eligible for sale to Freddie Mac as long as they have continued to make timely payments on their outstanding mortgages.
In addition, purchase or refinance mortgage may be eligible if the borrower missed payments on the mortgage being refinanced or another outstanding mortgage, but subsequently reinstated the mortgage.
Additionally, temporary requirements allow homeowners who have missed mortgage payments and are approved for one of Freddie Mac’s relief options, including the company’s newly created COVID-19 Payment Deferral, to be eligible for a new refinance or purchase loan after making three timely payments.
On April 30, Freddie Mac’s Primary Mortgage Market Survey® showed the 30-year fixed-rate mortgage average at 3.23%, which was the all-time low in its more than 50-year history. Rates have hovered around those lows in the weeks that have followed, standing this week at 3.28%
Freddie Mac is also extending its temporary requirements for purchasing mortgages in forbearance. Requirements are now effective for loans with note dates on or before June 30, 2020, if they are delivered by August 31, 2020.
While the temporary requirements announced today are effective for applications on or after June 2, 2020, Freddie Mac is encouraging lenders to use these same considerations for loans they are currently processing. The temporary requirements will remain in effect until further notice.
Since March 18, Freddie Mac has announced several actions to help struggling homeowners and support the home purchase market. They include:
- Suspending single family foreclosure sales and evictions until June 30, 2020.
- Increasing flexibility in employment verification requirements and leveraging appraisal alternatives
- Temporarily purchasing loans where the borrower has requested forbearance.
- Announcing a Payment Deferral solution, which adds up to 12 months of missed payments to the end of the mortgage term.
Homeowners and renters looking for additional resources can visit MyHome® by Freddie Mac. Homeowners can use the secure Freddie Mac Loan Look-Up Tool to quickly find out if the company owns their loan and renters can identify if they are protected by the COVID-19 eviction moratorium.
Under the temporary eligibility guidelines, effective immediately, homeowners who missed payments and entered into a loss mitigation solution – such as a repayment plan, payment deferral, or loan modification – are eligible for a new refinance or purchase mortgage after three timely payments. There is no waiting period for borrowers who missed payments due to a COVID-19 financial hardship but have since completed reinstatement by repaying the full amount of the outstanding payments missed during the forbearance period. There also is no waiting period for borrowers who requested forbearance due to a COVID-19 financial hardship but ultimately were able to make all their payments in full and on time.
Also, in an effort to provide additional financing options to single-family mortgage lenders, Fannie Mae’s ability to purchase single-family mortgages in forbearance has been extended to include loans with note dates on or before June 30, 2020, provided the loans are delivered by August 31, 2020 and no more than one mortgage payment has been missed. The previous policy was set to expire on May 31, 2020.
Effective immediately, lenders may apply these policies to loans in process, and they must apply the policies for loan application dates on or after June 2, 2020. These policies will be in effect until further notice.
More on Repaying Forbearance
Under a COVID-19 forbearance plan, homeowners are required to repay the missed payments, but they are never required to repay them all at once. When the forbearance plan ends, the mortgage servicer must work with the homeowner to determine how they will repay missed payments. The best solution will depend on the homeowner’s unique financial situation when the COVID-19 forbearance plan has concluded.
Homeowners and renters can visit Fannie Mae’s KnowYourOptions.com website for a one-stop overview of the various options available to those who might need help due to COVID-19.