In a move sure to bring a sigh of relief to millions of distressed homeowners, loans backed by Fannie Mae and Freddie Mac will now defer all missed mortgage payments, tacking them on to the end of their loans already in forbearance.
Borrowers who took forbearance due to COVID-related issues will not have to repay their missed payments until they sell their homes, refinance their current mortgage or their mortgage matures. Under the program, the borrower begins making their mortgage payments again when they’re able.
For homeowners in forbearance due to COVID-19, payment deferral allows them to make up missed forbearance payments when they sell their home or refinance. This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers. Borrowers who can pay their mortgage should, because missed payments remain an obligation that will ultimately have to be repaid.” The extension can continue up to 180 days beyond the 180 days granted by forbearance.
The issue is that forbearance is not forgiveness; therefore, borrowers in forbearance have to repay their missed mortgage payments one way or another. The GSEs’ (government-sponsored loans’) new payment deferral allows borrowers who took forbearance to shift as many as 12 months of mortgage payments to the end of their loan and is available to homeowners who have completed a COVID-19 related forbearance plan and are able to continue making their full monthly contractual payment but cannot afford full reinstatement or a repayment plan to bring their mortgage loan current.
According to Freddie Mac, the maturity date, remaining term, interest rate and payment schedule of the borrower’s mortgage remains the same as it was before. In addition, Freddie Mac said that utilizing the payment deferral option does not prevent a homeowner from someday being eligible for a Freddie Mac modification if payment relief is needed in the future. This option will begin being offered to borrowers on July 1, 2020.
For more information on how this all works, I am available to answer your questions.
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Roxy Redenbaugh, Broker
Sr Mortgage Consultant
Residential and Commercial
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