Fannie Mae: “Refer to the Selling Guide for requirements pertaining to Remote Ink-Signed Notarization (RIN).”
Fannie Mae: See Lender Letter LL-2021-02, Impact of COVID-19 on Servicing.
Fannie Mae: Any financial hardship that impacts the borrower’s ability to make mortgage payments as a result of COVID-19, including illness of the homeowner or a dependent, is an eligible hardship that would qualify them for a forbearance plan and/or consideration for other Fannie Mae workout options.
Fannie Mae: If a borrower contacts a servicer indicating they are impacted by COVID-19, the servicer must determine if the borrower has experienced an eligible hardship (for example, unemployment, reduction in regular work hours, or illness of a borrower/co-borrower or dependent family member). For example, if a borrower is ill or quarantined and unable to work and, as a result, experiences a reduction in income that impacts the borrower’s ability to make their monthly mortgage payment, the borrower may be eligible for one of our existing workout options (in accordance with our workout hierarchy). For this situation, a forbearance plan may be an ideal workout option to consider. For more information, see Lender Letter LL-2021-02, Impact of COVID-19 on Servicing and LL-2021-07, COVID-19 Payment Deferral.
Fannie Mae: “If a borrower’s outstanding payments were resolved through a COVID-19 payment deferral, the borrower must have made three consecutive monthly payments after the completion of a COVID-19 payment deferral to be eligible for a new mortgage loan for sale to Fannie Mae. See Lender Letter LL-2020-03, Impact of COVID-19 on Originations.”
Fannie Mae: “Our Disaster Response Network (DRN) is operational and can be used to assist borrowers who are financially impacted by COVID-19. The DRN has trained financial counselors who will work with borrowers to create a workable budget based upon the borrower’s present financial situation and assist in explaining options including obtaining unemployment benefits and any new special assistance. We encourage servicers to refer Fannie Mae borrowers to our Disaster Response Network at 1-877-542-9723.”
Fannie Mae: “No. A borrower who enters a forbearance plan may continue making scheduled payments and thus not necessarily become delinquent.”
Fannie Mae: “Pursuant to Fannie Mae’s guaranty to the MBS Trust, MBS investors receive scheduled principal and interest for all loans in the MBS pool. While the loan is in forbearance and in a Fannie Mae MBS, investors continue to receive scheduled principal and interest even if the borrower does not make their contractual payments.”
Fannie Mae: ”
For both MBS and CRT disclosures: • when a loan is in a temporary payment forbearance plan in which the borrower is not making payments, or making partial payments3 , it will be reported as delinquent. • if the loan is brought current through a reinstatement (full single lump sum payment) it will be reported as current. • if the loan is in a repayment plan post the temporary payment forbearance plan, it will be reported as delinquent until the repayment plan is complete. Once the borrower enters the repayment plan, the loan delinquency status will no longer increase4 . As the borrower makes their agreed upon payments, the loan will be reported as progressively less delinquent until the plan is complete and the loan is reported as current. • if the loan is in a COVID-19 payment deferral plan, it will be reported as current once Fannie Mae’s systems are updated with the payment deferral terms. • if the loan is in a modification, it will be reported as delinquent during the modification trial period and will be reported as current once it is in a permanent modification. Loss mitigation options resulting in a modification will generally require the loan to be removed from the MBS. However, during any modification trial period, the loan will remain in the MBS until the trial period ends.”
Fannie Mae: “The servicer may request reimbursement for advances it has made for property taxes, insurance premiums, applicable HOA dues, and other out of pocket expenses by submitting a request for expense reimbursement as soon as possible after incurring an expense. For additional details, including instances when multiple requests for reimbursement are submitted in connection with the same mortgage loan, see Servicing Guide Section E-5-01, Requesting Reimbursement for Expenses.”
Fannie Mae: “Beginning with our monthly MBS disclosure file published in June 2020, for all outstanding securities, market participants can see the number of loans, percentage of loans, UPB, and percentage of UPB reported as delinquent at the pool level.2 This includes loans in temporary forbearance if the borrower is only making partial or no payments, although principal and interest payments are being advanced to the certificate holder. Beginning with the March 2021 disclosure files, we also provide delinquency data at the loan level. Previously, loan level delinquency information was only available for re-performing loan (RPL) pools. We also provide a Borrower Assistance Plan stratification for the monthly MBS disclosure file that sets forth the number of loans, percentage of loans, UPB, and percentage of UPB for mortgages underlying each security that are in a forbearance plan, repayment plan, trial period plan, other workout option, or no workout option. This field in the monthly files will be published on a one-month delay due to the timing of our servicing reporting cycle. For example, the values populated in this stratification in the monthly MBS disclosures published in July correspond to the delinquency status represented in the Days Delinquent stratification in the monthly MBS disclosures published in June. Beginning with the March 2021 disclosure files, we also now provide the Borrower Assistance Plan attribute at the loan level. For Fannie Mae, servicers are required to report that a loan is in an active forbearance plan, even if the borrower is making contractual payments on such loan. As a result, a loan in an active forbearance plan that is making contractual payments and remains current will be disclosed as being in forbearance plan as part of Borrower Assistance Plan disclosures. For Credit Risk Transfer (CRT), delinquency is disclosed at the loan-level. Beginning with the September 2020 remittance report (July 2020 activity), Fannie Mae replaced the loan-level forbearance indicator with the Borrower Assistance Plan attribute. The updated field will still be published on a two-month delay, which is aligned with current CRT disclosure timing. See Appendix A for additional details regarding the impact to CRT reporting.”
Fannie Mae: “For loans that become current through a reinstatement or repayment plan, servicers recoup the advanced principal and interest as the borrower makes up the missed payments. For loans that enter into a COVID-19 payment deferral plan, and therefore remain in the MBS trust, servicers are reimbursed by Fannie Mae for advanced principal and interest when the COVID-19 payment deferral terms are finalized and updated in Fannie Mae’s system and the mortgage loan has been brought current. For loans that are purchased out of the MBS trust by Fannie Mae, such as delinquent loans not in one of the above plans, or loans that are purchased out of the trust prior to the completion of a permanent modification, servicers are reimbursed advanced principal and interest by Fannie Mae at the time the loan is removed from the trust.”
Fannie Mae: “The servicer must remit principal and interest on scheduled/scheduled remittance mortgage loans regardless of whether it receives payments from the borrower, until a loan becomes four months delinquent (four consecutive missed monthly payments, the borrower becomes current, or the borrower enters into a COVID-19 payment deferral plan. Upon the loan being purchased out of the MBS trust, Fannie Mae will reimburse the servicer for any principal and interest advances made. Effective January 2021, Fannie Mae extended the timeframe for its delinquent loan buyout policy for single-family MBS from four months past due to twenty-four months past due. Servicer advancement of scheduled principal and interest remains restricted to four months of delinquency. For whole loan deliveries, servicers select their preferred remittance type. Generally, loans delivered through the whole loan conduit are actual/actual remittance. Under this remittance, servicers remit interest and principal the following business day after they receive at least $2,500 in principal and interest payments, collectively, for all the loans that they service on an actual/actual basis. For actual/actual remittance, servicer advancing is not required if a borrower does not make his or her payments. Pursuant to Fannie Mae’s guaranty of our certificates, MBS investors receive scheduled principal and interest payments for all loans in the MBS pool (regardless of remittance type of the underlying loans and regardless of the status of the borrower.”
Fannie Mae: The loan is not subject to the requirements of the Lender Letter and is eligible for standard sale terms and conditions if the lender verifies and documents in the loan file the following requirements: • The forbearance plan ended or was terminated. • The borrower did not miss any payments before sale to Fannie Mae. • The borrower did not experience a change in circumstance or financial hardship after the note date. As a reminder, the loan must meet all requirements of the Selling Guide.
Fannie Mae: “Certain loans that wentinto forbearance after loan closing and before sale to us became eligible for sale beginning May 1, 2020. All loans must have had note dates on or before Dec. 31, 2020 and be sold to us prior to Mar. 1, 2021. Refer to LL-2020-06, Selling Loans in Forbearance Due to COVID-19 for details.”
Fannie Mae: “Hourly workers with fluctuating hours are covered under our variable income policy. The year-to-date income amount being used will account for a decline in income when determining the amount of income to be used for the trending analysis and when determining the amount to be used for qualifying purposes.”
Freddie Mac: The 2020 and 2021 YTD earnings average used for qualifying, in accordance with Guide Section 5303.4(b), accounts for the decline in income experienced during the pandemic related income interruption(s).
Fannie Mae: For loan applications dated Feb. 1 through Mar. 31, the profit and loss statement (audited or unaudited) must include a minimum three-month look back period to ensure there is sufficient information to determine the extent to which a business has been impacted by COVID-19. This may require reporting of prior and current year details.
Fannie Mae: Yes. If the borrower has entered a loss mitigation solution described in LL-2021-03 and is required to make at least three timely payments as of the note date of the new transaction, those payments must be consecutive monthly payments. A lump sum payment containing all three payments does not satisfy the three timely payment requirements in LL-2021-03. The borrower’s eligibility to close on a new transaction is not solely based on how many payments have been remitted, but whether at least three consecutive monthly payment due dates have passed in accordance with the loss mitigation option.
CFPB: “It depends. Small servicers do not have to comply with the early intervention and continuity of contact requirements described above because the rule exempts small servicers from those requirements. See Regulation X, 12 CFR 1024.30(b)(1).
In addition, small servicers do not have to comply with the majority of the loss mitigation requirements in the Bureau’s mortgage servicing rules, including those described above. Regulation X, 12 CFR 1024.30(b)(1). However, three prohibitions apply to small servicers. See Regulation X, 12 CFR 1024.41(j). Small servicers shall not:
- Make the first notice or filing required to foreclose unless a borrower’s mortgage loan obligation is more than 120 days delinquent, the foreclosure is based on a borrower’s violation of a due-on-sale clause, or the servicer is joining the foreclosure action of a superior or subordinate lienholder,
- Make the first notice or filing required to foreclose if a borrower is performing pursuant to the terms of a loss mitigation agreement, and
- Move for foreclosure judgment or order of sale, or conduct a foreclosure sale if a borrower is performing pursuant to the terms of a loss mitigation agreement.
Small servicers also must comply with the payoff statement provisions in Regulation Z, 12 CFR 1026.36(c)(3).
A servicer is a small servicer if it:- Together with any affiliates, services 5,000 or fewer mortgage loans, and the servicer (or an affiliate) is the creditor or assignee for all of them;
- Is a nonprofit entity, meaning it is designated as a nonprofit under section 501(c)(3) of the Internal Revenue Code of 1986, that services 5,000 or fewer mortgage loans (including any mortgage loans serviced on behalf of associated nonprofit entities), for all of which it (or an associated nonprofit entity) is the creditor; or
- Is a Housing Finance Agency, as defined in 24 CFR § 266.5.
Regulation Z, 12 CFR 1026.41(e)(4); Regulation X, 12 CFR 1024.30(b)(1).
For more information about small servicers, see section 3 of the Bureau’s Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Rules Small Entity Compliance Guide.”
CFPB: Yes. Generally, when a servicer receives a written request for a payoff statement from a consumer or person acting on behalf of the consumer, the servicer must send the statement within a reasonable time, but in no case more than 7 business days. However, when a servicer is not able to provide the statement within 7 business days of the request because of natural disasters or other similar circumstances, the servicer does not need to provide the statement within 7 business days but must provide it within a reasonable time. Regulation Z, 12 CFR 1026.36(c)(3). Servicers can provide payoff notices in a reasonable time rather than within 7 business days if they cannot provide it within 7 business days due to the COVID-19 emergency.
For more information about payoff statements, review section 7 of the Bureau’s Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Rules Small Entity Compliance Guide.
CFPB: No. In general, servicers must maintain policies and procedures reasonably designed to assign personnel to a delinquent borrower that can assist the borrower with loss mitigation options. Regulation X, 12 CFR 1024.40. A servicer has discretion to determine whether to assign a single person or a team of personnel. The personnel may be single-purpose or multi-purpose. Single-purpose personnel’s primary responsibility is to respond to a delinquent borrower’s inquiries, and as applicable, assist the borrower with available loss mitigation options. Multi- purpose personnel do not have primary responsibility for responding to a delinquent borrower’s inquiries, and as applicable, assisting the borrower with available loss mitigation options. Regulation X, Comment 40(a)-2.
For more information about the continuity of contact requirements, see section 12 of the Bureau’s Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Rules Small Entity Compliance Guide.
CFPB: It depends. Borrowers can request a CARES Act forbearance regardless of their delinquency status. If the borrower is not delinquent, the early intervention requirements do not apply. If the borrower is delinquent, the servicer must comply with the early intervention requirements as discussed more below.
The CARES Act forbearance qualifies as a short-term repayment forbearance program under Regulation X. FAQ # 4 under “Early Intervention Requirements” below describes the early intervention requirements for delinquent borrowers in short-term payment forbearance programs and FAQ # 3 under “Short-term Loss Mitigation Programs” above describes the communication requirements for such programs under Regulation X, 12 CFR 1024.41.
CFPB: “In general, yes. However, the April 3, 2020 Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act (Joint Statement) released by the Bureau, the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) ( “the agencies”) informs servicers of the agencies’ flexible supervisory and enforcement approach during this emergency regarding certain consumer communications required by the mortgage servicing rules. In addition, the rule itself already includes some flexibility that may be useful to servicers during the current crisis.
If a servicer receives an incomplete loss mitigation application, the servicer generally still has to comply with the requirement to provide an acknowledgement notice within 5 days of receipt of the application, even if the borrower has been offered or is in a short-term payment forbearance program or short-term repayment plan. See comment 41(c)(2)(iii)-2. However, in response to the COVID-19 emergency, as of April 3, 2020 and until further notice, the agencies do not intend to cite in an examination or bring an enforcement action against servicers for failing to provide the acknowledgment notice described in Regulation X, 12 CFR 1024.41(b) within five days of the receipt of an incomplete application (whether the servicer receives the incomplete application before or during the forbearance or repayment plan period), provided the servicer sends the acknowledgment notice before the end of the forbearance or repayment period. See April 3, 2020 Joint Statement.
The rule also requires servicers to provide two separate communications in connection with short-term payment forbearance programs and short-term repayment plans offered based on an evaluation of an incomplete application.
A servicer provides the first communication promptly after offering any short-term payment forbearance program or short-term repayment plan. Unless the borrower has rejected the offer, servicers must provide a written notice stating (1) the specific payment terms, (2) the duration of the program or plan, (3) that the servicer offered the program or plan based on an evaluation of an incomplete application, (4) that other loss mitigation options may be available, and (5) that the borrower has the option to submit a complete loss mitigation application to receive an evaluation for all available options regardless of whether the borrower accepts the short-term program or plan. Regulation X, 12 CFR 1024.41(c)(2)(iii).
A servicer provides the second communication if the borrower remains delinquent near the end of the forbearance program or repayment plan, the servicer must contact the borrower prior to the end of the forbearance period to determine if the borrower wishes to complete the loss mitigation application and proceed with a full loss mitigation evaluation. Regulation X, Comment 41-(b)(1)-4.iii. Servicers have flexibility about how to make this contact. For example, the servicer could share this information orally to a consumer on a telephone call or include a note on a consumer’s regular periodic statement.
The Bureau permits servicers to include additional language in either the first or second communication discussed above to clarify why they are offering the short-term option. Servicers offering the CARES Act forbearance or other short-term options due to concerns about the COVID-19 emergency, for example, could include language explaining as much to avoid borrower confusion.
Additionally, servicers do not have to tailor either the first or second communications described above to individual borrowers’ circumstances. In general, servicers may use similar content when corresponding with all affected borrowers if they offer multiple borrowers the same short term option terms and duration. Being able to use similar content in these circumstances may help servicers conserve resources. For example, servicers could develop a form letter that they send to all borrowers enrolled in the same short-term forbearance programs as a result of hardships related to COVID-19.
For more information about the loss mitigation requirements, see section 13 of the Bureau’s Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Rules Small Entity Compliance Guide.”
CFPB: “Yes, the Bureau reminds servicers that the mortgage servicing rules already include an exception from certain loss mitigation procedural requirements for short-term options, such as certain short-term payment forbearance programs or short-term repayment plans, as defined in the rule (see below). This existing regulatory flexibility permits servicers to quickly offer relief to borrowers (whether affected by the COVID-19 emergency or not) without first having to collect a complete loss mitigation application.
Regulation X generally requires servicers to obtain a complete loss-mitigation application before evaluating a mortgage borrower for a loss-mitigation option, such as a loan modification or short sale. Servicers generally may not offer a loss-mitigation option based upon an evaluation of any information provided in connection with an incomplete application. Regulation X, 12 CFR 1024.41(c)(2)(i).
However, Regulation X permits servicers to offer a short-term payment forbearance program or short-term repayment plan (as defined below) based upon an evaluation of an incomplete application. Regulation X, 12 CFR 1024.41(c)(2)(iii). Servicers may also offer a short-term payment forbearance program to a borrower in conjunction with a short-term repayment plan. Comment 41(c)(2)(iii)-4.
In addition, a servicer may offer any loss-mitigation options to a borrower who has not submitted an application at all. A servicer also may offer loss mitigation options to a borrower when the offer is not based on any evaluation of information submitted by the borrower in connection with a loss-mitigation application.
For purposes of the rule, a payment forbearance program generally is a loss mitigation option pursuant to which a servicer allows a borrower to forgo making certain payments or portions of payments for a period of time. It allows forbearance of payments due over periods of no more than six months, but it is considered short-term regardless of the amount of time the servicer allows the borrower to make up the missing payments. Comment 41(c)(2)(iii)-1. Servicers can also offer multiple successive short-term payment forbearance programs under the rule. (For example, at the conclusion of a 180-day forbearance, the servicer can offer the borrower another 180-day forbearance).
In addition, for purposes of the rule, a short-term repayment plan generally is a loss mitigation option under which a borrower would repay all past due payments over a specified period of time to bring the mortgage loan account current. A short-term repayment plan allows for the repayment of no more than three months of past due payments and allows a borrower to repay the arrearage over a period lasting no more than six months. Comment 41(c)(2)(iii)-4.
For more information about the loss mitigation requirements, review section 13 of the Bureau’s Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Rules Small Entity Compliance Guide.”
Freddie Mac: “In an ongoing effort to provide transparency to investors in valuing our mortgage securities, Freddie Mac continues to work toward developing disclosure that will provide insight into the mortgages affected by forbearance and Borrower assistance plans.
On May 7, 2020, Freddie Mac and Fannie Mae began providing at-issuance, daily disclosure files that include pool-level stratifications of the delinquency status and Borrower assistance plan participation of loans in the pool. The Freddie Mac daily file includes information for all newly issued Level 1 and MultiLender pools and for all products, including ARMs, modified mortgages and reinstated pools. The daily file is a temporary issuance disclosure process that will conclude with the expiration of the temporary purchase program for newly-funded forborne and delinquent loans.
Beginning with the June 2020 monthly disclosures, Freddie Mac and Fannie Mae implemented enhancements to our respective monthly supplemental files to include Borrower assistance plan information for all pools. Beginning with the March 2021 monthly disclosures, Freddie Mac and Fannie Mae will implement further enhancements to our respective disclosures to include Borrower assistance plan and delinquency information at a loan-level.
Please see the New Delinquency and Borrower Assistance Plan Disclosures announcements from May 2021 and January 2021 for additional details, including disclosure file locations and formats.”
Fannie Mae: “Beginning with our monthly MBS disclosure file published in June 2020, for all outstanding securities, market participants will see the number of loans, percentage of loans, UPB, and percentage of UPB reported as delinquent at the pool level. 2 This will include loans in temporary forbearance if the borrower is only making partial or no payments, although principal and interest payments are being advanced to the certificate holder. For re-performing loan (RPL) pools, we provide delinquency information at the loan level in addition to at the pool level in our monthly disclosure files.
We also provide a Borrower Assistance Plan stratification for MBS at issuance and monthly that sets forth the number of loans, percentage of loans, UPB, and percentage of UPB for mortgages underlying each security that are in a forbearance plan, repayment plan, trial period plan, other workout option, or no workout option. This field in the monthly files will be published on a one-month delay due to the timing of our servicing reporting cycle. For example, the values populated in this stratification in the monthly MBS disclosures published in July correspond to the delinquency status represented in the Days Delinquent stratification in the monthly MBS disclosures published in June.
In addition, Fannie Mae recently announced we are enhancing our MBS disclosures to provide Borrower Assistance Plan and Delinquency data at the loan-level, beginning with the March 2021 Business Day 4 MBS disclosure files.
For Fannie Mae, servicers are required to report that a loan is in an active forbearance plan, even if the borrower is making contractual payments on such loan. As a result, a loan in an active forbearance plan that is making contractual payments and remains current will be included in the count and balance of loans in a forbearance plan as part of Borrower Assistance Plan disclosures.
For Credit Risk Transfer (CRT), delinquency is disclosed at the loan-level. Beginning with the September 2020 remittance report (July 2020 activity), Fannie Mae replaced the loan-level forbearance indicator with the Borrower Assistance Plan attribute. The updated field will still be published on a two-month delay, which is aligned with current CRT disclosure timing. See Appendix A for additional details regarding the impact to CRT reporting.”
Fannie Mae: “As noted in a previous FAQ, a forbearance plan is a retention option in our workout hierarchy for a borrower with an eligible hardship that is temporary in nature and has not been resolved. A forbearance plan provides for a period of reduced or suspended contractual monthly mortgage payments, followed by a full reinstatement, mortgage loan payoff, or another workout option to enable the borrower to resolve the delinquency.
COVID-19 payment deferral is a retention option for borrowers with a hardship that is temporary in nature and that has been resolved. To receive a COVID-19 payment deferral, the borrower must be able to resume making his or her mortgage payments (among other eligibility criteria). This solution brings the mortgage loan current by “deferring” the borrower’s missed payments into a non-interest bearing balance. See Lender Letter LL-2021-02, Impact of COVID-19 on Servicing, LL-2021-07, COVID-19 Payment Deferral, and Servicing Guide D2-3.2-01, Forbearance Plan for additional information.”
Freddie Mac: “Announced in the Guide Bulletin 2020-6, the Payment Deferral solution is a servicing relief and loss mitigation solution to resolve delinquencies and help homeowners remain in their homes. Under the Payment Deferral solution, an eligible Borrower will be brought current by deferring delinquent principal and interest; the deferred amounts are placed in a non-interest-bearing forborne balance that will become due at the earlier of payoff of the interest-bearing balance, transfer or sale of the property, or the maturity date of the loan.
With Guide Bulletin 2020-15, we announced the Freddie Mac COVID-19 Payment Deferral solution, in response to the COVID-19 pandemic and in response to Servicer feedback.
While the COVID-19 Payment Deferral solution leverages a similar concept to the previously announced Payment Deferral solution, the COVID-19 Payment Deferral solution is designed specifically to assist Borrowers who have a COVID-19 related hardship. All of the relevant requirements are described in detail within Guide Bulletin 2020-15 and most recently updated in Guide Bulletin 2021-6.
Servicers were to begin evaluating eligible Borrowers for a COVID-19 Payment Deferral solution on and after July 1, 2020.
A loan will remain in its related mortgage security while the Payment Deferral solution is in effect provided the Payment Deferral solution is implemented following expiration of a forbearance plan.”
Freddie Mac: “The Servicer must evaluate the Borrower to determine if the Borrower qualifies for one of our delinquency resolution options such as payoff, reinstatement or repayment plan, or loan modification. Our delinquency resolution options can range from a Payment Deferral solution or other loan modification home retention options or a short sale and a deed-in-lieu of foreclosure. Guide Bulletin 2020-10 provides more details.”
Fannie Mae: “Yes. Borrowers with a COVID-19 related hardship are not restricted from eligibility for a forbearance plan based on previous hardships or completed workout options.”
HUD: “No. FHA is unable to remove any loans in default or claim status from Neighborhood Watch Compare Ratio calculations, including loans in forbearance for borrowers affected by the COVID-19 National Emergency. FHA uses Compare Ratios to determine whether termination or suspension of certain Mortgagee authorities is warranted under the Credit Watch Termination and Lender Insurance (LI) Program monitoring processes. FHA will consider the impact of the COVID-19 National Emergency when a lender’s Compare Ratio is above the designated threshold for either process.”
HUD: “Mortgagees must review Borrowers that are impacted, directly or indirectly, by COVID-19, that do not qualify for a COVID-19 Home Retention Option or indicate that they cannot resume making the monthly or modified monthly Mortgage Payment, for the COVID-19 Home Disposition Options. The COVID-19 Home Disposition Options are available to Owner-Occupant and Non-Occupant Borrowers.
COVID-19 Pre-Foreclosure Sale (COVID-19 PFS)
A COVID-19 PFS option is available for Borrowers who are experiencing a hardship affecting their ability to sustain the Mortgage due to COVID-19.
To evaluate Borrowers for the COVID-19 PFS option, Mortgagees must follow the Streamlined PFS requirements (III.A.2.l.ii), except as noted below.
COVID-19 PFS Eligibility
The Mortgagee must ensure that Borrowers and FHA-insured Mortgages meet the following requirements for a COVID-19 PFS.
For a Borrower to qualify for a COVID-19 PFS, the Mortgagee must ensure that:
- The Mortgage was current or less than 30 Days past due as of March 1, 2020;
- The Borrower indicates a financial hardship affecting their ability to sustain the Mortgage due, directly or indirectly, to the COVID-19 National Emergency;
- The Borrower does not qualify for any COVID-19 Home Retention Options; and
- The Borrower and Mortgage must meet all PFS eligibility requirements except the Mortgagee is not required to review the Borrower for Borrower Eligibility (III.A.2.l.ii(B)(3)
- COVID-19 PFS Program Requirements
The Mortgagee must ensure the COVID-19 PFS meets all other Streamlined PFS program requirements outlined in Pre-Foreclosure Sales (III.A.2.l.ii), with the following exceptions:
- Under PFS Outreach Requirements (III.A.2.l.ii(C)), Mortgagees may utilize any available means of communication to provide the Borrower with form HUD-90035.
- Mortgagee PFS Incentive (III.A.2.l.ii(P)) does not apply to COVID-19 PFS.
COVID-19 Deed-in-Lieu of Foreclosure (COVID-19 DIL)
A COVID-19 DIL is a COVID-19 Home Disposition Option in which a Borrower voluntarily offers the deed as collateral Property to HUD in exchange for a release from all obligations under the Mortgage.
A COVID-19 DIL option is available for Borrowers who are experiencing a hardship affecting their ability to sustain the Mortgage due to the COVID-19 pandemic, and who were unable to complete a COVID-19 PFS transaction at the expiration of the PFS marketing period.
The Mortgagee must ensure that the Borrower and the eligible FHA-insured Mortgage meet the following eligibility and program requirements. To evaluate Borrowers for the COVID-19 DIL, Mortgagees must follow the Streamlined DIL requirements in DIL of Foreclosure (III.A.2.l.iii), except as noted below.
COVID-19 DIL Eligibility
The Mortgagee must ensure that the Borrower and the FHA-insured Mortgage:
- Meet the requirements for COVID-19 PFS transactions;
- Was unable to complete a COVID-19 PFS transaction by the expiration of the PFS marketing period; and
- Must meet all Streamlined DIL eligibility requirements except:
- the Borrower Eligibility Streamlined DIL Standards (III.A.2.l.iii(B)(2)(a)(ii)), which are not required for the COVID-19 DIL; and
- for COVID-19 DIL, Mortgagees are not required to submit a request for National Servicing Center (NSC) approval via Extensions and Variances Automated Requests System (EVARS) for approval to offer a COVID-19 DIL Option to a Borrower who owns more than one FHA-insured Property as outlined in DIL Exceptions for Borrowers with More than One FHA-Insured Mortgage (III.A.2.l.iii.(B)(2)(d)).
COVID-19 DIL Program Requirements
The Mortgagee must ensure the COVID-19 DIL meets all other Streamlined DIL program requirements outlined in DIL of Foreclosure (III.A.2.l.iii), with the following exceptions:
- Mortgagee DIL Compensation (III.A.2.l.iii(H)) does not apply to COVID-19 DIL.
- Extensions for Foreclosure Time Frames (III.A.2.l.iii(I)): if the DIL follows a failed COVID-19 PFS, it must be completed, or foreclosure must be initiated within 90 days of the end of the COVID-19 Forbearance period.
Mortgagees must offer eligible Borrowers the COVID-19 Loss Mitigation Options and procedures set forth in Mortgage Letter 2020-22 no later than 90 days from July 8, 2020, but may begin offering the new options immediately.”
HUD: “Yes, however, this guidance only applies to the following COVID-19 Loss Mitigation options:
- COVID-19 Owner-Occupant Loan Modification;
- COVID-19 Non-Occupant Loan Modification;
- COVID-19 Combination Partial Claim and Loan Modification; or
- COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation.
The Mortgagee may include an escrow shortage that falls below the target balance, calculated during an escrow analysis, that exceeds the amount of the Mortgagee’s advances already capitalized in the modified mortgage.
The Mortgagee must document in the Servicing File, all Mortgagee advances, including the total amount paid out of the escrow account during the same period for taxes, insurance premiums, and other charges (as separately identified) that were capitalized into the mortgage modification. The Mortgagee must document the escrow shortage and the balance in the escrow account at the end of the same period.”
HUD: “In addition to the requirements in SF Handbook 4000.1 Sections II.A.4.c.xii(I) and II.A.5.b.xii.(I) Rental Income (TOTAL and Manual) and Section 3.50 through Section 3.55 of the HECM Financial Assessment and Property Charge Guide; where a borrower is qualifying utilizing rental income, for each property generating rental income the Mortgagee must either:
- Reduce the effective income associated with the calculation of rental income by 25%, or
- Verify 6 months PITI reserves (this option is applicable for Forward Mortgages only), or
- Verify the borrower has received the previous 2 months rental payments as evidenced by borrower’s bank statements showing the deposit. (This option is applicable only for borrowers with a history of rental income from the property).”
COVID Help for Home: “The mortgage industry is concerned about our customers who have missed one or more payments and may be eligible for CARES Act assistance. Sometimes customers don’t call their mortgage company because they don’t have the funds to make a payment so they just don’t engage. But for almost all loan types, we have payment relief programs where mortgage companies could provide instant relief to struggling homeowners – but a conversation is needed. This campaign is supplemental to a company’s regular outreach efforts. The goal is to create more conversation in this space so that customers know that there are tools to help them.”
Freddie Mac: “The mortgage may be eligible for sale to Freddie Mac, if it meets the temporary requirements announced in Bulletin 2020-12 and last extended in Bulletin 2020-44. Otherwise, once the Seller/Servicer approves a forbearance plan the terms of the mortgage have been waived or changed and the mortgage would be ineligible under Guide Section 4201.2.”
Freddie Mac: “The mortgage may be eligible for sale to Freddie Mac, if it meets the temporary requirements announced in Bulletin 2020-12, and last extended in Bulletin 2020-44. Otherwise, once the Seller/Servicer approves a forbearance plan the terms of the mortgage have been waived or changed and the mortgage would be ineligible under Guide Section 4201.2.”
Freddie Mac: “The mortgage may be eligible for sale to Freddie Mac, if it meets the temporary requirements announced in Bulletin 2020-12, and last extended in Bulletin 2020-44. Otherwise, it is not eligible for sale regardless of whether the Seller/Servicer approves or the borrower accepts the forbearance plan offer.”
Fannie Mae: “No. When completing an exterior-only or a desktop appraisal the appraiser must have a data source for all relevant characteristics, including interior condition, and reference the source used in the report. For example, it is unacceptable to assume the condition of the property is “average” or “similar to the exterior of the home.”
The Appraiser’s Certifications, approved for use with desktop and exterior-only appraisals prepared using the COVID-19 flexibilities, require the appraiser to report the condition of the improvements in factual, specific terms. The appraiser may rely on subject property information from third-party data sources.
As previously communicated in LL-2020-04 and COVID-19 FAQs, if there is insufficient information about the property to complete the appraisal assignment, the mortgage is not eligible for sale to Fannie Mae.”
Freddie Mac: “No. When completing an exterior-only or a desktop appraisal the appraiser must have a data source for all relevant characteristics, including interior condition, and reference the source used in the report. For example, it is unacceptable to assume the condition of the property is “average” or “similar to the exterior of the home”.
The Appraiser’s Certifications, approved for use with desktop and exterior-only appraisals prepared using the COVID-19 flexibilities, require the appraiser to report the condition of the improvement in factual, specific terms. The appraiser may rely on subject property information from third-party data sources.
As previously communicated in Bulletin 2020-05 and COVID-19 FAQs, if there is insufficient information about the property to complete the appraisal assignment, the mortgage is not eligible for sale to Freddie Mac.”
Fannie Mae: “For states without an express and currently effective RON statute, we assessed the overall likelihood of that state’s recognition of valid RON acts performed out of state, and looked at a number of factors, including governors’ executive orders, applicable state laws, and applicability of the Full Faith and Credit clause of the U.S. Constitution (and any exceptions to its application). The state list was aligned with Freddie Mac. The passage of a federal law is also contemplated in the language and would potentially supersede the need for state-by-state analysis.”
Freddie Mac: “In determining the states to be included in Exhibit C of Guide Bulletin 2020-8, a state that has not enacted an express Remote Online Notarization statute is analyzed based on the likelihood that its overall legal structure will recognize RON. The issuance of a governor’s emergency executive order is one of several factors in such analysis.”
Freddie Mac: “Yes. However, for the exterior-only appraisal to be eligible for reuse for a subsequent transaction, the existing mortgage (i.e., the mortgage being refinanced) must be owned by Freddie Mac. Additionally, the requirements of Guide Section 5601.8 must be met, including age of appraisal reports, appraisal update requirement and reuse of an appraisal report. The subsequent transaction must have an application received date that is prior to expiration of the flexibilities for appraisals allowed for COVID-19.”
Fannie Mae: “A credit report supplement may be acceptable to meet the requirements in LL-2020-03, depending on the information provided in the document, if it demonstrates that the borrower has made all mortgage payments due in the month prior to the note date of the new loan transaction no later than the last business day of the month. For example, a supplement that provides confirmation of the date of the last payment made by the borrower and the due date of the next payment would be acceptable. Credit report supplements that only provide the current status of the mortgage, such as “current” or “paid as agreed,” or are only reflective of the information that otherwise appears on the credit report, would not be sufficient to verify that the borrower meets the terms of LL-2020-03.”
Freddie Mac: “Yes. However, for the exterior-only appraisal to be eligible for reuse for a subsequent transaction, the existing mortgage (i.e., the mortgage being refinanced) must be owned by Freddie Mac. Additionally, the requirements of Guide Section 5601.8 must be met, including age of appraisal reports, appraisal update requirement and reuse of an appraisal report. The subsequent transaction must have an application received date that is prior to expiration of the flexibilities for appraisals allowed for COVID-19.”
Fannie Mae: “No. The temporary COVID-19 appraisal flexibilities only permit a desktop appraisal to be used for a purchase transaction, and Selling Guide B4-1.2-02, Appraisal Age and Use Requirements requires that to be able to reuse an appraisal for a subsequent transaction, the new transaction must be a no-cash out refinance.”
Freddie Mac: “No. The temporary COVID-19 appraisal flexibilities only permit a desktop appraisal to be used for a purchase transaction and Guide Section 5601.8 requires that to be able to reuse an appraisal for a subsequent transaction, the new transaction must be a no-cash out refinance.”
Fannie Mae: “No. Although the 1004 Desktop (70D) and 1004 Hybrid (70H) are now available, they will only be used in a few instances for testing purposes and are not acceptable for use with the COVID-19 appraisal flexibilities. Appraisers should continue using the eligible forms for desktop appraisals using COVID-19 appraisal flexibilities as provided in LL-2020-04 (Forms 1004/70, 1073/465, 2090, 1025/72, and 1004C/70B).”
Fannie Mae: “The update to record retention requirements applies to all loans delivered with remote online notarizations in accordance with the requirements set forth in LL-2020-03. For loans delivered prior to Aug. 27, 2020, lenders will not be required to store the notarial ceremony for the life of the loan and instead must maintain the notarial ceremony per the updated requirements of LL-2020-03.”
Freddie Mac: “The update to record retention requirements applies to all mortgages delivered with remote online notarizations in accordance with the requirements in Bulletin 2020-8. For mortgages delivered prior to August 27, 2020, Sellers will not be required to store the notarial ceremony for the life of loan and instead must maintain the notarial ceremony in compliance with the updated requirements of Bulletin 2020-35.”
Fannie Mae: “In accordance with Selling Guide, B3-6-05, Monthly Debt Obligations, non-mortgage debts paid by others can be excluded from the borrower’s DTI ratio with documented evidence that the other party has been making the payments for at least 12 months and the payment history indicates there are no delinquencies.
Given that many student loans were placed into an automatic forbearance status and the other party may have missed payments due to the forbearance, we will allow exclusion of the monthly student loan payment if:
- the missed payments are resolved by the responsible party (not the borrower) prior to closing of the new mortgage loan;
- the responsible party had been making payments on the student loan for at least nine months prior to the automatic forbearance;
- the lender provides borrower documentation evidencing the student loan is in a COVID-related automatic forbearance, and any missed payments have been paid; and
- all other Selling Guide requirements have been met (for example, evidence of 12 total payments, either monthly or in aggregate, on the omitted debt).”
ICBA: “Large volume lenders are relieved from new quarterly reporting; however, all entities should continue collecting and recording HMDA data in anticipation of making annual submissions in March 2021. On March 26, The Consumer Financial Protection Bureau (Bureau) issued a statement that it will not expect quarterly information reporting by certain mortgage lenders as required under the HMDA and Regulation C (generally financial institutions that report for the preceding calendar year at least 60,000 covered loans and applications (excluding purchased loans) must report their HMDA data quarterly (except for the fourth quarter) in addition to annually).”
Fannie Mae: “A gap in employment or a reduction in income due to COVID-19 cannot be excluded from the calculation, and the year to date income must continue to be calculated over the entire time period. Refer to B3-3.1-01, General Income Information.”
Freddie Mac: “No. For fluctuating employment earnings (e.g., fluctuating hourly employment earnings, overtime, bonus, commission, tips), and regardless of the earnings trend, all 2020 and 2021 YTD income must be included in the calculation, in accordance with the requirements in Guide Section 5303.4(b) Employed income calculation guidance and requirements. As the pandemic is ongoing, the income interruption/gap is not yet considered a one-time occurrence, such as an isolated injury may be; therefore, the period of income interruption must be considered in the overall YTD calculation.”
Fannie Mae: “Yes. Lenders can continue to waive business income tax returns when the requirements of the Selling Guide are met.”
Freddie Mac: “Yes; however, the seller may choose to obtain an additional year(s) of individual and/or business tax returns to support their underwriting decision.”
Is it acceptable to only use year-to-date income to calculate qualifying variable income? (added July 2 by Hollis Daniels)
Freddie Mac: “According to Guide Section 5303.4(b), if the income is consistent or the trend is increasing, the Seller must average the most recent year(s) and YTD income over the applicable number of months documented.”
“When the income trend is declining, the seller must use the YTD income and must not include the previous higher level unless there is documentation of a one-time occurrence (e.g., injury) that prevented the Borrower from working or earning full income for a period of time and evidence that the Borrower is back to the income amount that was previously earned. As the COVID-19 pandemic is ongoing, the income interruption/gap is not yet considered a one-time occurrence, such as an isolated injury may be.”
Fannie Mae: “When variable income is the source of income used in qualifying the borrower(s), lenders must follow the requirements as outlined in B3-3.1-01, General Income Information and perform a trending analysis. This includes determining the monthly year-to-date income amount and comparing that to prior years’ earnings to determine the appropriate amount of qualifying income for the loan transaction.
If the trend in the amount of income is stable or increasing, the income amount should be averaged.
If the trend was declining but has since stabilized and there is no reason to believe that the borrower will not continue to be employed at the current level, the current, lower amount of variable income must be used (i.e., the monthly year to date income amount).
If the trend is declining, the income may not be stable. Additional analysis must be conducted to determine if any variable income should be used.”
FDIC: “No. Mortgage originations are typically subject to the CFPB’s Ability to Repay and Qualified Mortgage Rule (ATR/QM). The ATR/QM rule does not apply when you alter the terms of an existing loan without refinancing it. A loan modification that does not meet the definition of a refinancing in Regulation Z at § 1026.20(a) is not subject to the ATR/QM rule, and, accordingly, would not alter the QM status of a loan that was a QM at origination. As the CFPB notes in its Small Entity Compliance Guide: “The Truth in Lending Act applies to a loan modification only if it is considered a refinancing under Regulation Z. If a loan modification is not subject to the Truth in Lending Act, it is not subject to the ATR/QM rule. Therefore, you should determine if a loan modification is a refinancing to see if the ATR/QM rule applies. You will find the rules for determining whether a loan workout is a modification or a refinance in Regulation Z at § 1026.20(a) and accompanying Commentary.”
HUD: “FHA has observed a significant increase in Early Payment Default (EPD) nationwide. Most are likely caused by loss of employment and/or income due to the COVID-19 National Emergency, not the result of non-compliance with FHA Single Family origination and underwriting requirements. Therefore, FHA is providing Mortgagees with flexibility by temporarily waiving its requirements found in Handbook 4000.1, Sections V.A.3.a.i(C) and V.A.3.a.iv(B)(2). With this waiver, Mortgagees are not required to conduct QC reviews of EPDs that would have been selected as part of a Mortgagee’s May, June or July 2020 QC selections. Mortgagees must continue to meet all other loan-level QC requirements in Section V.A.3. For example, Mortgagees must select FHA-insured loans for review via random and discretionary sampling methods that meet the conditions described in Section V.A.3.a.iv. These random and discretionary samples may include EPDs.”
Fannie Mae: “There is no pre-defined criteria or calculation for a claim amount from an investor. Investors can evaluate several factors on which they believe that they have been financially harmed due to an event, like a loan repurchase. You may contact your Fannie Mae account team to discuss.”
Freddie Mac: “In the event investors in Freddie Mac securities pay a premium that exceeds any premium paid to the Seller, the Seller will be responsible to pay the excess amount apportioned based on loan UPB and impacted investors that choose to make claims.”
Fannie Mae: “No. Other than the specific instances where an LLPA is identified as a remedy, there will be no repurchase alternatives offered.”
Freddie Mac: “No.”
Fannie Mae: “Lenders should contact their Fannie Mae account team to make their respective election. Your account team will provide guidance on formalizing your remedy election.”
Freddie Mac: “Seller/Servicers should contact their Freddie Mac representative or call their Customer Support Contact Center at 800-FREDDIE how to make their election or if they have questions.”
Fannie Mae: “Lenders must self-report any loan that did not meet the requirements for the sale of loan in forbearance set forth in LL-2020-06 in accordance with self-reporting provisions set forth in Selling Guide D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention, and Audit.
Fannie Mae will require the responsible party (“lender”) to remedy the loan as described here.”
Freddie Mac: “Sellers must self-report any mortgage in forbearance that did not meet the requirements in Bulletin 2020-12 for the sale of a mortgage in forbearance following the QC reporting provisions set forth in Guide Section 3402.10 or through Quality Control Advisor®, and Freddie Mac will require the Seller to remedy the mortgage as described here.”
National Association of Realtors: “Yes. When an infectious disease, such as COVID-19, is associated with a specific population or nationality, fear and anxiety may lead to social stigma and discrimination.” Housing professionals “may not discriminate against individuals on the basis of their national origin, even if they are from other countries that have also been hit particularly hard by the COVID-19 pandemic.”
National Association of Realtors: “Federal and state fair housing laws remain intact during the COVID-19 pandemic. Those laws make it unlawful to discriminate on several protected bases, including disability and national origin. The pandemic provides a unique set of circumstances for navigating federal antidiscrimination provisions. First, each real estate professional must determine whether they will provide services during this time. To the extent they continue to make services available, the Fair Housing Act applies. Such services should be provided on an equal basis while recognizing that no one is required to engage in any transactions that put their health or safety, or the health and safety of others, at risk. If reasonable accommodations can be made to provide housing or services to individuals with COVID-19, without threatening the health or safety of others, the federal Fair Housing Act calls for such accommodations to be made.”
CFPB: “Yes. The ECOA Valuations Rule already includes flexibility that allows an applicant to waive certain timing requirements of the Rule. For valuations developed in connection with an application that are subject to the ECOA Valuations Rule, creditors must generally provide applicants with copies of all valuations promptly upon completion, or three business days prior to consummation of the transaction (for closed-end credit) or account opening (for open-end credit), whichever is earlier. However, as noted in a September 14, 2018 Statement on Supervisory Practices Regarding Financial Institutions and Consumers Affected by a Major Disaster or Emergency, the ECOA Valuations Rule permits an applicant to waive the timing requirement through an affirmative oral or written statement and agree to receive any copy at or before consummation or account opening, except where otherwise prohibited by law. This regulatory flexibility available under the ECOA Valuations Rule can expedite access to credit secured by a first lien on a dwelling for consumers affected by the COVID-19 pandemic.”
Freddie Mac: “When a borrower refinances a mortgage that with a payment deferral and the amount of the deferred payments is included in the new mortgage, the new mortgage is eligible for sale to Freddie Mac as a “no cash-out” refinance if it otherwise meets all of the requirements for an “no cash-out” refinance in the Single-Family Seller/Servicer Guide. Funds applied to paying off the deferred portion are not considered cash out.”
Fannie Mae: “When a borrower refinances a loan that has a payment deferral and the amount of the deferred payments is included in the new loan, the new loan is eligible to be sold as an LCOR if it otherwise meets all of the requirements for an LCOR in the Selling Guide. Funds applied to pay off the prior loan, including the deferred portion, are not considered cash out.”
Freddie Mac: “No. Missed payments during a forbearance may not be refinanced into the new loan amount in a no cash-out or cash-out refinance transaction. However, per the temporary requirements in Bulletin 2020-17, if the existing mortgage is in a repayment plan, Payment Deferral, trial period plan or other loss mitigation program and the borrower has either successfully completed the loss mitigation program or made at least three consecutive timely payments, as applicable, the proceeds may be used to pay off the existing mortgage.”
Fannie Mae: “No. Missed payments during a forbearance may not be refinanced into the new loan amount in a limited cash-out or cash-out refinance transaction. However, if a borrower has initiated a repayment plan or accepted a loss mitigation solution (e.g., payment deferral, modification, etc.) and has made three timely payments, the entire existing loan amount, including any remaining outstanding payments under a repayment plan or deferred amounts, may be refinanced into the new loan. See Lender Letter LL-2021-03 for details.”
Freddie Mac: “If a borrower was not employed on the note date, the loan would be ineligible for sale to Freddie Mac regardless of the temporary flexibilities set forth in Bulletin 2020-12. The loss of employment would constitute a significant defect and the mortgage would be subject to repurchase unless there is other eligible documented income that would satisfy our qualification requirements. Freddie Mac’s standard QC process, including a seller’s opportunity to provide additional information or documentation in the rebuttal process, would apply.”
Fannie Mae: “If a borrower was not employed on the note date, the loan would be ineligible regardless of the temporary flexibilities in LL-2020-06. We would cite a significant defect and the loan would be subject to repurchase unless there was other eligible income documented and the loan satisfies our qualification requirements. Our standard QC process includes an opportunity for lenders to provide additional information or documentation in the rebuttal process.”
Freddie Mac: “If the forbearance begins on the settlement date of the loan, the Credit Fee in Price will be assessed. Please refer to the Post Fund Data Correction instructions to add the IFI.”
Fannie Mae: “If the forbearance begins any time on the sale date of the loan, the LLPA is due to Fannie Mae. For whole loans, the sale date is the date that Fannie Mae sends funds via wire transfer to the lender. For MBS, the sale date is the date that Fannie Mae issues MBS securities to the lender or to the investor designated by lender (also known as the settlement date) and takes ownership of, and title to, the loan. See Receiving Sale Proceeds or Securities in the C1-2-01, General Information on Delivering Loan Data and Documents.”
Fannie Mae: “When the mortgage loan has an escrow account, the servicer must ensure the timely payment of all escrow and related charges in accordance with applicable law.
However, without regard to whether the mortgage loan has an escrow account, the servicer must protect Fannie Mae’s mortgage lien and the property securing the mortgage loan by monitoring the status of all escrow and related charges; this includes advancing escrow to protect Fannie Mae’s mortgage lien. See Servicing Guide B-1-01, Administering an Escrow Account and Paying Expenses for additional information.”
Freddie Mac: “When the mortgage loan has an escrow account, the servicer must ensure the timely payment of all escrow and related charges in accordance with applicable law.
However, regardless of whether the mortgage has an escrow account, the servicer must protect Freddie Mac’s first lien position and the property securing the mortgage by monitoring the status of all escrow and related charges; this includes advancing escrow to protect Freddie Mac’s first lien position.”
Fannie Mae: “Yes. Specifically for COVID-impacted borrowers, the CARES Act states that a forbearance plan must be provided to any borrower who requests a forbearance with an attestation of the financial hardship caused by the COVID-19 emergency; and no additional documentation other than the borrower’s attestation to a financial hardship caused by the COVID-19 emergency is required. In the event that the servicer is unable to achieve full QRPC and offers a forbearance plan to a borrower impacted by COVID-19 in compliance with the CARES Act, the servicer is considered to be in compliance with Fannie Mae’s Servicing Guide. The servicer must approve forbearance plans for borrowers impacted by COVID-19 in accordance with the CARES Act.
If the servicer determines the borrower is not eligible for a forbearance plan per the requirements in the Servicing Guide or in Lender Letter LL-2020-02, Impact of COVID-19 on Servicing, but there are acceptable mitigating circumstances, it must request our prior written approval following the existing process. This process requires completion of the Forbearance Exception Request Template and submission to loss_mitigation@fanniemae.com. The subject line must Include “Forbearance.” See Servicing Guide D2-3.2-01, Forbearance Plan for additional information.”
Freddie Mac: “Yes, Borrowers impacted by COVID-19 must be offered forbearance under the information required by the CARES Act and Bulletin 2020-10, which do not require a borrower response package.”
Fannie Mae: “At the request of a borrower impacted by COVID-19, the servicer must provide an initial forbearance plan for a period up to 180 days, and that forbearance period may be extended for up to an additional 180 days at the request of the borrower. In accordance with Servicing Guide D2-3.2-01, Forbearance Plan, the servicer may provide an initial forbearance period, and any extended forbearance period, in separate, shorter increments. If the borrower’s COVID-19 related hardship has not been resolved during an incremental forbearance period, the servicer must extend the borrower’s forbearance period, not to exceed 12 months total. For a borrower impacted by COVID-19, Fannie Mae is temporarily eliminating the requirement that the servicer must receive Fannie Mae’s prior written approval for a forbearance plan that would result in the mortgage loan becoming greater than 12 months delinquent.”
Freddie Mac: “Freddie Mac’s COVID-19 forbearance is available for up to six months initially (in increments if needed), and up to 12 months in total. The Servicer should discuss with the borrower the nature of the hardship and let that inform the decision of how long the forbearance should last, to the extent possible under applicable law. In the event that either a six-month term is what is agreed upon by the Servicer and borrower, or the borrower directly requests a six-month term, then the Servicer must offer a six-month term.”
HUD: “Mortgagees should report Status Code 06 – Formal Forbearance for the COVID-19 Forbearance and Status Code 10 – Partial Claim Started for the COVID-19 National Emergency Standalone Partial Claim, in the Single Family Default Monitoring System (SFDMS).
FHA continues to revise its FHA Single Family COVID-19 Q&A as needed to keep stakeholders updated with the latest information about FHA’s response to the Presidentially-declared COVID-19 national emergency. Refer to the Single Family main page on hud.gov for updates.”
HUD: “Mortgagees should also use the Single Family Default Monitoring System (SFDMS) existing Delinquency/Default Reason Codes available to report the Reason for Default accurately. For example: 002 Illness of Principal Borrower or 003 Illness of Borrower’s Family Member if the default is due to a primary borrower or family member that is ill; 001 Death of Principal Borrower or 004 Death of a Borrower’s Family Member if the illness results in death; 016 Unemployment if the borrower is laid off and has no job to go back to; or 006 Curtailment of Income if the borrower’s income is otherwise affected, including furlough. For further reporting questions, please contact sfdatarequests@hud.gov.
FHA continues to revise its FHA Single Family COVID-19 Q&A as needed to keep stakeholders updated with the latest information about FHA’s response to the Presidentially-declared COVID-19 national emergency. Refer to the Single Family main page on hud.gov for updates.”
HUD: “For borrowers included in the COVID-19 Moratorium published in Mortgagee Letter 2020-04, mortgagees should report the existing Delinquency/Default Status Code HUD Issued Moratorium (AS) for the applicable reporting cycle(s). Please do not report Natural Disaster (34). Borrowers otherwise affected by COVID-19 that require Loss Mitigation assistance should be reported as initially as Delinquent (42).
FHA continues to revise its FHA Single Family COVID-19 Q&A as needed to keep stakeholders updated with the latest information about FHA’s response to the Presidentially-declared COVID-19 national emergency. Refer to the Single Family main page on hud.gov for updates.”
HUD: “HUD encourages servicers to consider the impacts of COVID-19 on borrowers’ financial situations and any flexibilities a servicer may have under the Fair Credit Reporting Act (FCRA) and CARES Act § 4021.d.(F) when taking any negative credit reporting actions. Borrowers with FHA-insured mortgages who are performing as agreed under FHA’s COVID-19 Forbearance option are not considered to be delinquent for purposes of credit reporting.”
HUD: “FHA permits a Borrower to designate an attorney-in-fact to use a POA to sign documents on their behalf at closing, including page 4 of the final Form HUD-92900-A, HUD/VA Addendum to Uniform Residential Loan Application, and the final Fannie Mae Form 1003/Freddie Mac Form 65, URLA. Detailed requirements on the use of a POA to execute closing documents can be found in Handbook 4000.1 Section II.A.6.a(xiii). Included in this section are specific requirements for use of a POA, which has a connection to the transaction.”
HUD: “FHA does not regulate the use or format of the notarization of documents. The Mortgagee must ensure that the Mortgage and Note comply with all applicable state and local requirements for creating a recordable and enforceable Mortgage, and an enforceable Note, including the requirements for notarization of these documents. Generally, the state law governs what requirements are applicable for proper notarization of a document.”
Fannie Mae: “If a lender discovers a loan was in forbearance after the loan data was submitted to Loan Delivery but prior to the sale date (the date funds or the security is swapped), the lender must self-report the loan. These situations include:
- The loan was sold before Lender Letter LL-2020-06 was published or prior to May 1.
- The loan data was delivered after May 1 but did not include the SFC 919 because the borrower went into forbearance while the loan was in Fannie Mae acquisitions processing.
- The loan data was delivered after May 1 and the sale was consummated, but the loan data did not include the SFC 919.
All self-reporting takes place in Loan Quality ConnectTM. This includes creating and submitting the self-report, uploading all supporting documentation, and tracking a loan’s status as we make a decision as to how to proceed. To facilitate the self-reporting process for COVID-19 loans, we added “COVID forbearance” to the self- reporting process for COVID-19 loans, we added “COVID forbearance” to the self-report reason menu in Loan Quality Connect.
As a reminder, the lender must notify us within 30 days of identifying loans not eligible for delivery. Refer to D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention, and Audit, for all our self-reporting requirements.
A Job Aid on how to self-report is available to assist lenders with this process.”
Freddie Mac: “A Seller must self-report the mortgage through the post-fund data correction process or, alternatively, through the QC reporting process, within thirty days of discovery, as set forth in Bulletin 2020-14.”
Fannie Mae: “Certain types of temporary leave may be eligible for qualifying. See B3-3.1-09, Other Sources of Income; Temporary Leave Income. However, please note that furloughed borrowers are currently ineligible under the temporary leave policy. See Lender Letter LL-2020-03.”
Furloughed income being received for a specified period of time, such as four weeks, “is not stable, predictable, or likely to continue and therefore does not meet the requirements in Selling Guide B3-3.1-01, General Income Information; Continuity of Income.”
Freddie Mac: “The requirements for Income while on temporary leave do not extend to employer-initiated actions, such as furloughs and layoffs regardless of whether there is an expected return to work date.”
Freddie Mac: “Yes. Temporary alternative methods of verifying the borrower’s employment were introduced in Bulletin 2020-5.”
Fannie Mae:“Yes, reference the guidelines and flexibilities contained in LL-2021-03.”
CFPB: “Yes, the CARES Act forbearance qualifies as a “short-term repayment forbearance program” under Regulation X. The mortgage servicing rules already include an exception from certain loss mitigation procedural requirements for short-term payment forbearance programs, such as the CARES Act forbearance. This existing regulatory flexibility permits servicers to quickly offer borrowers CARES Act forbearances. FAQs # 2 through 4 under “Short-term Loss Mitigation Options” below describe this flexibility.”
FHFA: On April 21, the Federal Housing Finance Agency (FHFA) announced:
“The alignment of Fannie Mae’s and Freddie Mac’s (the Enterprises) policies regarding servicer obligations to advance scheduled monthly principal and interest payments for single-family mortgage loans. Once a servicer has advanced four months of missed payments on a loan, it will have no further obligation to advance scheduled payments. This applies to all Enterprise servicers regardless of type or size…
When a mortgage loan is in a Mortgage-Backed Security (MBS), Fannie Mae servicers with a scheduled payment remittance are responsible for advancing the principal and interest payment regardless of borrower payments. Freddie Mac servicers, who are generally responsible for advancing scheduled interest, are only obligated to advance four months of missed borrower interest payments. Today’s instruction establishes a four-month advance obligation limit for Fannie Mae scheduled servicing for loans and servicers which is consistent with the current policy at Freddie Mac.
FHFA is also instructing the Enterprises to maintain loans in COVID-19 payment forbearance plans in Mortgage Backed Security (MBS) pools for at least the duration of the forbearance plan.”
Fannie Mae: No, Fannie Mae’s existing policies related to disasters do not apply to loans impacted by COVID-19. Instead, lenders can follow the guidance in Lender Letters LL-2021-03, Impact of COVID-19 on Originations and LL-2021-03, Impact of COVID-19 on Appraisals. All guidance specific to COVID-19 will be communicated through Lender Letters and FAQ documents such as this.
Freddie Mac: “No. While we are aware the Federal Emergency Management Agency (FEMA) has made certain declarations that would potentially lead this national emergency to also be considered an “Eligible Disaster’ in certain areas, we have created specific requirements related to servicing mortgages impacted by COVID-19. Servicers must follow those specific requirements in Guide Bulletins 2020-4, 2020-6, 2020-7, 2020-10, 2020-15 and 2020-16.”
CFPB: “
CFPB: Not immediately. In general, if a borrower submits an incomplete loss mitigation application 45 days or more before a foreclosure sale, servicers generally must exercise reasonable diligence to obtain documents and information to complete the borrower’s loss mitigation application. Regulation X, 12 CFR 1024.41. However, servicers may suspend reasonable diligence efforts to complete a borrower’s loss mitigation application while the borrower is performing under a short-term payment forbearance program until near the end of the program, unless the borrower requests additional assistance (e.g., longer term relief, such as a loan modification). Regulation X, Comment 41(b)(1)-4.iii. In the case of a 180-day CARES Act forbearance, for example, a servicer could suspend these efforts until near the end of the 180 days. If, for example a servicer extended the CARES Act forbearance an additional 180 days, the servicer could suspend these efforts until near the end of the second 180 days.
For more information about the loss mitigation requirements, see section 13 of the Bureau’s Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Rules Small Entity Compliance Guide.”
HUD: “FHA will continue to process claims during the COVID-19 National Emergency; however, servicers may experience slightly longer processing timeframes if there are office closures, particularly for any claims submitted manually and Title I claim submissions and Title I manufactured housing endorsements.”
OCC: “On April 3, 2020, the OCC, along with the other federal financial institution regulatory agencies and the state banking regulators, issued an interagency statement on mortgage servicing that provides needed regulatory flexibility to enable mortgage servicers to work with struggling consumers affected by COVID-19. The statement clarifies the application of the Regulation X mortgage servicing rules to Coronavirus Aid, Relief, and Economic Security (CARES) Act forbearance and describes the agencies’ flexible approach to supervision and enforcement with respect to certain Regulation X provisions that require consumer notices and loss mitigation provisions.”
HUD: For Borrowers who do not qualify for the COVID-19 Standalone Partial Claim, the Mortgagee must review the Borrower for a COVID-19 Owner-Occupant Loan Modification, which modifies the rate and term of the Mortgage.
The Mortgagee must ensure that the Borrower and the FHA-insured Mortgage meet the following requirements for a COVID-19 Owner- Occupant Loan Modification.
HUD: “FHA-insured Single Family mortgages, excluding vacant or abandoned properties, are subject to an extension to the moratorium on foreclosure through June 30, 2020. The moratorium applies to the initiation of foreclosures and to foreclosures in process.
Separate from any eviction moratorium applicable to lessors provided under the CARES Act, evictions of persons from properties securing FHA-insured Single Family mortgages, excluding actions to evict occupants of legally vacant or abandoned properties, are also suspended through June 30, 2020.
Deadlines for the first legal action and reasonable diligence timelines are extended by 90 days from the date of expiration of this moratorium for FHA- insured Single Family mortgages, except for FHA-insured mortgages secured by vacant or abandoned properties.”
HUD: “FHA announced it is extending the foreclosure and eviction moratorium for single family FHA-insured mortgages through June 30, 2021.”
HUD: “Mortgagees do not need to provide a re-verification of employment within 10 days of the Note date as described in Handbook 4000.1, Sections II.A.4.c.ii(C)(1)-(2) Traditional and Alternative Current Employment Documentations, provided that the Mortgagee is not aware of any loss of employment by the borrower and has obtained:
- For forward purchase transactions, evidence the Borrower has a minimum of 2 months of Principal, Interest, Taxes and Insurance (PITI) in reserves; and
- A year-to-date paystub or direct electronic verification of income for the pay period that immediately precedes the Note date, or
- A bank statement showing direct deposit from the Borrower’s employment for the pay period that immediately precedes the Note date.”
HUD: “When applicable, the appraiser may amend the scope of work to perform an Exterior-Only (viewing from the street) or Desktop- Only. The Appraiser may rely on supplemental information from other reliable sources such as Multiple Listing Service (MLS), and Tax Assessor’s Property Record to prepare an appraisal report. The Appraiser may rely on information from an interested party to the transaction (borrower, real estate agent, property contact, etc.) with clear appraisal report disclosure when additional verification is not feasible. The appraisal report must contain adequate information to enable the intended users to understand the extent of the inspection that was performed.”
HUD: “No. The mortgagee must obtain the borrower’s signature on the appropriate IRS form to obtain tax returns directly from the IRS for all credit-qualifying mortgages at the time the final Uniform Residential Loan Application (URLA) is executed. If FHA requires tax returns as required documentation for any type of effective income, in lieu of signed individual or business tax returns from the borrower, the mortgagee may obtain a signed IRS Form 4506, Request for Copy of Tax Return, IRS Form 4506-T, Request for Transcript of Tax Return, or IRS Form 8821, Tax Information Authorization, and tax transcripts directly from the IRS.”
Fannie Mae: “If verbal or electronic reverifications cannot be completed, lenders can complete the file review without the reverification. However, lenders must:
- internally track all loans that did not have a successful reverification attempt during this time, and
- conduct a special discretionary sample of such mortgages and perform the required reverifications on the sample population upon the expiration of the flexibilities contained in Lender Letter LL-2020-03, Impact of COVID-19 on Originations
As a reminder, the reporting requirements of D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention, and Audit continue to apply with respect to this special discretionary sample(s).
Reminder: Lenders should prioritize execution of IRS Form 4506-T in the special discretionary sample(s) based on the expiration date of the IRS Form 4506-T.”
Freddie Mac: “Freddie Mac does not require IRS transcripts to be obtained in connection with origination of the Mortgage.”
