FHFA Extends Forbearance Program On Purchase of Qualified Loans

The Federal Housing Finance Agency (FHFA) has approved an extension of the current temporary policy to support homeowners and mortgage lenders. This policy allows the purchase of certain single-family mortgages in forbearance that meet specific eligibility criteria as set by Fannie Mae and Freddie Mac (the Government Sponsored Enterprises, GSE). The policy is extended for loans originated through November 30, 2020.

What is this temporary policy all about? 

FHFA and Consumer Financial Protection Bureau (CFPB) launched the Borrower Protection Program earlier this year. The program ensures that borrowers are protected during the coronavirus national emergency. It also facilitates related information sharing between FHFA and CFPB to verify that borrowers are qualifying for mortgages they can afford.

By sharing aggregated data with the CFPB on loans that enter forbearance before delivery to the GSEs, it will fulfill FHFA’s obligation under the so-called “Qualified Mortgage Patch” that ensures all loans sold to the GSEs are complying with the intent of Dodd-Frank’s ability to repay provisions.

When the COVID-19 crisis came, there were some borrowers who requested forbearance shortly after closing but before the lender could deliver the loan to its respective GSE.

Under normal situations, mortgage loans in either forbearance or delinquency are not eligible for delivery under GSE requirements. However, in response to the COVID-19 crisis, FHFA, through a temporary policy, announced the delivery of certain single-family mortgages even in forbearance.  Today’s extension allows this policy to continue for loans originated through November 30, 2020.

Furthermore, eligible loans will continue to be priced to mitigate the heightened risk of loss to the GSE from the said loans. These prudential measures will ensure fulfillment of the GSEs’ charter requirements to only purchase loans that meet the purchase standards imposed by private, institutional mortgage investors.

FHFA will continue to monitor the coronavirus’ impact on renters, borrowers, and the mortgage market and update policies as needed.

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