Millions of Americans are contacting their mortgage servicers to set up a mortgage forbearance plan as a result of the health and economic impacts of the coronavirus. However, they are starting to realize it’s increasingly important to have a clear way to repay the amount they owe once the forbearance period ends. Meanwhile, some homeowners are not on a mortgage forbearance plan, but still face a financial hardship related to COVID-19.
Fannie Mae not only offers repayment options but also provides a new option to help. In May, we announced the COVID-19 payment deferral, which became available July 1. Here are four key facts to know about this repayment option.
COVID-19 payment deferral allows homeowners to repay at a later date.
Homeowners who are eligible either entered a mortgage forbearance plan or did not enter a forbearance plan but missed payments as a result of their financial hardship related to COVID-19. The new repayment option lets eligible homeowners defer unpaid mortgage payments. Their payments become a noninterest-bearing balance. The balance is either due at the maturity date or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the mortgage loan.
COVID-19 payment deferral is the newest home retention repayment option for homeowners
The COVID-19 payment deferral is a good repayment option for many homeowners because it’s easy to explain, immediately resolves the arrearage, and it gives the homeowner time to regain their financial footing.
COVID-19 payment deferral is easy to execute for mortgage servicers
Execution of the COVID-19 payment deferral is seamless for a number of reasons: It has no trial period, both Fannie Mae and Freddie Mac follow its implementation requirements, and the Servicing Management Default Underwriter™ (SMDU™) enables automation.
If homeowners don’t meet the eligibility requirements for COVID-19 payment deferral, they still have other repayment options
Every homeowner’s financial situation is different. The COVID-19 payment deferral will not work for everyone. Homeowners who don’t utilize COVID-19 payment deferral still have three options to help them get back on track: mortgage reinstatement, a repayment plan, or loan modification.