Recent Update (4/27/2020): “No Lump Sum Required at the End of Forbearance,” Says FHFA
In response to the COVID-19 pandemic, Fannie Mae and Freddie Mac gave many borrowers with financial hardships a forbearance option, which is a temporary pause or reduction in their monthly mortgage payments. The missed payments eventually have to be paid back. The Federal Housing Finance Agency (FHFA) wants homeowners in forbearance to know they are not required to make lump sum repayments if their mortgages are backed by Fannie Mae or Freddie Mac. Note: Not all home loans are backed by Fannie Mae and Freddie Mac.
For those borrowers who opt for forbearance, the FHFA says that their mortgage servicer will contact them about 30-days before the end of the forbearance plan to see if the temporary hardship has been resolved and discuss a variety of repayment options. If the hardship has not been resolved, the forbearance plan can be extended. If the hardship has been resolved, the servicer will work with the borrower to:
- Set up a repayment plan;
- Modify the loan so the borrower’s payments are added to the end of the mortgage; or
- Set up a modification that reduces the borrower’s monthly mortgage payment.
For more information, click here.
Federal Government Announces Relief for FHA-Backed Mortgages—
For those homeowners whose mortgage is backed by Fannie Mae, Freddie Mac, or the Federal Housing Administration (FHA), they may qualify for the suspension or lowering of your mortgage payments for up to twelve months if they show that they have been economically impacted by COVID-19. It is estimated that 50-65% of the mortgages throughout the country are impacted by this action. It is important to note that this is not a forgiveness of debt.
State of California Announces Mortgage Relief—
On March 25th, Governor Newsom announced that four of the five major national banks– Wells Fargo, US Bank, Citi and JP Morgan Chase– agreed to waive mortgage payments for 90 days for those affected by COVID-19. Bank of America has committed to a 30-day forbearance, with additional extensions possible. Many State-charter banks and credit unions have also agreed to a 90-day forbearance. While there are no income requirements to obtain mortgage relief, a homeowner will need to provide evidence that they have been impacted by COVID-19. This is not a forgiveness of debt.
If homeowners are having trouble paying their mortgages, they should contact and work directly with their mortgage servicer to learn about and apply for available relief.
More information can be found here.