WASHINGTON– The Federal Housing Finance Agency (FHFA) has announced Fannie Mae and Freddie Mac are now making available a new payment deferral option for borrowers affected by the coronavirus pandemic.
Separately, all but one CU-backed candidate won their races in this week’s elections.
The FHFA policy change was welcomed by credit unions.
The payment deferral option allows borrowers, who are able to return to making their normal monthly mortgage payment, the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity, the FHFA said.
“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 agency noted that in response to the COVID-19 national emergency, borrowers with a financial hardship due to the pandemic have been able to receive forbearance. The missed payments will have to be paid back by the borrower after the forbearance ends. FHFA and the two GSEs do not require lump sum repayment at the end of the forbearance.
Servicers are required to evaluate borrowers for one of several repayment options, generally referred to as a “hierarchy" of repayment and loan modification options, noted the FHFA.
“Payment deferral takes the missed mortgage payments and puts them into a payment due at the sale, or refinancing of the home, or the end of the loan,” the FHFA said. “The borrower's monthly mortgage payment will not change. Mortgages that exercise the payment deferral option will remain in Enterprise Mortgage-Backed Securities, subject to the terms of the trust agreements.”
The FHFA said servicers will begin offering the payment deferral repayment option starting July 1, 2020.
In addition to the new payment deferral option, borrowers with COVID-19 related hardships can still utilize other options that include reinstatement, repayment plan, or loan modifications based on their individual situations, the FHFA added.
NAFCU Response
In response to the FHFA announced, NAFCU President and CEO Dan Berger said, “NAFCU appreciates the FHFA’s commitment to providing mortgage borrowers with additional repayment options during the coronavirus pandemic. Allowing homeowners to choose to defer payments to a later date would provide them with additional financial flexibility to makes ends meet. This policy change would also allow credit unions to preserve liquidity to lend to those in need, instead of being required to buy back loans from the GSEs. NAFCU welcomes this policy change as it helps homeowners and preserves the safety and soundness of credit unions and the mortgage industry.”
All But One CU-Backed Candidates Win Races
Meanwhile, all but one credit union-backed candidate won their primary races this week.
The one loss: Republican Mike Garcia defeated Democrat Christy Smith in a race to fill out the remainder of the term of former Rep. Katie Hill, who resigned the seat. CUNA’s PAC, the Credit Union Legislative Action Committee (CULAC), and the California league had been supporting Smith. The race wins back a seat Republicans had earlier lost. The two candidates are likely to face off again in November for a full term.
Meanwhile, in Nebraska, all three congressional candidates supported by CULAC and the state league won their primaries: Don Bacon, Adrian Smith and Jeff Fortenberry will now be on the ballot in November.
In Wisconsin’s seventh district, State Sen. Tom Tiffany, who had the backing of CULAC and the Wisconsin league to fill the vacancy created by the resignation of Rep. Sean Duffy in that special election, won his race. Tiffany will also be on the ballot in the general election in November for a full term.