Fannie Mae has updated their Lender Letter to require that a borrower be evaluated for payment deferral prior to other mortgage loan modifications.
Freddie Mac has announced similar changes, with the Freddie Mac Payment Deferral program. According to the GSE, effective January 1, 2021, Freddie Mac will launch a loss mitigation solution for borrowers who became delinquent due to a short-term hardship that has since been resolved.
"Customers want deferrals on the front end, as a 'right now' option," said Courtney Thompson, SVP, Default Mortgage at Flagstar Bank. "I think consumers would be much happier with the relief we could offer them if that deferral was available now."
According to Freddie Mac, the Payment Deferral is designed to provide relief to eligible Borrowers who have the financial capacity to resume making their monthly payments, but who are unable to afford the additional monthly contributions required by a repayment plan.
This development follows upon the FHFA’s announcement that the GSEs would provide payment forbearance to borrowers impacted by the coronavirus. This forbearance would permit a mortgage payment to be suspended for up to 12 months due to hardship considerations.
Additionally, suspension of foreclosures and evictions for mortgages backed by the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) will extend at least 60 days.
"I was happy to see the GSEs came out with a simple deferment program that helps out borrowers and defers payments to the end of term while they're going through their difficulties," said Wes G. Iseley, Senior Managing Director, Carrington Holding Company, LLC, and Chair of the National Mortgage Servicing Association (NMSA). "We hope that FHA and HUD will look at this and adopt a similar program as well."
In a letter to HUD, the NMSA recently advocated for deferments as the best tool to help homeowners and the industry during this time.
“This option is preferred over forbearances, trial options, and modifications currently being discussed to assist homeowners,” the letter states.
“Deferments have assisted borrowers in times when there is a short-term financial disruption,” it continues. “A deferment is an extension of the term of the loan with the coupon rate remaining. The borrower would resume monthly payments at the end of the deferment period as adjusted by any interim escrow analysis change in payment.”
As the letter notes, no firm is staffed adequately to accommodate the documentation, analysis, calculation, recording, and paperwork required for the levels of forbearance, trial plans, and modifications projected in the current crisis. For reference, staffing numbers would need to be brought to the type of multiples of servicing headcount not seen since the financial crisis of 2008.
Here's a link where you can track related announcements from FHFA, Fannie, and Freddie.