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Since the CARES Act instituted mortgage forbearance for borrowers of government-secured home loans, misinformation and malpractices have abounded.
To correct some of that, today the Federal Housing Finance Agency, which oversees mortgage buyers Freddie Mac and Fannie Mae, released a statement reiterating that borrowers in forbearance are not obliged to repay the missed monthly payments in a lump sum after the suspension period ends.
“During this national health emergency, no one should be worried about losing their home,” said FHFA Director Mark Calabria in a statement. “No lump sum is required at the end of a borrower’s forbearance plan for Enterprise-backed mortgages. … While today’s statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all mortgage lenders to adopt a similar approach.”
So far, some lenders have only offered three months of forbearance, concluded with a lump sum repayment, prompting borrowers to decry the terms on social media.
What servicers have often left out of their communications with customers is that if mortgage holders continue to experience coronavirus-related hardship they can extend the forbearance period for up to a whole year, but in three- or six-month increments. At the end of each forbearance term, lenders must work with clients to either continue the payment suspension or establish a repayment plan.
As outlined by FHFA, some of the repayment options include:
- A loan extension so that the missed payments are added to the end of the mortgage
- A loan modification so that the monthly mortgage payments are reduced
- A repayment plan so that the forborne amount is spread out over several months’ time
- A full repayment (a lump sum)
In a separate statement this morning, Freddie Mac CEO David 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 to bring borrowers current, including repayment plans, resuming normal payments or lowering your monthly payment through a modification. We encourage homeowners facing hardship to work with their servicer to identify the plan that’s appropriate for their unique situation.”