A sign advertising home mortgage services at a Bank of America branch in Manhattan Beach, Calif.
Patrick T. Fallon | Bloomberg | Getty Images
Federal regulators have changed rules and cleared up some confusion about limits placed on the more than 4 million borrowers in the mortgage relief program the government rolled out to contend with the coronavirus’s economic onslaught.
Lending rules that were in place before the pandemic left borrowers with little clarity about how they could get future mortgages or refinance their loans. Yet on Tuesday, the director of the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, announced that borrowers may now refinance or buy a home with a new mortgage if they have begun to make payments on their current mortgage again.
They can do this if they’re in the forbearance program, or also if they have gotten out of it already. But they have to have made at least three months’ worth of payments. The previous guidelines had said borrowers must be current on their mortgage for at least a year.
“Homeowners who are in COVID-19 forbearance but continue to make their mortgage payment will not be penalized,” said FHFA Director Mark Calabria. “Today’s action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as efficiently as possible.”
There had been some confusion on the part of lenders and servicers as to when borrowers now current on their loans could get back into the market. In addition, some borrowers claimed they had been unknowingly put into the forbearance program just by calling to ask for information about it.
“We appreciate clear guidance from FHFA and feel these responsible parameters will allow lenders to serve well-qualified borrowers in their purchase of a new home,” said Debra Still, president and CEO of Pulte Mortgage, a division of one of the nation’s largest homebuilders.
The FHFA is also extending Fannie and Freddie’s ability to purchase single-family mortgages that are in forbearance. They can now buy forborne loans, with note dates on or before June 30, as long as they are delivered to the two by Aug. 31, and have only one missed mortgage payment. The previous policy was set to expire on May 31.
“These welcome moves ensure that homeowners who continue to make on-time payments – and those who have successfully exited forbearance – can benefit from near record-low mortgage rates,” said Bob Broeksmit, CEO of the Mortgage Bankers Association. “It also keeps the mortgage market functioning efficiently and helps ease current credit availability constraints.”
Borrowers may apply for mortgage forbearance with no proof of hardship, only declaring that they are unable to make their monthly payments. While the number of borrowers continues to increase, now with just more than 8% of all borrowers in forbearance, according to the MBA, the weekly volume of new applicants is shrinking.