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Fannie, Freddie Unveil New Payment Deferral Option for Loans in Forbearance

The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac are making new payment deferral options available for borrowers in COVID-19-related forbearance plans.

The plan allows homeowners, who are able to return to making their normal monthly mortgage payments, the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity.

“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,” said FHFA Director Dr. Mark A. Calabria. “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.”

Servicers will begin offering deferral payment options beginning July 1, 2020.

The FHFA and the GSEs, in response to COVID-19, allowed borrowers facing financial hardship to go into mortgage forbearance programs—a pause or reduction in their monthly payments.

As of May 7, nearly 4.1 million homeowners are in forbearance plans, representing 7.7% of all active mortgages, according to the latest forbearance data from Black Knight.

They account for $890 billion in unpaid principal and include 6.4% of all GSE-backed loans and 11% of all FHA/VA loans. At today’s level, mortgage servicers need to advance a combined $4.5 billion/month to holders of government-backed mortgage securities on COVID-19-related forbearances. Another $2.1 billion in lost funds will be faced each month by those with portfolio-held or privately securitized mortgages (some 7.2% of these loans are in forbearance as well).

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