True Stories: Hybrid, eNote and RON Implementation

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Mortgage

In a bid for stability, FHFA and FHA extend forbearance policies

The extension means some borrowers may not exit forbearance until Dec. 31, 2021.

Major forbearance policy changes have been set into motion.

The Department of Housing and Urban Development announced on Tuesday an extension allowing single-family homeowners with Federal Housing Administration-insured mortgages to request an initial forbearance through Dec 31, 2020.

Homeowners with FHA-insured mortgages that needed assistance due to financial hardship from the pandemic initially had through Oct. 30 to request forbearance. However, a news release from HUD said that the effects of COVID-19, coupled with its impact on borrowers across the country, led them to extend the period.

The FHA requires mortgage servicers to provide up to six months of COVID-19 forbearance when a homeowner requests this assistance, and up to an additional six months of forbearance for homeowners who request an extension of the initial forbearance. In effect, this means some borrowers may not exit this forbearance until the end of 2021.

“By providing this important extension, FHA seeks to assist those struggling with the continued financial effects of the COVID-19 pandemic,” said HUD assistant secretary for housing and federal housing commissioner Dana Wade. “Our goal is to make sure that no homeowner loses their home unnecessarily as a result of this pandemic.”


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The FHA’s forbearance announcement now aligns with its extended foreclosure moratorium, also set to expire Dec. 31. In a bid to keep homeowners in place, the FHA also expanded its menu of loss mitigation options in July that employed a “waterfall method” to help servicers assess homeowners at or before the end of their forbearance period.

The Federal Housing Finance Agency also embarked on forbearance assistance this week after announcing on Wednesday that Fannie Mae and Freddie Mac would continue to buy qualified loans in forbearance through Nov. 30.

In a release, the FHFA said it will continue to share aggregated data with the Consumer Financial Protection Bureau on loans that enter forbearance before delivery to the Enterprises – an action it says “will allow the FHFA to fulfill it obligation under the so-called ‘Qualified Mortgage Patch’ to ensure that loans sold to the Enterprises are complying with the intent of Dodd-Frank’s ability to repay provisions.”

Beginning the second week of October, forbearances fell below 3 million for the first time since April, and as of Oct.16 the number of all mortgages in active forbearance hovered at 5.6%. An August report from Black Knight revealed two and half million homeowners have exited forbearance already – with 1.8 million performing.

Ginnie Mae securities, primarily mortgages backed by the FHA and Veterans Administration, still lead the way in terms of share of loans in forbearance with 9.5% as of Friday. GSE loans, however, settled at 4%.

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