Perspectives Blog

Getting Help to Where It’s Needed Most

October 16, 2020
Malloy Evans
Malloy Evans

Senior Vice President, Single-Family Chief Credit Officer

Steve Holden
Steve Holden

Vice President, Single-Family Analytics and Modeling

The COVID-19 health pandemic has had far-reaching effects across the globe. In addition to the tragic health consequences, millions of people in the United States have been impacted financially as a result of widespread furloughs, job loss, and business closures, which have left many unable to pay their mortgages.

In this crisis, Fannie Mae’s job is to responsibly keep those impacted by the pandemic in their homes wherever possible. This is central to our mission and why we exist to serve the housing market in both good times and bad times. As Fannie Mae CEO Hugh Frater said at the outset, our company will “lean into the housing challenges brought by the pandemic.” That’s why in mid-March, in coordination with the Federal Housing Finance Agency, we began taking steps to halt foreclosures, stop evictions, and provide relief to those who were struggling to make their mortgage payments. These protections were subsequently codified in the CARES Act.

One of the most important and effective tools to help struggling homeowners in an uncertain environment is payment forbearance, which allows borrowers to suspend their monthly mortgage payments for up to a year.

We knew that millions of homeowners would need our help. At the onset of the pandemic, we quickly began working with our network of servicing companies to ramp up the tools Fannie Mae uses to help borrowers struggling with mortgages that Fannie Mae owns or guarantees. These servicers interact directly with borrowers on a day-to-day basis, and we wanted to ensure that our forbearance relief option was made widely available to anyone affected by the pandemic.

Those efforts paid off. In February, roughly 6,000 Fannie Mae single-family home borrowers – out of 17 million total – were in an active forbearance plan. By May, that number had surpassed 1 million.

We consider the response an enormous success. Implementing forbearance plans at this scale and this rapidly is challenging and costly. But it is essential. We know that during times of sudden economic hardship, the most effective way to help – and prevent much costlier and disruptive issues down the road – is to responsibly provide relief that allows borrowers to stay in their homes until the uncertainty passes and their finances stabilize.

We’re now six months into the pandemic, and we continue to look for ways to ensure as many borrowers as possible who need assistance are taking advantage of our relief options. We examine who is, and who is not, in forbearance to improve our outreach and implementation. We want to ensure that we have taken all reasonable steps to help those borrowers who need it.

To date, the data show that our forbearance efforts have been successful. Of the borrowers most clearly affected by the pandemic (those who were current on their mortgage payments in February but at least two payments behind* at the end of August), more than 96% took advantage of a forbearance plan. This is a remarkable statistic and demonstrates the ability of Fannie Mae and its servicers to reach the overwhelming majority of troubled borrowers with a solution that provided immediate assistance.

Equally important is the question: Who is taking advantage of forbearance, and are there communities being left out of this vital assistance – particularly historically underserved communities or borrowers of color?

Here’s what we know: Non-white borrowers who have a COVID-related mortgage delinquency have taken up forbearance plans at slightly higher rates than all such borrowers overall. Through August: 

  • About 95.6% of borrowers identified as non-Hispanic white in a COVID-related delinquency had entered into a forbearance plan.
  • The same statistic for borrowers identified as Black was 96.5%; 97.8% for Hispanic borrowers; and 98.5% for Asian borrowers.

The data notwithstanding, we know that there remain borrowers who can and should take advantage of forbearance plans but who, for whatever reason, have not. That’s why we continue to work to try to educate as many struggling borrowers as possible about the relief options that we’re making available to them. In the weeks after the crisis began, Fannie Mae launched its Here to Help campaign across print, television, digital, and social media outlets to reach consumers with information and tools to help both homeowners and renters stay housing secure during the pandemic. In addition to this work, we continue to evaluate forbearance patterns among both borrowers and servicers, with an eye toward improving our outreach.

The COVID-19 crisis will be with us for some time. While the economy is recovering, risks remain, and we are a long way from returning to pre-pandemic levels. Despite the number of homeowners in forbearance declining month by month, the solutions for many borrowers will need to be long-term. Few borrowers will realistically be able to repay a series of missed monthly payments all at once. So, we are offering borrowers more lasting, sustainable resolutions, including repayment plans, deferring missed payments to when the loan is paid off, or more permanent modifications that reduce a borrower’s monthly payments for the life of the loan.

All of which is to say that while we at Fannie Mae are encouraged by the progress so far, we know that much more work is ahead to help our borrowers get back on their feet and recover from the financial impacts of the COVID-19 pandemic.

Malloy Evans
Senior Vice President, Single-Family Chief Credit Officer

Steve Holden
Vice President, Single-Family Analytics and Modeling

October 16, 2020

* For this analysis, we chose loans that are 60 days or more delinquent (instead of 30 days) because each month Fannie Mae experiences a certain number of loans that miss a single payment but are subsequently brought current by borrowers without any intervention from servicers. Therefore, 60 days or more delinquent is a more reliable measure of those borrowers who may need a forbearance plan.