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Few homeowners understand that their mortgage is really owned by the quasi-govy giant lenders Fannie Mae & Freddie Mac. Fannie Mae and Freddie Mac announced that homeowners in forbearance can request payment deferrals and tack any missed payments on to the end of their loan term, without penalty or added interest.
Under forbearance, homeowners are still required to repay any missed payments. But the government-sponsored enterprises made clear in an announcement Wednesday that borrowers do not have to repay them all at once.
Freddie Mac stated that borrowers taking one of its mortgage deferral solutions will be able to eventually resume their monthly mortgage payment to its pre–COVID-19 amount by adding up to 12 months of missed payments—including escrow advances—to the end of the mortgage term. Borrowers will not accrue any extra interest or late fees. Its solution is effective July 1, the date when mortgage servicers will begin to evaluate homeowners with resolved COVID-19–related hardships for eligibility.
“Our main focus continues to be finding new and innovative ways to help borrowers and their families during this pandemic,” says Donna Corley, executive vice president and head of Freddie Mac’s single-family business. “Our payment deferral solution adds another tool to our toolbox to help homeowners pick up where they left off once they’ve recovered from a short-term financial hardship.”
Fannie Mae and Freddie Mac are allowing homeowners affected financially by the COVID-19 pandemic to pause their mortgage payments for up to a full year through forbearance. By the start of May, nearly 4 million homeowners had taken advantage of the government’s or a bank's mortgage forbearance program, according to data from Black Knight, a mortgage analytics firm. Loan servicers are to reach out about 30 days before a borrower’s initial forbearance plan is to end to determine what type of repayment plan is needed.
Fannie Mae says that homeowners will have several options to pay back missed payments, including rolling the payments to the end of their mortgage as well as repaying in full—if they wish to—or setting up a repayment plan to gradually catch up.
Fannie and Freddie also said loan modifications could be possible depending on the borrower’s situation.
The National Association of REALTORS® applauded the Federal Housing Finance Agency's move to deliver greater certainty to homeowners who need to take forbearance. This move offers "solutions and some much-needed certainty to the millions of U.S. families facing unemployment and unsure how they will cover next month’s bills," says Vince Malta, NAR's president. "This flexibility will be invaluable for American consumers as we begin to emerge from this crisis and restart our economy."
To determine whether a loan is owned by one of the GSEs, visit Fannie’s lookup tool or Freddie Mac’s lookup tool.
