Key Highlights

  • Lump sum paybacks at end of borrower’s forbearance plan for Fannie Mae and Freddie Mac-backed mortgages
  • Nearly 3.5M mortgages now in forbearance
  • Approximately 6.5% of all US home loans in forbearance

Homeowners with mortgage loans now in forbearance that are backed by Fannie Mae and Freddie Mac do NOT have to make lump sum paybacks when the forbearance period ends.

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To make this position very clear, the director of the Federal Housing Finance Agency (FHFA, the overseer of Fannie and Freddie, Mark Calabria said, “During this national health emergency, no one should be worried about losing their home. No lump sum is required at the end of a borrower’s forbearance plan for Enterprise-backed mortgages (Fannie and Freddie)…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 a lot of confusion about lump sum paybacks being “required” on all home mortgages in forbearance but, in fact, there are payback options. Some of those options include…

  • That a loan extension allows missed payments to be added at the end of the mortgage
  • That a loan modification allows monthly mortgage payments to be reduced
  • That a loan modification allows a repayment plan that spreads out the forborne amount to be spread out over several months
  • A full lump sum repayment

Of the nearly 3.5M mortgages now in forbearance or approximately 6.5% of all US home loans, according to Black Knight, some of these borrowers now in forbearance might encourage other mortgage holders to seek help instead of trying to cover four months of mortgage payments all at one time. And some of these borrowers now in forbearance might encourage their non-Enterprise lenders to accommodate their needs as is the FHFA.

In fact, if borrowers in forbearance have continued hardship due to COVID after their initial forbearance term, they can extend their forbearance period for up to a whole year, but in 3- or 6- month interval terms. Borrowers must certainly work with their lenders during such 3- or 6-month forbearance terms and lenders must certainly work with their borrowers.  

 

Thanks to Forbes’ Dima Williams.

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