There is some good news from Fannie Mae and Freddie Mac that applies to borrowers who are currently in forbearance or recently ended their forbearance.
Fannie Mae and Freddie Mac’s temporary guidelines will allow borrowers who went into forbearance due to Covid-19 to refinance their loans or obtain new home loans so long as they’ve reinstated their mortgage previously in forbearance and made three straight timely payments under their repayment plan, payment deferral option, or loan modification from their missed payments (I believe prior to this guidance it was 12 straight timely payments).
Borrowers do not have to make up all of their payments in one lump sum.
Further, Fannie Mae’s press release states “[t]here is no waiting period for borrowers who missed payments due to a COVID-19 financial hardship but have since completed reinstatement by repaying the full amount of the outstanding payments missed during the forbearance period. There also is no waiting period for borrowers who requested forbearance due to a COVID-19 financial hardship but ultimately were able to make all their payments in full and on time.”
Loan originators may apply these policies to loans in process immediately and must apply the new policies for loan applications dated June 2, 2020 or later. The policies are in effect until further notice.
It is important to note that with respect to credit reporting, the CARES Act requires that mortgage servicers report borrowers as “current” on any loan that goes into forbearance due to a COVID-19 financial hardship.
Veterans Affairs loans have not changed their underwriting standards and are still available for veterans looking to buy a home during this time. As of Jan. 1, there is no upper loan limit on VA mortgages.
I am still trying to figure out if guidance has been issued to prevent lenders from internally marking a borrower as a “risk” if a borrower inquires about forbearance options, as I wrote about on Friday. This issue has prevented some borrowers who were exploring all of their options from obtaining a loan refinance or being denied a loan because of the originator’s worry the loan would immediately go into forbearance shortly after being opened. Hopefully, policy is heading in the right direction on that issue.
There is new information coming out daily in this fluid and uncertain time.
