The Federal Housing Finance Agency is extending the length of time that borrowers can be in a COVID-related forbearance on mortgages back by Fannie Mae and Freddie Mac.
Originally, Fannie Mae and Freddie Mac instructed loan servicers that mortgage borrowers could request up to 12 months of forbearance on their mortgages as a result of the coronavirus pandemic.
Now, the FHFA is allowing these borrowers to request a forbearance extension of up to three months, the agency announced Tuesday.
While in forbearance, mortgage borrowers are not required to make their monthly mortgage payments. When forbearance ends, these borrowers have a range of options to choose from to pay back the owed amount, including tacking the missed payments onto the end of the mortgage’s duration.
Homeowners must already be in forbearance on their mortgage by Feb. 28 to qualify for the three-month extension.
Separately, the FHFA is extending the moratorium on single-family foreclosures and evictions for properties with mortgages backed by Fannie and Freddie by one month until March 31. FHFA Director Mark Calabria said the steps were being taken “to keep families in their home during the pandemic.”
The FHFA expects that Fannie and Freddie will bear between $1.5 billion and $2 billion in expenses as a result of the COVID-19 foreclosure moratorium.
As of Jan. 31, 3.07% of Fannie Mae and Freddie Mac loans are in forbearance, according to recently-released data from the Mortgage Bankers Association. That’s better than the overall forbearance rate for all mortgages nationwide, which stands at 5.35%.
The number of loans in forbearance decreased at the end of January, the Mortgage Bankers Association reported. “While new forbearance requests increased slightly at the end of January, the rate of exits picked up somewhat but remained much lower than in recent months,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.
Fratantoni had expected the rate of exits from forbearance to pick up in March and April as people came up against the original 12-month deadline to resume making payments. He warned that, given the employment situation nationwide, homeowners who are unemployed and still in forbearance would “need additional support until the job market recovers to a greater extent.”