There is good news on the lending front. The Federal Housing Finance Agency (FHFA), the government agency that oversees Fannie Mae and Freddie Mac, has announced that the “waiting period” for a Fannie Mae and Freddie Mac post-forbearance loan is dropping from 12 months to 3 months. This is huge for anyone who entered into forbearance but would have been shut out of the summer market. Additionally, since rates are expected to stay low, Fannie Mae and Freddie Mac provide a tremendous opportunity for struggling homeowners to more readily bounce back with a refinance.
The specific information from Fannie Mae is as follows
Under the temporary eligibility guidelines, effective immediately, homeowners who missed payments and entered into a loss mitigation solution – such as a repayment plan, payment deferral, or loan modification – are eligible for a new refinance or purchase mortgage after three timely payments.
There is no waiting period for borrowers who missed payments due to a COVID-19 financial hardship but have since completed reinstatement by repaying the full amount of the outstanding payments missed during the forbearance period.
There also is no waiting period for borrowers who requested forbearance due to a COVID-19 financial hardship but ultimately were able to make all their payments in full and on time.
What this also introduces into the process in an imperative that homeowners need to act deliberately on their post-forbearance plan to get the 3-month clock started. This does not happen automatically and most if not all lenders/mortgager loan servicers have easy automated systems to select a post-forbearance plan.
Fannie Mae and Freddie Mac Post-Forbearance Plans
There are several options that you will likely see for post-forbearance plans. The first is a balloon payment under which you pay the full amount of past payment in a single lump sum. The second is a payment plan that decreases the amount over a set period ranging from 6 to 12 months. This partial payment gets added to your regular mortgage payment until it is completely paid off. Finally, it is a modification under which the terms of the loan are modified to allow the homeowner to pay back the missed payments without drastically affecting the payment. This can include everything from adding the payments to the end of the loan to lowering the rate.
Regardless of what you choose, you MUST be proactive. Many lenders are overrun with new loan production and managing servicing of loans in forbearance. The sheer volume is overwhelming systems that were never created to manage the number of clients. Make certain that you know what you need to pay. If you want to refinance or buy in the next six months, your current financials will help meet future requirements.