Extension will protect more that 28 million Homeowners After its prior extension to Aug. 31 in June, the agency said it intended to monitor the effects of the coronavirus and update policies as needed. According to FHFA director Mark Calabria, the most recent extension will protect more than 28 million homeowners with a mortgage backed by Fannie Mae or Freddie Mac.
“With this latest extension of the foreclosure and eviction moratorium, we can continue to help ensure distressed borrowers are able to remain in their homes during this national emergency,” said Malloy Evans, senior vice president and single-family chief credit officer at Fannie Mae.
Fannie and Freddie’s foreclosure moratorium applies to enterprise-backed, single-family mortgages only, while the REO eviction moratorium applies to properties that have been acquired by an enterprise through foreclosure or deed-in-lieu of foreclosure transactions.
According to the GSEs, the suspension does not apply to tenants in homes that have not been foreclosed. The FHFA recommends those who may be struggling with their mortgage or facing possible foreclosure to review their options with their servicers as soon as possible. Homeowners impacted by COVID-19 are eligible for a forbearance plan to reduce or suspend their mortgage payments for up to 12 months, as mandated by the CARES Act.
Recent data from Black Knight shows the number of new forbearances dropped in July as the overall delinquency rate, measuring mortgages with payments 30 days or more overdue, fell to 6.91% from 7.59%. However, the number of seriously delinquent mortgages – payments overdue by 90 days or more – soared to a 10-year high during July in a tally that counts forbearances.
On Wednesday, the FHFA extended another deadline after it announced the GSEs will continue to buy qualified loans in forbearance until Sept. 30
1. What is a non-judicial foreclosure?
Non-judicial foreclosure of real property is a public auction by the Trustee under a Deed of Trust with a power of sale.
2. What are the advantages of a non-judicial foreclosure?
No judicial involvement • No redemption right of borrower once the foreclosure sale is completed • All junior liens and interest, such as leases, are foreclosed out. Exception is post sale redemption for an IRS lien. They have 120 days to redeem the property where they come in and pay you off and take the property to satisfy their lien • Upon foreclosure, purchaser receives title under a Trustee’s Deed Upon Sale • Advantage to borrower is no deficiency Judgment may be sought after a non-judicial foreclosure.
3. What is a Notice of Default?
The Notice contains a statement of the breach under the note. A copy of the recorded Notice of Default is then mailed to the Trustor, any Successor’s in Interest and any junior lien holders and their Assignees. A sale cannot be set for 90 days plus one day from the recording date of the Notice of Default. If residential, owner occupied, first Deed of Trust, you must add 3 additional months before proceeding. This is period is referred to as the “Pre-Publication Period.”
4. What is a Trustee’s Sale Guarantee?
A TSG (Trustee’s Sale Guarantee) is issued for the purposes of the Trustee to process the non–judicial foreclosure. It does not insure the benefit of any other party other than the Trustee. The TSG is NOT a policy of title insurance. It does not insure any parties as to any matters. It does guarantee the following:
• The vested owner shown is current and correct • The names and address of persons who have recorded requests for a copy of the Notice of Default and Notice of Trustee’s Sale • The names and addresses of additional persons who are entitled to receive a copy of the Notice of Trustee’s Sale pursuant to California Civil Code 2924b(c)(3). Sale mailings • The names and address of State taxing agencies which are entitled to receive a copy of the Notice of Trustee’s Sale pursuant to California Civil Code 2924b(c)(3). Sale mailings • Identifies the judicial district in which the property is located, and newspapers adjudicated for the purpose of publishing of the Notice of Trustee’s Sale.
5. What is a Notice of Sale?
After the three–month Pre-Publication period has expired, a Notice of Trustee’s Sale is published, posted and mailed at least 20 days prior to the Sale. If there is an IRS tax lien on the property, we must send a copy of the Notice of Trustee’s Sale to the IRS 25 days before the scheduled sale date. This period is commonly referred to as the “Publication Period” because a copy of the Notice of Trustee’s Sale is published in an adjudicated newspaper of general circulation in the city where the property is located. The notice must be published once a week for 3 consecutive weeks and a copy posted on the property and one public location in the city where the Trustee’s Sale will be conducted. At least 20 days before the Trustee sale date, the original Notice of Trustee’s Sale must be recorded in the county where the property is located. Until 5 business days prior to the sale date, the beneficiary must allow reinstatement, if loan can be reinstated. Within the 5 days period, it is up to the beneficiary as to whether they will accept a reinstatement.
6. What is a Trustee’s Sale?
The Trustee’s Sale is a public auction by the Trustee under the Deed of Trust, pursuant to the non–judicial foreclosure proceedings. • Sales are held in a public place on the date, time and place stated in the Notice of Trustee’s Sale between the hours of 9:00 a.m. and 5:00 p.m. on any business day Monday through Friday. • The beneficiary may open the bid up to the amount of the total debt owed under his Deed of Trust plus foreclosure fees and expenses. • “Funds “ that can be used are cash, cashier’s check drawn on a state or national bank, a check drawn by a state or federal credit union, or a check drawn by a state or federal savings and loan association, savings association, or savings bank specified in Section 5102 of the Financial Code and authorized to do business in this state. • All bidders must qualify with the Auctioneer to bid at the time of sale. • The trustee’s sale is complete when the final bid is accepted. • The successful bidder he gets a receipt at the sale for his money. The Trustee prepares the Trustee’s Deed Upon Sale and is sent to the successful bidder for them to record. • The sale is deemed perfected as of 8:00 a.m. on the day of sale as long as bidder records within 15 days
7. Can the foreclosure sale be postponed?
As of January 1, 2006, C 2924g was amended substantially changing the beneficiary postponements and doing away with the 3 postponement limitation and replaces it with a 365 day limitation from the date set forth on the Notice of Trustee’s Sale before republication is necessary.
8. What does a Trustee do?
Foreclose and Recovery.
9. Does title need to be the original Trustee on the Deed of Trust to process the foreclosure?
No, Title may be substituted in as Trustee to process the foreclosure.
10. How much will it cost?
The Trustee fee is based on the unpaid principal balance of the Note.
11. How long will the process take?
A California non-judicial foreclosure takes approximately 4 months to complete, unless it is an owner occupied, residential 1st Deed of Trust, then, it could take up to 7 months.
12. Do you have to go to court?
No, this is a non-judicial foreclosure and there are no court appearances.
13. Do you personally have to come into the office to start a foreclosure?
No, you may need to have some documents notarized; however, the foreclosure process may be completed entirely by mail or email.
14. What if you have lost the original Note?
There are remedies for a lost Original Note, contact our Trustee Services Department for details.
15. Can you collect payments from the borrower during the foreclosure process?
Four facts about the new repayment option
Millions of Americans are contacting their mortgage servicers to set up a mortgage forbearance plan as a result of the health and economic impacts of the coronavirus. However, they are starting to realize it’s increasingly important to have a clear way to repay the amount they owe once the forbearance period ends. Meanwhile, some homeowners are not on a mortgage forbearance plan, but still face a financial hardship related to COVID-19.
Fannie Mae not only offers repayment options but also provides a new option to help. In May, we announced the COVID-19 payment deferral, which became available July 1. Here are four key facts to know about this repayment option.
1. COVID-19 payment deferral allows homeowners to repay at a later date.
Homeowners who are eligible either entered a mortgage forbearance plan or did not enter a forbearance plan but missed payments as a result of their financial hardship related to COVID-19. The new repayment option lets eligible homeowners defer unpaid mortgage payments. Their payments become a noninterest-bearing balance. The balance is either due at the maturity date or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the mortgage loan. Once the homeowner repays the balance, the owner can continue paying their regular monthly payment in accordance with the terms of the mortgage.
2. COVID-19 payment deferral is the newest home retention repayment option for homeowners
The COVID-19 payment deferral is a good repayment option for many homeowners because it’s easy to explain, immediately resolves the arrearage, and it gives the homeowner time to regain their financial footing.
3. COVID-19 payment deferral is easy to execute for mortgage servicers
Execution of the COVID-19 payment deferral is seamless for a number of reasons: It has no trial period, both Fannie Mae and Freddie Mac follow its implementation requirements, and the Servicing Management Default Underwriter™ (SMDU™) enables automation.
4. If homeowners don’t meet the eligibility requirements for COVID-19 payment deferral, they still have other repayment options
Every homeowner’s financial situation is different. The COVID-19 payment deferral will not work for everyone. Homeowners who don’t utilize COVID-19 payment deferral still have three options to help them get back on track: mortgage reinstatement, a repayment plan, or loan modification.
Homeowners with a resolved hardship related to COVID-19 (including those who are exiting a forbearance plan) have options to bring their loan current. Servicers should discuss options with homeowners and determine eligibility.
Options after a forbearance plan include:
Reinstatement
Homeowner resumes making their regular monthly mortgage payments and repays the missed amount all at once at the end of the forbearance plan.
Repayment plan
Homeowner resumes making their regular monthly payments, plus an additional portion of the missed amount each month, until the missed amount is paid off.
COVID-19 payment deferral
Homeowner resumes making regular monthly payments, but no extra amounts. This deferral resolves the hardship by deferring the missed amount (including any servicing advances and escrow advances made on their behalf for taxes and/or insurance) to the maturity date as a non-interest bearing balance. The deferred amount is due on the maturity date (or earlier whenever the home is sold, or the loan is refinanced or otherwise paid off). Guidance: Lender Letter LL-2020-07, COVID-19 Payment Deferral
Fannie Mae Flex Modification
Homeowner is experiencing a permanent impact to their ability to pay their regular monthly mortgage payment. After the homeowner completes a trial period plan, all unpaid amounts are added to the unpaid principal balance, and monthly mortgage payments are permanently modified to what may be a lower amount through a rate reduction and a term extension to 40 years (480 payments) from the effective date of the modification. In addition, a portion of the interest-bearing balance may be converted to a non-interest bearing principal balance due at the maturity date (or earlier whenever the home is sold, or the loan is refinanced or otherwise paid off.) The homeowner may pay more total interest because the loan is extended over a new 40-year term.
On May 13, House Speaker Nancy Pelosi (D-CA) introduced the HEROES Act, which includes $200 billion of additional funding for housing and homelessness programs. The HEROES Act passed in the House, but was labeled too “pricey” for some and is awaiting approval from the Senate.
Here is some of what the HEROES Act contains:
If signed, the HEROES Act would extend the current 120-day eviction moratorium originally stipulated in the CARES Act.
This would help renters in federally assisted properties with an incremental 12-month moratorium, and landlords would have to provide a 30-day notice of eviction to tenants after the new moratorium expires.
Homeowners would also be protected by the Act and will be granted a 60-day mortgage forbearance automatically if their mortgage became 60 days delinquent between March 13 and the day the bill was enacted, and they had not already received forbearance.
Under the Act, Multifamily property owners who receive forbearance will not be able to charge tenants late fees or penalties, report negative information to credit agencies, or evict tenants for nonpayment of rent.
Today, to help borrowers and renters who are at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will extend their single-family moratorium on foreclosures and evictions until at least August 31, 2020. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The current moratorium was set to expire on June 30.
“To protect borrowers and renters during the pandemic we are extending the Enterprises’ foreclosure and eviction moratorium. During this national health emergency no one should worry about losing their home,” said Director Mark Calabria.
The Agency announced earlier this month that it is extending several loan origination flexibilities currently offered by Fannie Mae and Freddie Mac (the Enterprises) designed to help borrowers during the COVID-19 national emergency, including the authority to purchase mortgages in forbearance, until at least July 31. Other flexibilities that have been extended include:
The FHFA previously announced that Fannie Mae and Freddie Mac would be able to buy loans in forbearance, with note dates on or before June 30, as long as they are delivered by August 31 and have missed just one mortgage payment. Additionally, the agency will be re-proposing the updated minimum financial eligibility requirements for the Enterprises.
“FHFA has determined that it is prudent to work with the Enterprises to reassess and re-propose these requirements, including incorporating lessons learned from the evolving COVID-19 national emergency,” the Agency said in a release.
“FHFA will continue to monitor the coronavirus situation and update policies as needed,” the agency said in a release. “To understand the protections and assistance the government is offering people having trouble paying their mortgage, please visit the joint Department of Housing and Urban Development, FHFA, and the Consumer Financial Protection Bureau website at cfpb.gov/housing.”
As the coronavirus began sweeping through the country in March, many states issued shut-down orders for businesses, putting as many as 40 million people out of work by May. On March 27, Congress passed the CARES Act to offer economic relief to those affected by the shut-downs, expanding unemployment benefits and offering mortgage forbearance to homeowners with mortgages backed or insured by the federal government, including Freddie Mac, Fannie Mae, VA and FHA.
Under the CARES Act, homeowners can ask for forbearance from their mortgage servicer and suspend payments for up to 12 months. There are now more than 4 million mortgage loans in forbearance, and we know that homeowners have many questions about the specifics of the program.
We have partnered with Freddie Mac to bring you this FAQ page to answer those questions and provide updates to the program. Our goal is to provide a resource that is continuously updated with the latest news and information on forbearance so that lenders, servicers and homeowners can work together during this period of crisis and recovery.
Guide Bulletin 2020-15: COVID-19 Payment Deferral
This Bulletin announces Freddie Mac COVID-19 Payment Deferral.
Freddie Mac COVID-19 Payment Deferral
Issued 05/13/2020
SUBJECT: FREDDIE MAC COVID-19 PAYMENT DEFERRAL
With Bulletin 2020-6, Freddie Mac announced the Payment Deferral, a loss mitigation solution for Borrowers who became delinquent due to a short-term hardship that has since been resolved. As we continue to monitor and respond to the COVID-19 pandemic, and in response to Servicer feedback, we are announcing the Freddie Mac COVID-19 Payment Deferral.
The COVID-19 Payment Deferral leverages a similar concept to the recently announced Payment Deferral solution. Under the terms of a COVID-19 Payment Deferral an eligible Borrower will be brought current by deferring delinquent amounts to create a non-interest bearing balance that will become due at the earlier of the Mortgage maturity date, payoff date, or upon transfer or sale of the Mortgaged Premises. The remaining Mortgage term, interest rate schedule (i.e., whether a fixed-rate Mortgage, an ARM or Step-Rate Mortgage) and maturity date of the Mortgage will all remain unchanged.
KEY DIFFERENCES FROM A STANDARD PAYMENT DEFERRAL
We have made several adjustments to the requirements of the standard Payment Deferral to create the COVID-19 Payment Deferral, which is designed specifically to assist Borrowers who have a COVID-19 related hardship. All relevant requirements are described in detail in this Bulletin. However, there are several key differences between the previously announced solution and the COVID-19 Payment Deferral, including:
Servicers must complete a COVID-19 Payment Deferral in accordance with all requirements described in the below sections of this Bulletin.
EFFECTIVE DATE
Servicers must begin evaluating eligible Borrowers for a COVID-19 Payment Deferral on and after July 1, 2020.
FREDDIE MAC COVID-19 PAYMENT DEFERRAL
Eligibility requirements and exclusions
To be eligible for the COVID-19 Payment Deferral, all of the following requirements must be met:
COVID-19 Payment Deferral eligibility requirements and exclusions
The Servicer must achieve quality right party contact in accordance with the requirements specified in Bulletin 2020-10 (“Limited QRPC”). In addition to the information required to achieve Limited QRPC, the Servicer must confirm that the Borrower:
If the Borrower’s Mortgage was previously modified under the Home Affordable Modification Program℠ (HAMP®) and the Borrower is in “good standing” when they entered into a COVID-19 forbearance plan and the Borrower transitions directly to a COVID-19 Payment Deferral, then the Borrower will not lose good standing as a result of the forbearance plan or as a result of a COVID-19 Payment Deferral.
Delinquency/Payment requirements
The Mortgage must:
Note: If a Borrower had a COVID-19 related hardship but was 31 or more days delinquent as of the effective date of the National Emergency declaration (March 1, 2020), and the Servicer determines the Borrower can maintain the existing monthly contractual payment, the Servicer must transmit an exception request via Workout Prospector® to Freddie Mac.
Mortgages subject to indemnification agreements
If the Mortgage is subject to an indemnification agreement and is otherwise eligible under the COVID-19 Payment Deferral requirements of this Bulletin, the Servicer has the discretion to approve the COVID-19 Payment Deferral provided the following conditions are met:
Note: The Servicer is not eligible to receive an incentive for completing a COVID-19 Payment Deferral on a Mortgage that is subject to an indemnification agreement.
Mortgage insurance
If the Mortgage is subject to mortgage insurance, and the mortgage insurance company is not included on our list of delegated mortgage insurance companies for Mortgage modifications, the Servicer must obtain delegation of authority from the MI or seek approval from the MI to complete the COVID-19 Payment Deferral.
Texas Equity Section 50(a)(6) Mortgages
If the Borrower is eligible and qualifies for the COVID-19 Payment Deferral, the Servicer must offer the COVID-19 Payment Deferral to the Borrower. If the Servicer receives Borrower notification classifying the COVID-19 Payment Deferral as a modification and claiming that the terms of the modification agreement do not comply with the provisions of Article XVI Section 50(a)(6) of the Texas Constitution, the Servicer must notify Freddie Mac within seven Business Days of receipt of such objection or complaint to Freddie Mac at Distressed_Property@freddiemac.com and include the following:
Upon receipt of Freddie Mac’s instructions, the Servicer must comply with any required response time frames to claims of defects and any other complaint in accordance with Section 8104.1 and the Texas Constitution.
Borrower documentation
The Servicer must not require a complete Borrower Response Package (BRP) to evaluate the Borrower for a COVID-19 Payment Deferral if the Borrower has been evaluated in accordance with all requirements described in this Bulletin and the eligibility criteria are satisfied.
The following Mortgages and Borrowers are ineligible for the COVID-19 Payment Deferral:
Determining the terms of the COVID-19 Payment Deferral
The steps to determine the terms of the COVID-19 Payment Deferral are described in the table below:
Determining COVID-19 Payment Deferral Terms
Delinquent Payment Deferral
The Servicer must follow the steps below when determining the terms of the COVID-19 Payment Deferral.
If the existing Mortgage includes a non-interest bearing UPB as a result of a prior modification, the terms impacting that non-interest bearing UPB will remain unchanged.
The Servicer must apply the COVID-19 Payment Deferral forbearance as follows:
The Servicer must:
When offering the COVID-19 Payment Deferral, the Servicer must ensure all other terms of the existing Mortgage remain unchanged including, but not limited to, the:
NOTE: The maximum number of monthly payments that may be deferred as part of a COVID-19 Payment Deferral is twelve.
Escrow analysis
The Servicer is not required to perform an Escrow analysis in conjunction with a COVID-19 Payment Deferral and may continue to perform the Escrow analysis as regularly scheduled.
If the Servicer chooses to perform an Escrow analysis, any Escrow account shortage that is identified at the time of the COVID-19 Payment Deferral must not be capitalized and the Servicer is not required to fund any existing Escrow account shortage. Any Escrow advances must be included in the deferred balance, as described in the “Delinquent COVID-19 Payment Deferral” section, above. In addition, the Servicer is not required to revoke any Escrow account waiver.
Completing a COVID-19 Payment Deferral
The Servicer must send a COVID-19 Payment Deferral Agreement provided as Attachment A to this Bulletin (see Download dropdown above), or the Servicer’s customized equivalent of the COVID-19 Payment Deferral Agreement, to the Borrower no later than five days after completion (e.g., a closed /settled workout option) of the COVID-19 Payment Deferral. In the event the Servicer elects to require the Borrower to sign and return the COVID-19 Payment Deferral Agreement, it must receive the fully executed COVID-19 Payment Deferral Agreement prior to the settlement date.
The use of Attachment A to this Bulletin (see Download dropdown above) is optional; however, it reflects the minimum level of information that the Servicer must communicate. The Servicer must ensure the COVID-19 Payment Deferral Agreement complies with applicable law.
The Servicer must complete the COVID-19 Payment Deferral in the same month it determines the Borrower is eligible. If the Servicer is unable to complete the COVID-19 Payment Deferral within this timeframe, the Servicer may, at its option, use an additional month to allow for sufficient processing time (“processing month”) to complete the COVID-19 Payment Deferral. The Servicer must treat all Borrowers equally in applying the processing month, as evidenced by a written policy (i.e., the criteria for when a processing month is required must be the same for all Borrowers). Additionally, the Servicer is not permitted to defer more than twelve months of payments as part of a Payment Deferral, so if a processing month is used for a borrower who is already twelve months delinquent, the Servicer must require a payment during the processing month. Otherwise, the Borrower is not required to submit a payment during the processing month for a COVID-19 Payment Deferral.
The Servicer must process a COVID-19 Payment Deferral Agreement in compliance with the requirements for processing a regular Payment Deferral Agreement, as described in Section 9203.23. This includes the requirements for recordation, title endorsement and Document Custodian. The table below provides some of the key criteria:
COVID-19 Payment Deferral Agreement
COVID-19 Payment Deferral conditions
Recordation
The Servicer must ensure that the Mortgage subject to the COVID-19 Payment Deferral retains its First Lien position and continues to be fully enforceable in accordance with its terms at the time of completion of the COVID-19 Payment Deferral, throughout the term of the Mortgage, and during any bankruptcy or foreclosure proceeding involving the Mortgage.
The Servicer must record the COVID-19 Payment Deferral Agreement only when doing so is necessary to ensure its compliance with this First Lien retention and the COVID-19 Payment Deferral enforcement requirement.
Title endorsement
Document Custodian
Evaluation hierarchy
To be eligible for a COVID-19 Payment Deferral, a Borrower must have been current or less than 31 days delinquent as of the effective date of the National Emergency declaration (March 1, 2020). Otherwise, the Servicer must conduct all loss mitigation evaluations in accordance with our standard loss mitigation evaluation hierarchy, as described in Section 9201.2 (or must submit an exception request for Freddie Mac approval, as described above).
If Limited QRPC is established with a COVID-19 impacted Borrower who was current or less than 31 days delinquent (i.e., the Borrower had not missed more than one monthly payment) as of the effective date of the National Emergency declaration, and the Borrower is unable to resolve the Delinquency through a reinstatement or repayment plan, the Servicer must evaluate the Borrower for the loss mitigation options set forth in the following COVID-19 evaluation hierarchy:
NOTE: In most cases, Borrowers with a COVID-19 related hardship who qualify to be evaluated for a COVID-19 Payment Deferral (as described in this section) will be transitioning from a COVID-19 forbearance, but forbearance is not a prerequisite in order to be eligible.
Extend Modification and Capitalization and Extend Modification
Upon the mandatory effective date of the COVID-19 Payment Deferral on July 1, 2020, we are revising the guidance we provided in Bulletin 2020-4 by eliminating the Extend Modification and the Capitalization and Extend Modification as options in the COVID-19 evaluation hierarchy and replacing those options with the COVID-19 Payment Deferral, as shown in the hierarchy described above. Prior to the July 1 effective date, Servicers must continue to evaluate Borrowers based on the existing guidance from Bulletin 2020-4, which includes the Extend Modification and Cap and Extend Modification.
Solicitation for a COVID-19 Payment Deferral
The Servicer must proactively solicit the Borrower to offer a COVID-19 Payment Deferral within 15 days after the expiration of the forbearance plan if:
Contacting the Servicer directly in accordance with any acceptable outreach and communication method as described in Bulletin 2020-7, or
Returning an executed COVID-19 Payment Deferral Agreement, if applicable, or
Any other method evidencing the Borrower’s acceptance, in compliance with applicable law (e.g., making the monthly payment due under the terms of the COVID-19 Payment Deferral offer*)
The solicitation letter must also include language that additional forbearance options are available, as applicable, if the Borrower’s hardship is ongoing, or a Flex Modification may be available if the Borrower needs payment relief.
*If permitting payment to constitute acceptance of the COVID-19 Payment Deferral offer, the Servicer must require the Borrower’s payment to be submitted so that it is received by the Servicer in the same month as the Payment Deferral offer is sent. This requirement must be described in the Solicitation Letter, if applicable.
Solicitation for a Flex Modification
If the Borrower is ineligible for a solicitation for a COVID-19 Payment Deferral, as described above, then the Servicer must evaluate the Borrower for a streamlined offer for a Flex Modification (provided that as of the evaluation date the Borrower is at least 90 days delinquent or is at least 60 days delinquent and has a Step-Rate Mortgage). Flex Modifications for Borrowers with a COVID-19 related hardship who were current or less than 31 days delinquent as of March 1, 2020 must be completed in accordance with the streamlined Flex Modification evaluations described in the section below, under “Reduced Flex Mod Requirements.” Otherwise, the Servicer must evaluate in accordance with our standard requirements in Section 9206.5. The Servicer must send a streamlined offer for a Flex Modification to an eligible Borrower within 15 days after the expiration of the forbearance plan.
If the Borrower was eligible for a solicitation for a COVID-19 Payment Deferral, but did not accept the offer, then the Servicer must evaluate the Borrower for a streamlined offer for a Flex Modification following the same requirements as described in the above paragraph, except that the Servicer must send the streamlined offer to an eligible Borrower within 15 days of the expiration of the COVID-19 Payment Deferral offer.
Flex Modification evaluations for failed COVID-19 Payment Deferral
If the Borrower accepts a COVID-19 Payment Deferral and subsequently becomes 60 days delinquent within six months of the effective date, then the Servicer must evaluate the Borrower for a Flex Modification based on the special eligibility criteria described below, and the Servicer is not required to first establish quality right party contact or collect a complete Borrower Response Package. A Flex Modification offer must be sent to an eligible Borrower under these requirements no later than the 75th day of Delinquency.
Reduced Flex Modification requirements
In lieu of the regular Guide requirements for Flex Modification eligibility as described in Sections 9206.5 and 9206.6, the Servicer will exclude only the following Mortgages from eligibility in these instances:
If the Servicer was not collecting Escrows on the existing Mortgage, the Borrower is not required to establish an Escrow account as a condition of the modification unless otherwise required by applicable law, or the Servicer confirms that the taxes and insurance premiums have not been paid and are past due.
Workout Prospector®
Workout Prospector® is being updated to accommodate the submission and settlement of COVID-19 Payment Deferrals. Although Servicers must begin their evaluations on and after July 1, 2020, the Payment Deferral path described below will not be available until July 13, 2020. Therefore, settlements using Workout Prospector should be withheld until July 13, 2020, even when the evaluation may have been conducted on or after July 1, but before July 13.
To model the terms of the COVID-19 Payment Deferral and complete the settlement process, Servicers must use the “Payment Deferral” path in Workout Prospector. Servicers must comply with the requirements in Section 9203.24 and the instructions provided in the Workout Prospector Users’ Guide to complete the submission and settlement process for a COVID-19 Payment Deferral.
Servicers may use a proprietary system or third-party system to generate the terms of the COVID-19 Payment Deferral; however, this data also must be entered in its entirety into Workout Prospector. The Servicer must ensure that its results comply with the requirements in Sections 9203.18 through 9203.25 and are the same as the data entered into Workout Prospector prior to sending the COVID-19 Payment Deferral Agreement to the Borrower.
Reporting requirements
In most cases, the COVID-19 Payment Deferral does not have an associated unique EDR status code. For each Mortgage subject to the COVID-19 Payment Deferral, the Servicer must continue reporting the appropriate delinquency status information to Freddie Mac through EDR in accordance with requirements in Section 9102.7 and Guide Exhibit 88, Servicing Tools. Once the COVID-19 Payment Deferral has been completed and the Mortgage is brought current, the EDR status code must reflect the Mortgage as current.
However, the Servicer must report Event Code H6, Payment Deferral Offer, to notify Freddie Mac that the Mortgage is subject to an active COVID-19 Payment Deferral offer in the following instances:
The forbearance period ends prior to settlement of an accepted COVID-19 Payment Deferral (e.g. if the Servicer elected to use a processing month and the forbearance plan expires), or
The Servicer has made a proactive offer following the expiration of a forbearance plan in accordance with the “Solicitation for a COVID-19 Payment Deferral” section above
In these instances, the Servicer must continue to report Event Code H6 until the offer has expired, or the Payment Deferral has been completed.
Other requirements
Other requirements for the COVID-19 Payment Deferral include:
FHFA, FHA Extends Foreclosure, Eviction Moratoriums
Foreclosure and eviction moratoriums backed by Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) have been extended to June 30.
Deadlines for all foreclosure and eviction moratoriums were set to expire on Sunday.
“During this national health emergency, no one should be forced from their home,” said FHFA Director Dr. Mark A. Calabria. “Extending the foreclosure and eviction moratoriums protects homeowners and renters with an Enterprise-backed mortgage and provides certainty for families.”
The FHA announced that it would halt all new foreclosure actions and suspend all foreclosure actions currently in process, excluding legally vacant or abandoned properties. Also, the Administration will cease all evictions of persons from FHA-insured Single Family properties, excluding actions to evict occupants of legally vacant or abandoned properties.
“We made it clear at the beginning of this pandemic that no American should have to worry about losing their home amidst a crisis. Today’s announcement ensures that commitment,” said U.S. Department of Housing and Urban Development (HUD) Secretary Dr. Benjamin Carson. “While we have made great strides in fighting this virus, the fact remains that many Americans are still struggling as we work diligently to get our economy back on sound footing, which I have full confidence we will do through the leadership of the President.”
HUD Deputy Secretary Brian Montgomery said for the more than 8.1 million single-family homeowners with FHA-insured mortgages who need assistance, “our highest priority is to ensure that they have the time through the foreclosure moratorium, and the assistance they need” to remain in their homes.
“At the same time, extending our policy flexibilities will ensure that affordable FHA-insured mortgage financing continues to remain available to support first-time and other homebuyers, and the Nation’s housing market,” Montgomery said.
This comes just 24 hours after the FHFA said the GSEs debuted new payment deferral options for borrowers, saying for those who are able to return to making their monthly payment, they now have the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity.
Servicers will begin offering deferral payment options beginning July 1, 2020.
The FHFA and the GSEs, in response to COVID-19, allowed borrowers facing financial hardship to go into mortgage forbearance programs—a pause or reduction in their monthly payments.
As of May 7, nearly 4.1 million homeowners are in forbearance plans, representing 7.7% of all active mortgages, according to the latest forbearance data from Black Knight. They account for $890 billion in unpaid principal and include 6.4% of all GSE-backed loans and 11% of all FHA/VA loans. At today’s level, mortgage servicers need to advance a combined $4.5 billion/month to holders of government-backed mortgage securities on COVID-19-related forbearances. Another $2.1 billion in lost funds will be faced each month by those with portfolio-held or privately securitized mortgages (some 7.2% of these loans are in forbearance as well).
Freddie Mac reiterates repayment policies in the wake of COVID-19
MCLEAN, Va., April 27, 2020 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC) today reiterated that borrowers in forbearance living in homes owned by the company have many options to repay missed payments and are never required to choose doing so in one lump sum.
Freddie Mac CEO David Brickman made the following statement:
“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. 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.”
In March, Freddie Mac announced it was taking a number of actions to assist homeowners facing financial hardship due to COVID-19. These include forbearance, during which a borrower’s payments are reduced or suspended. While borrowers in forbearance must repay the missed payments, full repayment immediately following forbearance is just one of many options, and they are never required to do so.
Owners facing a hardship are entitled to up to 12 months of forbearance. Servicers will start with a shorter plan and reassess to see if an extension for up to 12 months is necessary. Once the hardship has been resolved, there are several options for borrowers to repay the money owed, including:
Full repayment, known as reinstatement, where you pay back the missed payments and quickly get back on track.
A repayment plan, which allows borrowers to catch up gradually in addition to paying regular monthly payments.
Payment Deferral or modification of the loan, to keep monthly payments consistent and add the borrower’s missed payments to the end of the mortgage.
Modification of the loan, to reduce a borrower’s original monthly payment amount.
Loan servicers will reach out about 30 days before the initial forbearance plan is scheduled to end to determine which assistance program is best or if additional forbearance is needed. Borrowers who believe they are not being offered proper repayment options can reach out to the Consumer Financial Protection Bureau.
FORBEARANCE AND MODIFICATION SERVICE PROVIDERS
If you’re a homeowner behind on your mortgage payments and your mortgage company is not providing any answers or assistance, we are here to help you by providing FREE Forbearance & Modification information and/or assistance.
Fannie Mae’s most recent Lender Letter LL-2017-09 provides more clarification on policies related to disaster relief, which includes additional details for servicers on how to evaluate borrowers for workout options after a disaster-related forbearance. In addition, the Lender Letter introduces the Fannie Mae Extend Modification for Disaster Relief, a new post-disaster forbearance modification developed jointly with Freddie Mac and the Federal Housing Finance Agency (FHFA).
The new Extend Modification for Disaster Relief results in a fixed-rate modification that extends the mortgage loan term in monthly increments to match the number of delinquent payments, not exceeding 12 months. This modification is designed for borrowers who were current or less than 31 days delinquent at the time of the disaster and meet the eligibility requirements as outlined in the Lender Letter. Servicers are encouraged to implement the Extend Modification for Disaster Relief immediately but must begin evaluating borrowers for this new modification program no later than February 1, 2018.
As part of the Lender Letter, Fannie Mae has established guidance to servicers to evaluate borrowers that are unable to become current on their mortgage loans after post-disaster forbearance relief and subsequently require a modification when the property securing the mortgage loan or the borrower’s place of employment is located in a FEMA Declared Disaster Area eligible for Individual Assistance. This guidance provides the hierarchy of modifications for which servicers must evaluate borrowers and the factors servicers should take into consideration in their evaluation. These factors include:
Was the servicer able to establish a Quality Right Party Contact (QRPC)1 with the borrower during the disaster forbearance period?
Can the borrower maintain current contractual principal, interest, taxes, and insurance?|
Can the borrower manage any additional escrow repayment obligation?
Upon reviewing the required factors, the servicer will work with the borrower to determine the appropriate post-disaster-related forbearance plan modification.
The below information illustrates the hierarchy of the modifications for consideration and describes the corresponding steps that are taken for each modification program that Fannie Mae makes available to those impacted by a disaster event.
Cap & Extend Modification
This workout option allows a homeowner to capitalize the delinquency including unpaid interest and advanced escrow payments (taxes and insurance) into the mortgage balance while extending the term (maturity date) in monthly increments to ensure the payment amount established is in line with the original mortgage payment prior the hardship.
With this modification, the interest rate may stay the same depending on if the homeowner has an ARM or fix rate loan, and the market loan-to-value (MTMLTV). The term would be extended to achieve a payment equal to or less than the pre-modified payment.
A borrower response packet is not required for this workout, but the servicer must establish Quality Right Party Contract (QRPC) to confirm the payment is affordable.
For many homeowners facing COVID-19, they have the ability to keep making the regular contractual payment once they are back to work and this option may make sense (example: their place of employment was closed for 3 months and now is back up running with no impact to their wages).
Extend Modification
A Fannie Mae Extend Modification allows a homeowner to extend the term of their loan (maturity date) by the number of miss payments
Example: a homeowner with 20 years (240 payments) left on a 30-year mortgage and is 6 months past due would now have 246 payments left (240+6).
The homeowner will need to replay any miss escrow payments (taxes & insurance) over a period of time (can be spread up to 5 years).
The interest rate would stay the same if the homeowner has a fix rate loan and would be changed if an ARM.
A borrower response package is not required for this workout, but the servicer must establish Quality Right Party Contact (QRPC) to confirm the payment is affordable.
Flex Modification
A Fannie Mae Flex Modification allows a homeowner to capitalize the delinquency into the mortgage balance while extending the term (maturity date) to 480 months (number of payments) and the ARM loans, potentially adjusting the interest rate and potentially providing principal forbearance.
With this modification, the interest rate would stay the same if the homeowner had a fix rate loan and would be changed if an ARM. This mod targets a 20% payment reduction.
With the Flex Modification, a Borrower Response Packet must be completed if the mortgage loan is less than 90 days (3 months) delinquent after forbearance. However, if 90 days (3 months) or more delinquent, a Borrower Response Packet is not required nor QRPC.
Unlike with the first 2 modification options, this workout gives homeowners the best chance at a lowered payment, which may be important for those facing long term income impacts related to COVID-19
For Connecticut Avenue Securities™ (CAS) transactions, the Extend Modification for Disaster Relief will not result in modification loss amounts being passed through to investors. Under our current policy, as with any other modification, a loan must be removed from the MBS trust before any permanent modification is completed. Full details on the Fannie Mae Extend Modification for Disaster Relief and additional details on policies related to disaster relief can be read here.