Fannie Mae, the leading source of financing for home mortgages in the U.S. (they purchase home loans from lenders), earlier this week announced some payment deferral plans to help borrowers. Fannie Mae is authorizing it’s loan servicers to provide options to borrowers that have fallen delinquent or are having trouble making their house payments, which is likely a result of the financial impact on them of the COVID-19 pandemic.
While it’s complicated, there are several options that Fannie Mae has made available to loan servicers to offer to borrowers that are struggling. Complete details are in Fannie Mae Lender Letter (LL-2020-05) but the highlights are below:
- Eligibility criteria for a Payment Deferral:
- The mortgage loan must be a conventional first lien mortgage loan, and may be a fixed-rate, a step-rate, or an ARM.(the property may be vacant)
- As of the date of the evaluation, the mortgage loan must be 30 or 60 days delinquent (i.e., the borrower is not past due for more than two full monthly contractual payments); and
- such delinquency status must have remained unchanged for at least three consecutive months, including the month of the evaluation.
- And, the loan servicer must confirm that the borrower:
- has resolved the hardship,
- is able to continue making the full monthly contractual payment, and
- is unable to reinstate the mortgage loan or afford a repayment plan to cure the delinquency.
- The mortgage loan must be a conventional first lien mortgage loan, and may be a fixed-rate, a step-rate, or an ARM.(the property may be vacant)
There are some other conditions as well but those are the primary ones. Assuming the borrower meets these requirements, there are several options available to them. There are many options the lender can offer which include:
- Defer the past due payments (without interest accruing) until the mortgage loan matures, until the property is sold or the loan is refinanced or paid off.
If the hardship that caused the borrower to fall behind has been resolved however the borrowers do not have the ability to pay the delinquent payments, another option is for the lender to offer to increase future payments for a period of time to make up for the delinquent payments. If the borrower cannot afford the increased payments, that is when the payment deferral plan above kicks in. If the borrower’s hardship has not been resolved, then Fannie Mae can offer a forbearance plan.
If you are a homeowner and having problems making your payments, the best thing to do is immediately call your loan servicer to see what options are available to you.
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