Well, another week and even more changes to the expected post COVID-19 lending landscape. As expected, Fannie Mae and Freddie Mac have somewhat softened their stance on the impact for forbearance on new mortgage applications. The details are still coming out and for some there may still be challenges or prohibitions, but the news is mostly good, especially if you HAVE to refinance to meet the requirements of your divorce decree.
If you will recall, Fannie Mae and Freddie Mac released information several weeks ago communicating that there would be a 12-month prohibition on any new loans for anyone who entered into forbearance. At the time this seemed, pretty draconian as it also applied to people who changed their mind and even homeowners who selected forbearance as a backup, but never missed a payment.
The information that came out this week is not 100% clear and mileage may vary by lender, but here is a quick rundown
- If you requested forbearance, but never deferred a payment during the forbearance period i.e. you made all of their payments, in the months they were due, you should be OK. Expect to provide proof that you that you are current and never skipped a payment with most lenders under these circumstances.
- If you requested forbearance and deferred a payment during the forbearance period but are bringing their mortgage current. You must exit forbearance, bring their mortgage current, i.e. no back owed payments. As with before, you will need to show proof that you are current, but in this case, you will have to show where the money came from to bring the loan current. This cannot be undocumented cash, so plan accordingly.
- If you requested forbearance and did defer one or more payments, but cannot get current immediately, all is not lost. First, always remember that there is a reason why you did it and it got you through a touch time. In this case, refinancing or purchasing a home is the least of your considerations. The good news is that all is not doom and gloom.
- If you need to defer the payments to the end of the loan through a modification, expect the requirement to show 3 consecutive payments after signing the final agreement. As before, keep good records of everything, so that you can clearly show a lender that why you went into forbearance and that you are back on track.
- If you enter a repayment plan whereby you get current over a period of time, you will need to show 3 consecutive months of on-time payment under the repayment plan. Again, document, document, document. Make sure you know what you need to what you need to pay when and make the payment on time.
This is actually amazing news for anyone who used forbearance. The original news had the possibility of completely killing the real estate market and this means that there are options for this who were impacted by COVID-19. As I said before, this is what we see today and it could change. Also, lenders can decide to make requirements more rigorous, so make sure that you ask the right questions or get help.