Phew! No Lump Sum at the End of Forbearance for Fannie and Freddie Loans

Written by Jaymi Naciri Posted On Wednesday, 06 May 2020 05:00

Great news for forbearance seekers: Fannie and Freddie won’t require a lump sum at the end of the forbearance period. The Federal Housing Finance Agency (FHFA) made the announcement “after news stories cautioned that homeowners who take forbearance would be on the hook to repay missed payments in a lump sum as soon as their forbearance period ends,” said REALTOR magazine

According to a new report from the Mortgage Bankers Association, the percentage of of Fannie Mae and Freddie Mac loans in forbearance has risen to 5.46%, while “approximately 10% of borrowers whose mortgages are backed by the Federal Housing Administration or the Department of Veterans Affairs are in forbearance,” according to HousingWire."

The FHFA’s news release was intended to quell fears among homeowners who were concerned about the possibility of foreclosure at the end of the forbearance period if they couldn’t come up with the funds to pay back the total of their missed payments. 

“During this national health emergency, no one should be worried about losing their home," Director Mark Calabria said in the statement. “No lump sum is required at the end of a borrower's forbearance plan for Enterprise-backed mortgages.” The FHFA also noted that, while the announcement only applies to Fannie Mae and Freddie Mac mortgages, they “encourage all mortgage lenders to adopt a similar approach." 

The FHFA rolled out three potential alternatives to pay back missed payments for mortgages in forbearance:

• A repayment plan
• A loan modification that moves the delayed payments to the end of the mortgage
• A loan modification that lowers the mortgage payment 

“For those borrowers who opt for forbearance, their mortgage servicer will contact them about 30-days before the end of the forbearance plan to see if the temporary hardship has been resolved and discuss a variety of repayment options,” they said. “If the hardship has not been resolved, the forbearance plan can be extended. If the hardship has been resolved, the servicer will work with the borrower” on an alternative solution.

The latest information from the Fed outlines their post-forbearance repayment guidance. Information about lump sum payments was recently added to their Q&A to answer pressing questions about regarding FHA loans.

“A ‘lump sum’ repayment for the total missed payments is not required immediately at the end of the COVID-19 Forbearance period,” they said. “However, your lender will then evaluate you to see what loss mitigation options may be available. If you are an owner-occupant borrower who indicates they have the ability to resume making on-time mortgage payments, and were current or less than 30 Days past due as of March 1, 2020, you may be eligible for a COVID19 Standalone Partial Claim. A partial claim is a no interest, junior loan secured by your property. No payments are due on the COVID-19 Standalone Partial Claim until the payoff, maturity or acceleration of your insured mortgage, including for the sale of your Property or a refinancing, or the termination of FHA insurance on your mortgage. If you are not eligible for the COVID-19 Standalone Partial Claim, your servicer will evaluate you with FHA’s other loss mitigation tools to help you repay the balance owed over time. 


“A homeowner with an FHA-insured mortgage who receives a COVID-19 National Emergency Forbearance is responsible for repaying the suspended mortgage payments or the balance of reduced mortgage payments,” they continued. “Your mortgage servicer can help you determine your options for eventually repaying any suspended mortgage payments or the balance due as a result of reduced mortgage payments. Your servicer will not charge you late fees and penalties while you are on a COVID-19 National Emergency Forbearance plan.” 

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