April 28th, 2020 8:50 AM by Jackie A. Graves, President
Fannie Mae and Freddie Mac’s regulator said
Monday that borrowers benefiting from programs that let them skip mortgage
payments due to the coronavirus pandemic won’t have to make lump-sum repayments
when the crisis passes.
The Federal Housing Finance Agency’s announcement is
meant to “combat ongoing misinformation” about the forbearance plans homeowners
are entitled to seek under the $2 trillion economic
stimulus package enacted last month, Director Mark Calabria said in a
“During this national health emergency, no one should be worried
about losing their home,” Calabria said in the statement. “While today’s
statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all
mortgage lenders to adopt a similar approach.”
There has been growing confusion among borrowers and lenders about
how consumers would make up for the payments missed during the forbearances,
which could last for as long as a year. The stimulus legislation didn’t outline
what happens when the forbearance period ends, prompting some lenders to tell
borrowers they might have to make lump-sum payments or meet other onerous
The Federal Housing Administration, part of the Department of Housing and Urban
Development, as well as FHFA, have since issued guidance to lenders about
what terms they should be offering. Still, many companies that service
mortgages have been unsure about what the repayment terms should be and in some
cases, have been dissuading consumers from taking advantage of the program.
The confusion over repayment terms is exacerbating problems the
forbearance law is causing for servicers, companies that receive monthly
payments from borrowers and funnel money to mortgage-bond investors.
In addition to dealing with a deluge of forbearance requests,
servicers face the prospect of a liquidity crisis because they are required to
advance cash to investors even when borrowers aren’t paying. While they are
eventually repaid by Fannie and Freddie, nonbank servicing companies could run
out of cash in the meantime.
It’s unclear whether Monday’s clarification about lump sum
payments will do enough to address the confusion or whether regulators may need
to take additional steps, particularly because repayment terms are still
inconsistent among lenders.
number of borrowers seeking forbearance is climbing as more Americans find
themselves out of work or facing financial hardships due to the coronavirus
pandemic. Almost 6% of borrowers had delayed making mortgage payments as of
April 12, up from 3.7% a week earlier, according to the Washington-based Mortgage Bankers Association.
The stimulus law put few burdens on borrowers in extending the
forbearance relief, requiring them only to attest that they’re struggling and
forbidding servicers from demanding documented proof of hardship. While that
step was meant to make it easier for consumers to get relief quickly, officials
including Calabria and Treasury Secretary Steven Mnuchin have warned that the
program is meant only for those in need and not as a holiday for those who can
afford to pay.
Missed payments will have to be made up by borrowers, the FHFA
said Monday. Those who seek forbearance will be contacted by their loan
servicers 30 days before the end of their agreements to discuss options that
could include repayment plans, adding payments to the end of the mortgage or
setting up loan modifications, the agency said. Forbearances also could be
extended if their hardship hasn’t been resolved.
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