By Sabrina Karl
The stimulus legislation enacted in late March allows homebuyers experiencing financial hardships due to the coronavirus pandemic to request skipping their mortgage payment for up to 12 months.
But the legislation was devoid of details on how the missed payments would be handled, and confusion — among both mortgage borrowers and servicers — has been swirling.
Last week, the Federal Housing Finance Agency cleared things up, at least for the Fannie Mae and Freddie Mac mortgages it regulates, which account for 70% of U.S. home mortgages.
FHFA Director Mark Calabria said in a statement that borrowers benefiting from pandemic-related programs allowing them to skip mortgage payments, referred to as forbearance, will not have to make lump-sum payments when the crisis passes.
“During this national health emergency, no one should be worried about losing their home,” Calabria said in the statement. “While today’s statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all mortgage lenders to adopt a similar approach.”
The FHFA’s statement does not mean the payments won’t eventually need to be made. Rather than be forgiven, they will be deferred. But this is welcome news to borrowers who wondered, or had even been told, that at the end of their forbearance, they’d have to cough up all the missed payments in a lump sum.
As more Americans find themselves out of work or with reduced incomes due to Covid-19, the share of homebuyers requesting forbearance has climbed steadily. In the Mortgage Bankers Association’s latest weekly reading, almost 7% of borrowers had delayed making payments.
The FHFA said those in forbearance will be contacted before the end of their current agreement to discuss options, from tacking the payments onto the end of the mortgage to establishing a separate repayment plan to modifying the loan.