GSEs: No Lump Sum Required at End of Forbearance

The Federal Housing Finance Agency, Fannie Mae and Freddie Mac issued announcements yesterday reiterating borrowers in forbearance with a Fannie Mae or Freddie Mac-backed mortgage are not required to repay the missed payments in one lump sum.

“During this national health emergency, no one should be worried about losing their home,” said FHFA Director Mark Calabria. “No lump sum is required at the end of a borrower’s forbearance plan for Enterprise-backed mortgages.”

To help homeowners navigate the forbearance process, FHFA partnered with the Consumer Financial Protection Bureau on the Borrower Protection Program to provide homeowners accurate information about forbearance and address concerns noted in some consumer complaints.

“While today’s statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all mortgage lenders to adopt a similar approach,” Calabria 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,” said Freddie Mac CEO David Brickman. “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.”

“We want every homeowner who is struggling because of this pandemic to know they have mortgage options,” said Hugh R. Frater, CEO of Fannie Mae. “We do not require a homeowner to repay missed payments all at once at the end of the forbearance plan, unless they choose to do so. We encourage everyone to get the facts – call your mortgage servicer, or go to Fannie Mae’s website, which provides a one-stop overview of the various options available to homeowners and renters who might need help due to COVID-19.”

In response to the COVID-19 national emergency, Fannie Mae and Freddie Mac permitted borrowers with a financial hardship due to the pandemic a forbearance option, which is a pause or reduction in their monthly mortgage. The missed payments will have to be paid back by the borrower. 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. 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 to:

–Set up a repayment plan;

–Modify the loan so the borrower’s payments are added to the end of the mortgage; or

–Set up a modification that reduces the borrower’s monthly mortgage payment.  

More information can be found on the FHFA Webpage on Coronavirus Actions.