Fannie and Freddie Creating a New Forbearance Repayment Plan
Approximately 3.5 million homeowners have now asked for their mortgage payments to be put on hold due to the coronavirus epidemic (COVID-19). This is according to the latest Forbearance and Call Volume Survey from the Mortgage Bankers Association. The (MBA) revealed that the total number of loans in forbearance has increased from 5.95% to 6.99% as of April 19th, 2020.
Share of FHA and VA Loans in Forbearance Nears 10%
When measured comparatively, FHA loans and VA loans continue to exhibit the worst forbearance rates relative to other home loan types. This may also be attributable to their lower credit score requirements, and higher loan-to-value ratios (LTVs), with the VA requiring no down payment at all for borrowers.
The agencies Fannie Mac and Freddie Mae are reportedly working on a new way to repay mortgage forbearance and it mirrors the FHA’s partial claim that creates an interest-free second mortgage. This plan could also lead to even higher forbearance rates due to clarity on forbearance going forward and it being a good deal for borrowers.
The plan is to offer a partial claim where the missed payments are basically set aside in an interest-free second mortgage that doesn’t need to be paid back until you refinance your first mortgage or sell your home. This makes it easier for borrowers to get back on their feet financially, without having to worry about making up the shortfall when normal monthly payments resume. And it appears Fannie and Freddie are looking at the same type of plan, according to an article over at Bloomberg. MBA CEO Bob Broeksmit told the publication “they plan to soon announce a repayment plan similar to the one already offered by the FHA.”
Broeksmit said it would likely “be a top choice for borrowers,” and “lighten the processing load for servicers.”
This new policy will allow for even more homeowners to opt for forbearance, given the unbeatable deal of missed mortgage payments that don’t need to be repaid until you sell. Details will be announced within the next two weeks.
Contact one of our loan consultants to learn more.