Legal Alert

Freddie Mac Updates Guidance on Eligibility for New Loans for Borrowers With a Forbearance

by the Mortgage Banking Group
May 26, 2020

As previously reported Fannie Mae in an update to Lender Letter 2020-03 and Freddie Mac in Bulletin 2020-17 announced temporary eligibility requirements for new purchase and refinance transactions involving borrowers affected by the COVID-19 pandemic who are, or have been, in a forbearance with their existing mortgage loan. On May 22, 2020 Freddie Mae reissued Bulletin 2020-17 to make two revisions.

Previously the Bulletin indicated that for a borrower subject to repayment plan, under the additional eligibility requirements, the borrower must have (1) made three payments under the plan or (2) completed the plan, whichever occurs first (there is no requirement that the plan actually be completed). The guidance now reflects that the three payments must be consecutive. Additionally, Freddie Mac previously noted that the proceeds from the new mortgage loan may be used to pay off the remaining payments under the repayment plan being refinanced or any other mortgage. The revised guidance simply provides that the proceeds from the new mortgage loan may be used to pay off the remaining payments under the repayment plan.

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