- No lump sum payments required at end of loan period for GSE forbearance borrowers
- Repayment of missed mortgage payments ONLY an OPTION for borrowers with mortgages backed by Fannie Mae and Freddie Mac or other GSE
Remind your clients currently in forbearance who may have mortgages backed by Fannie Mae, Freddie Mac or another GSE that they DO NOT have to repay their missed mortgage payments in one lump sum. They obviously will have to repay those missed mortgage payments…just not in one lump sum.
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You might want to tell your clients to remind their loan servicers too that lump sum repayments are only one repayment option for borrowers in forbearance, not the only repayment option, since some of the servicers may be confused as well.
Hugh Frater, CEO of Fannie Mae, said, “We want every homeowner who is struggling because of this pandemic to know they have mortgage options. We do not require a homeowner to repay missed payments all at once at the end of the forbearance plan, unless they choose to do so.”
David Brickman, CEO of Freddie Mac, reiterated Frater’s comments. Brickman said, “Simply put, if you are a homeowner seeking forbearance and Freddie Mac owns your loan, you are never required to make up missed payments in a lump sum. Our policies offer a number of options…(and)…we encourage homeowners facing hardship to work with their servicer to identify the plan that’s appropriate for their unique situation.”
What are the repayment options for borrowers in forbearance with Fannie or Freddie backed mortgages?
- A repayment plan that enables borrowers to “catch up” gradually in addition to paying their regular monthly mortgage payments
- A payment deferral or modification of the original loan to maintain consistent monthly payments and add the borrower’s missed payments at the back end of the mortgage
- A modification of the loan to reduce the borrower’s original monthly payment amount and extend the time period of the loan
Just as borrowers reached out to and discussed their forbearance applications with their loan servicers (lenders) to determine the initial terms of forbearance, we encourage borrowers in forbearance to reach out to and discuss with their lenders (loan servicers) the terms of ending their forbearance via the most appropriate repayment option for that borrower approximately 30 days before that forbearance period ends.
Under the terms of the CARES Act, lenders/servicers are supposed to reach out to their borrowers in forbearance approximately 30 days prior to the forbearance period ending BUT, encourage your clients to do this, just in case. Done is done regardless of which party initiates the negotiated transaction.
Thanks to Fannie Mae, Freddie Mac and HousingWire.
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