May 14th, 2020 9:29 AM by Jackie A. Graves
Beginning on July 1, 2020, the more than 4 million homeowners
and counting in forbearance, can choose to repay the amount they owe when they
sell their home, refinance or when the loan ends, known as the payment deferral
option. For borrowers, this means that their mortgage will resume without any
change when the forbearance period ends.
This new addition to the suite of repayment
FHFA has in place is meant to help both borrowers and mortgage servicers. Some
of the other forbearance repayment options include extended loan modifications
(where the borrower tacks on what they owe to the end of the loan); lump-sum
payments; and a cap and extend option, among others.
“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 in a statement. “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.”
The new rules apply to mortgages underwritten by government
agencies Fannie Mae and Freddie Mac, which back most mortgages in the U.S.
Currently, some 7.54 percent of mortgages are in forbearance,
according to the Mortgage Bankers Association. Borrowers who choose the payment
deferral option must remain in the enterprise (Fannie Mae or Freddie Mac)
mortgage-backed securities, and they will be subject to the terms and
“MBA applauds Director Calabria and the FHFA for working with
the GSEs to offer another repayment option that will ease the burden for
homeowners who are affected by the COVID-19 pandemic. The payment deferral
option gives mortgage servicers a practical tool to help homeowners through
this unprecedented time,” MBA said in response to the recent news in a statement.
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