Do you have a Fannie / Freddie / FHA loans???Do you have a Fannie / Freddie / FHA loans???
DIRECTLY from the CFPB’s website – Fannie and Freddie are now adamantly asserting that homeowners in a forbearance plan DO NOT HAVE TO REPAY THEIR DEFERRED PAYMENTS IN A “LUMP SUM”.
Recent data shows that there are nearly 3.5 million borrowers already in forbearance as the virus shutdown continues to impact the economy.
And with that figure seemingly growing by tens of thousands of borrowers every day, the issue of what happens to those borrowers when their forbearance period ends is becoming a big problem.
But there appears to be a growing number of borrowers who think they have to repay all missed payments in 1 lump sum, because they’re confused about their options OR because of what their loan servicer told them.
But that’s not actually the case, according to the two biggest sources of mortgage financing in the country.
The issue seems to stem from the lack of clarity in the CARES Act about what happens when a borrower’s forbearance period ends.
The CARES Act stipulates: A borrower whose mortgage is backed by either the government, (FHA) or GSEs (Fannie /Freddie) and who is experiencing a COVID “related” hardship can request AND MUST be granted forbearance of up to 180 days.
But the Act doesn’t dictate what’s supposed to happen afterwards.
That’s led to confusion among borrowers and servicers, with some servicers apparently telling borrowers that they’ll need to repay their missed payments in full when their forbearance period ends.
That is an OPTION for repaying the missed payments, but not the only option, the GSEs said Monday.
“We want every homeowner, struggling because of Covid to know they have mortgage options,” Fannie Mae CEO Hugh Frater said in a statement.
“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.”
Those sentiments were echoed by Freddie Mac CEO David Brickman.
“Our policies offer a number of options to bring borrowers current, including repayment plans, resuming normal payments or lowering your monthly payment through a modificationn,” Brickman added.
“No lump sum is required at the end of a borrower’s forbearance plan for Enterprise-backed mortgages.”
As for what else borrowers can do instead of paying their missed payments back in full?
GSEs offer several other options, including:
A repayment plan, which allows borrowers to catch up gradually in addition to paying regular monthly payments.
Payment Deferral or modification of the loan, to keep monthly payments consistent and add the borrower’s missed payments to the end of the loan.
Modification of the loan, to reduce a borrower’s original monthly payment amount.
According to the GSEs, servicers are required to reach out to borrowers in forbearance approximately 30 days before their initial forbearance period ends to discuss their repayment options.
As Calabria notes, the policies in place at the GSEs only apply to mortgages backed by the GSEs (Fannie /Freddie) themselves, but Calabria called on others in the mortgage business to adopt similar policies.
Calabria also noted that the FHFA recently partnered with the CFPB to ensure that borrowers are getting accurate info about their forbearance options and to “address concerns noted in some consumer complaints.”
(However) The CFPB’s “wording” seemingly implies that some borrowers have already complained that their servicers “may not be giving them accurate info about their options” ” said FHFA Director Mark Calabria.
Editor’s Note: “DUH”! – I ‘ve been watching this circus unfold as I’ve been receiving panicky calls from agents and their clients; most of whom are fearing a repeat of the 2007 – 2012 loan modification, robo signing, foreclosure fraud debacles and other banking practices, that rivaled the Gambino Crime family’s loan sharking activities.
And if were not for the Dodd-Frank Whistle Blowers Act,, that’s exactly where the big banks and their servicers were starting to “drift”.
So, the GSEs’ announcement likely has two purposes: to remind borrowers of what their options are AND to remind GSE servicers of what they’re required to do for their borrowers.