As previously reported, on March 18, 2020, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to suspend foreclosures and evictions in connection with single-family mortgages for at least 60 days, and President Trump also announced that the Department of Housing and Urban Development is suspending foreclosures and evictions for at least 60 days. Fannie Mae, Freddie Mac, and HUD have now issued guidance to the industry, with the Fannie Mae and Freddie Mac guidance including additional measures.
CFPB Director Kathleen Kraninger issued a statement supporting the suspension of foreclosures and evictions.
HUD Mortgagee Letter 2020-4 provides for a 60-day moratorium from March 18, 2020, on forbearances and evictions. The moratorium applies to all FHA Title II Single Family forward mortgage loan programs and Home Equity Conversion Mortgage (i.e., reverse mortgage) loan programs. With regard to foreclosures, the moratorium applies to the initiation of foreclosure and the completion of any foreclosure in process. Additionally, the first legal action deadlines and reasonable diligence timelines are extended by 60 days.
Based on the announcement by President Trump that the foreclosure moratorium period would be at least 60 days, there is the potential for an extension of the moratorium.
In Lender Letter 2020-02, Fannie Mae addresses the suspension of foreclosures and other measures regarding borrowers affected by COVID-19.
Suspension of Foreclosure Sales. Fannie Mae servicers must suspend foreclosure sales for 60 days from March 18, 2020. The suspension does not apply to mortgage loans on properties that have been determined to be vacant or abandoned. Based on the announcement by FHFA that the suspension period would be at least 60 days, there is the potential for an extension of the suspension period.
Forbearance Plan Eligibility. For borrowers who have experienced a hardship because of COVID-19 that has affected their ability to make their monthly mortgage loan payment, the servicer should evaluate each borrower for a forbearance plan in accordance with Servicing Guide Section D2-3.2-01, Forbearance Plan. The servicer does not have to obtain documentation of the borrower’s hardship. Before offering a forbearance plan to a borrower, the servicer must achieve a quality right party contact with the borrower. The property securing the loan may be a principal residence, second home or investment property. The servicer must otherwise follow the requirements in Servicing Guide Section D2-3.2-01, Forbearance Plan.
Loan Modifications. The Lender Letter also addresses requirements for servicers to evaluate a borrower who receives a forbearance plan in response to COVID-19 for a loan modification. Fannie Mae is extending the availability of post-forbearance modifications for borrowers affected by a FEMA-Declared Disaster Area to borrowers affected by COVID-19.
Credit Bureau Reporting. If a delinquency is related to COVID-19, a servicer must suspend the reporting of the mortgage loan to credit bureaus during an active forbearance plan, or a repayment plan or Trial Period plan if the borrower is making the required payments as agreed, even though payments under the promissory note are past due.
Disaster Response Network. Fannie Mae advises that its Disaster Response Network is operational and can be used to assist borrowers who are financially affected by COVID-19. Servicers are encouraged to refer Fannie Mae borrowers to the Network at 1-877-232-6643.
In Bulletin 2020-4, Freddie Mac addresses the suspension of foreclosures and other measures regarding borrowers affected by COVID-19. The servicer will determine what constitutes a COVID-19 related hardship and must treat all borrowers equally when making this determination.
Suspension of Foreclosure Sales. The guidance in the Bulletin is identical to the Fannie Mae guidance.
Forbearance Plan Eligibility. Freddie Mac advises that a COVID-19 hardship is an eligible hardship under existing Seller/Servicer Guide (Guide) requirements, and that borrowers that are affected by COVID-19 meet Freddie Mac’s forbearance hardship requirements as described in Guide Section 9202.2. Freddie Mac notes that borrowers affected by COVID-19 may include situations such as long-term or permanent disability/serious illness of a borrower/co-borrower or dependent family member, reduction in income, death or other eligible hardship reasons. No documentation is required from the borrower in order to verify the hardship. A servicer must achieve quality right party contact with the borrower to verify the hardship, and once verified must work with the borrower to apply the appropriate solution, including the application of a forbearance plan, if applicable.
Loan Modifications. The Bulletin also addresses requirements for servicers to evaluate a borrower who receives a forbearance plan in response to COVID-19 for a loan modification. Freddie Mac is extending the availability of post-forbearance modifications for borrower’s effected by COVID-19 under the Freddie Mac Extend Modification for Disaster Relief in accordance with Bulletin 2017-25 and Guide Section 9206.4.
Borrower Contact Requirements. Among other requirements, the Bulletin provides that the servicer must initiate outreach attempts no later than 30 days prior to the end of the borrower’s COVID-19 related forbearance, and must attempt to contact the borrower until quality right party contact has been established or until the forbearance plan has expired.
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