Homeowners who are now struggling financially as a result of the coronavirus outbreak may be able to postpone their mortgage payments for up to 12 months, Fannie Mae and Freddie Mac announced last week.
The move by the federal loan servicers came days after President Trump announced that delayed mortgage payments may be an option for borrowers amidst the coronavirus pandemic. Fannie Mae and Freddie Mac cover about half of all home loans in the U.S.
Individuals who have experienced a loss of income due to the outbreak may qualify to make reduced payments or be allowed a pause in payments altogether. Under the new plan, borrowers will not incur penalties or late fees, and delayed payments will not be reported to credit agencies.
“Our thoughts are with everyone who may be impacted by COVID-19 and we urge you to stay safe and well during these unprecedented times,” Malloy Evans, senior vice president and single-family chief credit officer for Fannie Mae, said in a press release. “Fannie Mae, along with our lending and servicing partners, is committed to ensuring assistance is available to homeowners in need. We encourage residents whose employment or income are impacted by COVID-19 to seek available assistance as soon as possible.”
To get the delayed payment process started, borrowers will initially only need to testify over the phone to their lender that they’re experiencing financial hardship; documentation will come later. However, borrowers are responsible for reaching out to their loan servicer themselves. Payment relief can also apply to any type of property, whether it’s a primary home, secondary home, or investment property.
Throughout the loan forbearance period, Fannie Mae and Freddie Mac may reassess the borrower’s ability to pay the loan to ensure the plan is still necessary for that borrower. After this period is up, servicers will develop a feasible repayment plan with the borrower, including potentially extending the life of the loan.
Some banks are also offering mortgage forbearance periods for customers during this time, although, as of now, they are much shorter than 12 months. Fifth Third Bank, for instance, is offering borrowers a 90 day forbearance period on mortgages, and Ally is offering a 120 day forbearance period for mortgage customers. Bank of America also stated it will defer mortgage payments for borrowers who request it, although it did not specify a length of time.
“We don’t want people who have been responsible in making their mortgage payments to suddenly be declared delinquent and to lose their access to credit,” Chris Mayer, a real estate economist at Columbia University’s business school, told NPR. “Let’s fight the virus, and let’s hold people harmless for something that they didn’t control.”