The coronavirus (COVID-19) outbreak has completely upended life in the United States and around the world. With this national emergency limiting many people’s ability to work and earn a paycheck, you might be among the thousands finding it difficult or impossible to keep up with mortgage payments. The good news is that most people won’t face the prospect of losing their home soon, thanks to foreclosure suspensions across the country. Plus, federal law usually protects homeowners from the initiation of foreclosure until they’re at least 120 days overdue on the loan. In addition, most borrowers have access to a number of loss mitigation alternatives.
If you have a Fannie Mae or Freddie Mac loan—and many mortgage borrowers do—you’re most likely eligible for a 12-month payment suspension or reduction called a “forbearance.” When the forbearance period ends, you might be able to reduce or adjust your mortgage payments permanently through a special loan modification program.
How Fannie Mae and Freddie Mac Work
The Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) are government-sponsored enterprises (GSEs). Fannie Mae and Freddie Mac don’t make mortgage loans directly; instead, they buy them on the secondary market. Fannie Mae and Freddie Mac own or guarantee thousands of mortgage loans in the United States. (To learn more about how the GSEs work, see Who—or What—Are Fannie Mae and Freddie Mac?)
To find out if either Fannie Mae or Freddie Mac owns your loan, call your loan servicer or use the Fannie Mae and Freddie Mac loan-lookup tools online. If Fannie Mae or Freddie Mac owns your loan, you have access to special foreclosure avoidance options.
Fannie Mae and Freddie Mac Forbearances
Under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, homeowners with federally backed mortgage loans, including those with loans that Fannie Mae or Freddie Mac purchased or securitized, are eligible for a forbearance. The forbearance period will last up to 180 days and can be extended up to 180 additional days, provided that you request an extension during the "covered period" (see below).
Some servicers, however, are initially offering a shorter 90-day forbearance. Keep in mind that federal law provides extended relief—up to 360 days. If you need help enforcing your rights, consider hiring a foreclosure lawyer to help you.
What Is the Covered Period?
While the relevant section of the CARES Act doesn't define the term "covered period" during which you can ask for a forbearance, you should make your request before December 31, 2020, or the termination date of the COVID-19 national emergency declaration, whichever is sooner. This definition of covered period is set forth in a different section of the Act, which addresses forbearances in connection with federally backed loans on multifamily properties. If you want to get an extension on an initial forbearance, make your request before the original forbearance period ends. (To learn more, see Mortgage Payment Relief During the Coronavirus Outbreak.)
How You Can Get a Forbearance Under the CARES Act
To get the forbearance, you need to make a request to your loan servicer within the covered period and affirm that you've suffered a financial hardship due to the COVID-19 emergency; the servicer can't require any additional documentation beyond your attestation.
No Fees, Penalties, or Additional Interest
During the forbearance period, the servicer can't charge fees, penalties, or interest beyond the amounts scheduled or calculated as if you made all contractual payments on time and in full under the terms of the mortgage contract.
What Loans and Properties Qualify Under the CARES Act
The right to get this kind of forbearance applies to mortgage loans secured by a first or subordinate lien on residential real property, including individual units of condominiums and cooperatives, designed principally for the occupancy of from one to four families.
What Happens When the Forbearance Period Ends
Be aware that a forbearance isn't the same as loan forgiveness; you'll still owe the skipped amounts after the forbearance period ends. Usually, the servicer will take a lump-sum payment, offer a payment plan, or provide a modification in which the unpaid amounts get added to the loan balance.
Fannie Mae and Freddie Mac Modifications After a Forbearance
In the wake of a natural disaster (coronavirus falls into this category), Fannie Mae and Freddie Mac typically offer modifications to borrowers following a completed forbearance plan. So, in response to COVID-19, Fannie Mae and Freddie Mac issued guidance to servicers on how to handle borrowers who finish their coronavirus-related forbearance plan. These guidelines say that the servicer must begin attempts to contact the borrower no later than 30 days before the expiration of the forbearance plan term to discuss modifying the loan.
You might qualify for a specially-designed disaster modification, such as an Extend Modification for Disaster Relief (called an “Extend Mod”) or a Capitalization and Extend Modification (called a “Cap and Extend Mod”), or a Flex Modification. The Extend Mod, as well as the Cap and Extend Mod, generally help homeowners who can resume making full pre-disaster monthly payments after the forbearance, but are behind in escrow amounts. A Flex Modification, in contrast, helps those who can’t resume making their regular monthly payments.
To get a modification, you'll have to meet certain eligibility criteria. Among other things, you must have experienced a hardship due to coronavirus, which has impacted your ability to make your monthly payment. Qualifying hardships generally include:
- unemployment
- a reduction in regular work hours, or
- illness of a borrower or co-borrower or dependent family member
Also, the mortgage loan must have been current or less than 31 days delinquent as of March 13, 2020, the date of the National Emergency declaration related to COVID-19.
Getting More Help From Fannie Mae and Freddie Mac
Fannie Mae also offers other kinds of assistance in getting through a national emergency, including:
- providing a needs assessment and personalized recovery plan
- assisting those who need financial relief from insurance companies, mortgage servicers, and other sources, and
- web-based resources and ongoing guidance from experienced disaster relief advisors.
You can find housing resources, including details on disaster relief, on Fannie Mae’s Know Your Options website. You can also go to www.knowyouroptions.com/relief to learn about the benefits that Fannie Mae’s Disaster Response Network offers.
If you have a Freddie Mac loan, you can go to Freddie Mac’s My Home website to learn about available help for homeowners impacted by COVID-19.
Talking to a HUD-Approved Housing Counselor or Foreclosure Lawyer
To learn about different ways to avoid a foreclosure, consider talking to a (free) HUD-approved housing counselor. A housing counselor can help you understand the specific options available if you have a Fannie Mae or Freddie Mac loan, or if another entity owns or guarantees your home loan. You can also call your servicer to learn about available relief.
To learn about foreclosure laws and procedures in your state, including how long the process takes, talk to a foreclosure attorney.
If Fannie Mae or Freddie Mac doesn’t own your loan, most servicers (on behalf of the loan owner) are offering various options to help homeowners get through the COVID-19 crisis, like forbearance agreements and modifications. Those with FHA-loans have access to FHA's suite of loss mitigation alternatives.
