FHFA and HUD Extend Foreclosure Moratoriums – Fannie and Freddie Provide Guidance Regarding Termination of Mortgage Insurance
The Federal Housing Finance Agency (FHFA) announced on December 2, 2020, the extension of the Fannie Mae and Freddie Mac moratorium on single-family foreclosures from December 31, 2020, to January 31, 2021. The moratorium on evictions from single-family homes owned by Fannie Mae or Freddie Mac also is extended until January 31, 2021. The announcement does not address evictions from multi-family properties subject to a Fannie Mae or Freddie Mac loan. Fannie Mae addresses the extension in an update to Lender Letter 2020-02 and Freddie Mac addresses the extension in Bulletin 2020-46. Both Fannie Mae and Freddie Mac advise that the moratorium does not apply to properties determined to be vacant or abandoned.
In Mortgagee Letter 2020-43, dated December 17, 2020, the U.S. Department of Housing and Urban Development (HUD) extended the foreclosure and eviction moratorium for FHA insured single-family loans from December 31, 2020, to February 28, 2021. The FHA moratorium applies to all FHA Title II single-family forward and Home Equity Conversion (reverse) mortgage loans, except for FHA loans secured by vacant or abandoned properties. Deadlines for the first legal action and reasonable diligence timelines are extended by 120 days from the date of expiration of the moratorium.
In the update to Lender Letter 2020-02 and in Bulletin 2020-46, Fannie Mae and Freddie Mac also address a borrower-requested termination of private mortgage insurance. Fannie Mae advises that when verifying an acceptable payment record a servicer must not consider any payment that is 30 or more days past due in the last 12 months, or 60 or more days past due in the last 24 months, that is attributable to the COVID-19 financial hardship when, because of the borrower having a financial hardship related to COVID-19, the servicer provided:
- A COVID-19 related forbearance plan, repayment plan, or Trial Period Plan, and the borrower complied with the terms of such plan;
- A payment deferral; or
- A COVID-19 payment deferral and the borrower made three consecutive monthly payments following completion of the payment deferral.
However, the mortgage loan must be current when the termination is requested. Fannie Mae notes that the temporary policy change is effective for borrower-initiated requests for termination initiated through Fannie Mae’s servicing solutions system on or after March 1, 2021.
Freddie Mac advises that for borrowers who request to cancel mortgage insurance after the mortgage has been restored to current status following the conclusion of a COVID-19 related hardship, the borrower's payment history must meet the following payment history requirements:
- No payment that was 30 days or more past due in the preceding 12 months, except when the delinquency is a direct result of the mortgage being subject to a COVID-19-related hardship (including Mortgages on COVID-19 forbearance plans) and, following the COVID-19-related hardship, the borrower was transitioned to a relief or workout option to cure the delinquency (e.g., repayment plan or Trial Period Plan).
- No payment that was 60 days or more past due in the preceding 24 months, except when the delinquency is a direct result of the mortgage being subject to a COVID-19 related hardship (including Mortgages on COVID-19 forbearance plans) and, following the COVID-19 related hardship, the borrower was transitioned to a relief or workout option to cure the delinquency (e.g., repayment plan or Trial Period Plan).
- For mortgages restored to current status under the COVID-19 Payment Deferral, the borrower must make three consecutive payments following the settlement of the COVID-19 Payment Deferral to meet this qualification requirement.
Both Fannie Mae and Freddie Mac advise that the guidance on the termination of mortgage insurance applies regardless of whether the request to cancel borrower-paid mortgage insurance is based on the original or current value of the home.
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