Use this resource to support your conversations with homeowners about options after a forbearance plan or otherwise resolving a hardship related to the new coronavirus (COVID-19).
What options are available after a mortgage forbearance plan?
Homeowners with a resolved hardship related to COVID-19 (including those who are exiting a forbearance plan) have options to bring their loan current. Servicers should discuss options with homeowners and determine eligibility.
Options after a forbearance plan include:
Homeowner resumes making their regular monthly mortgage payments and repays the missed amount all at once at the end of the forbearance plan.
Guidance: Servicing Guide F-2-11, Fannie Mae’s Workout Hierarchy
Homeowner resumes making their regular monthly payments, plus an additional portion of the missed amount each month, until the missed amount is paid off.
Guidance: Servicing Guide D2-3.2-02: Repayment Plan
COVID-19 payment deferral
Homeowner resumes making regular monthly payments, but no extra amounts. This deferral resolves the hardship by deferring the missed amount (including any servicing advances and escrow advances made on their behalf for taxes and/or insurance) to the maturity date as a non-interest bearing balance. The deferred amount is due on the maturity date (or earlier whenever the home is sold, or the loan is refinanced or otherwise paid off).
Guidance: Lender Letter LL-2020-07, COVID-19 Payment Deferral
Fannie Mae Flex Modification
Homeowner is experiencing a permanent impact to their ability to pay their regular monthly mortgage payment. After the homeowner completes a trial period plan, all unpaid amounts are added to the unpaid principal balance, and monthly mortgage payments are permanently modified to what may be a lower amount through a rate reduction and a term extension to 40 years (480 payments) from the effective date of the modification. In addition, a portion of the interest-bearing balance may be converted to a non-interest bearing principal balance due at the maturity date (or earlier whenever the home is sold, or the loan is refinanced or otherwise paid off) The homeowner may pay more total interested because the loan is extended over a new 40-year term.
Guidance: Servicing Guide D2-3.2-06: Fannie Mae Flex Modification
Introducing the COVID-19 payment deferral
This solution is simple to explain to borrowers. The unpaid amount is deferred into a non-interest bearing balance, due and payable at maturity of the loan or earlier payoff. All other terms of the mortgage remain unchanged. There’s no trial period, which results in fewer borrower touchpoints than required for loan modifications. Evaluation and decisioning case submissions will be efficiently automated through Servicing Management Default Underwriter™ (SMDU™).