Fannie Mae & Freddie Mac to allow post-forbearance payments

Mortgage servicers Fannie Mae and Freddie Mac have said in a joint announcement that homeowners in forbearance will be able to request deferrals on their payments, and add any missed payments onto the end of their loan term without any penalty or additional interest.

Forbearance simply gives homeowners who’re struggling to pay their mortgages a few months’ relief, but they’re still required to make up any missed payments. But borrowers won’t be forced to make up for those missed payments all at once, the mortgage servicers said.

According to Freddie Mac, borrowers that take one of its mortgage deferral options will eventually have to resume their normal, pre-COVID-19 payment amounts by adding up to 12 months of missed payments to the end of their term. Borrowers won’t accrue any extra interest or late fees. The offer is effective from July 1, when Freddie Mac will begin evaluating homeowners suffering from hardship due to the coronavirus outbreak, to see if they’re eligible.

“Our main focus continues to be finding new and innovative ways to help borrowers and their families during this pandemic,” said Donna Corley, executive vice president and head of Freddie Mac’s single-family business. “Our payment deferral solution adds another tool to our toolbox to help homeowners pick up where they left off once they’ve recovered from a short-term financial hardship.”

Both Fannie and Freddie are allowing homeowners affected financially by the pandemic to defer payments for up to a year through forbearance. Almost 4 million homeowners have already taken advantage of their offer, according to data from mortgage analytics company Black Knight.

Loan servicers will reach out to homeowners about 30 days before a forbearance plan is up, to determine what kind of repayment plan is necessary.

Fannie Mae says that homeowners will have several options to pay back missed payments, including rolling the payments to the end of their mortgage as well as repaying in full — if they wish to - or setting up a repayment plan to gradually catch up.

Both Fannie and Freddie said loan modifications could also be possible, depending on the borrower’s situation.

The National Association of Realtors has welcomed the move, saying it provides greater certainty to homeowners during this difficult time.

The plan provides “solutions and some much-needed certainty to the millions of U.S. families facing unemployment and unsure how they will cover next month’s bills," said Vince Malta, president of the NAR. "This flexibility will be invaluable for American consumers as we begin to emerge from this crisis and restart our economy."

Fannie Mae and Freddie Mac both provide lookup tools for homeowners to determine if their home loan is owned by one of them.