Homeowners facing financial hardship because of the coronavirus pandemic could delay their mortgage payments for up to a year.
Fannie Mae and Freddie Mac, the government-sponsored enterprises that back millions of mortgages, this week said loan servicers could suspend payments for up to 12 months for homeowners experiencing a loss of income due to the outbreak of COVID-19.
The forbearance period excuses any penalties or late fees against borrowers, and the delays in payment would not be reported to credit agencies, according to Fannie and Freddie.
“The last time this happened, in the recession, this was absolutely negatively impacting people’s credit scores as their payments were derogatory,” said Scott Sheldon, senior loan officer at Sonoma County mortgages.
Servicers should also offer other payment relief options like loan modifications, typically reserved for natural disasters. Fannie and Freddie also suspended all foreclosure sales and evictions for 60 days.
“Fannie Mae, along with our lending and servicing partners, is committed to ensuring assistance is available to homeowners in need,” said Malloy Evans, senior vice president and single-Family chief credit officer at Fannie Mae, in a press release. “We encourage residents whose employment or income are impacted by COVID-19 to seek available assistance as soon as possible.”
You don’t have to have the virus to qualify for payment relief, both agencies said. The relief also applies to any type of property: your primary home, second home, or investment properties.
Fannie and Freddie can reevaluate the borrower’s ability to pay during the forbearance period to make sure the plan is still needed. After the forbearance period, Fannie and Freddie told servicers to work out an affordable repayment plan with the borrower, which could include extending the term of the loan.
But it’s the homeowner’s responsibility to contact their mortgage servicer if they are struggling financially.
“We ask that servicers be responsive to potential requests for assistance from borrowers who may be impacted by COVID-19,” said Kevin Palmer, senior vice president of single-family portfolio management at Freddie Mac.