Homeowners currently in forbearance plans (or those considering it) just got a new repayment option that will help them resume their mortgage without adding stress to their financial situation, according to the Federal Housing Finance Agency (FHFA).
Beginning on July 1, 2020, the more than 4 million homeowners and counting in forbearance, can choose to repay the amount they owe when they sell their home, refinance or when the loan ends, known as the payment deferral option. For borrowers, this means that their mortgage will resume without any change when the forbearance period ends.
This new addition to the suite of repayment options the FHFA has in place is meant to help both borrowers and mortgage servicers. Some of the other forbearance repayment options include extended loan modifications (where the borrower tacks on what they owe to the end of the loan); lump-sum payments; and a cap and extend option, among others.
“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 Mark Calabria in a statement. “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 new rules apply to mortgages underwritten by government agencies Fannie Mae and Freddie Mac, which back most mortgages in the U.S.
Currently, some 7.54 percent of mortgages are in forbearance, according to the Mortgage Bankers Association. Borrowers who choose the payment deferral option must remain in the enterprise (Fannie Mae or Freddie Mac) mortgage-backed securities, and they will be subject to the terms and agreements.
“MBA applauds Director Calabria and the FHFA for working with the GSEs to offer another repayment option that will ease the burden for homeowners who are affected by the COVID-19 pandemic. The payment deferral option gives mortgage servicers a practical tool to help homeowners through this unprecedented time,” MBA said in response to the recent news in a statement.