Throughout the coronavirus pandemic, the Federal Housing Finance Agency (FHFA) has extended the moratoriums for the government-sponsored loan enterprises Fannie Mae and Freddie Mac (the enterprises) multiple times. In February, the agency, which regulates and supervises the enterprises, announced that its most-recent moratoriums on single-family foreclosures and real estate owned evictions would be extended again. Here is what you need to know now that the FHFA has extended the foreclosure and eviction moratoriums:
The FHFA’s Extension of the Foreclosure and Eviction Moratorium
On February 25, 2021, the FHFA announced the extension of the foreclosure and eviction moratoriums for Fannie Mae and Freddie Mac until June 30, 2021. The previous extension was scheduled to expire on March 31, 2021. As before, the foreclosure moratorium only applies to enterprise-backed, single-family mortgages. Further, the real estate owned eviction moratorium continues to apply to properties that an enterprise has acquired through foreclosure or deed-in-lieu of foreclosure transactions. Additionally, these protections do not extend to enterprise properties that are vacant or abandoned. The FHFA’s announcement did not address multi-family loans under either of the enterprise loan programs.
Forbearance for Up to 18 Months
The FHFA also announced that borrowers with mortgages backed by the enterprises may be eligible for three additional months of COVID-19 forbearance. This change increases the maximum COVID-19 forbearance period for an enterprise loan from 15 months to 18 months. While in forbearance, qualifying borrowers do not have to make mortgage payments. The COVID-19 Payment Deferral allows borrowers to repay their missed payments when their home is sold, refinanced, or at mortgage maturity.
With respect to the forbearance term extension, both enterprises require that the servicer achieve a “Qualified Right Party Contact” (QRPC) to evaluate the borrower for an extension. Eligibility for the forbearance extension is limited to borrowers in a COVID-19 forbearance plan as of February 28, 2021.
According to a recent report, data from the Mortgage Bankers Association showed that, as of January 31, 2021, 3.07% of Fannie Mae and Freddie Mac loans were in forbearance. The statistics also reflected that the overall national forbearance rate at that time was 5.35%.
The Enterprises and Loans in Forbearance
Fannie Mae and Freddie Mac purchase mortgages from lenders. The enterprises either hold these mortgages in their portfolios or package the loans into mortgage-backed securities that may be sold. In April of last year, the FHFA announced that Fannie Mae and Freddie Mac would temporarily be allowed to purchase certain qualifying loans that were in forbearance. Up until this point, delinquent mortgages and loans in forbearance were typically ineligible for purchase by the two enterprises.
The temporary policy change was due to some borrowers seeking forbearance after closing but before lenders could sell their loans. The agency relaxed the restrictions to provide support to homeowners and mortgage lenders and help keep the mortgage lending market moving under challenging economic conditions. At the time of the decision. FHFA Director Mark Calabria stated, that “Purchases of these previously ineligible loans will help provide liquidity to mortgage markets and allow originators to keep lending.” In October 2020, the agency extended the policy as applied to loans originated through November 30, 2020.
As of February, the FHFA projected that the enterprises would bear “$1.5 to $2 billion in expenses due to the existing COVID-19 foreclosure moratorium and its extension.”
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