NCLC’s chart, Summary of Foreclosure Alternatives for Borrowers with COVID-19 Hardships (updated April 21, 2020), is a key resource summarizing available options for each type of mortgage loan, with links to applicable guidances, significant forbearance provisions beyond the CARES Act, and post-forbearance options.
The chart is summarized below as:
- Fannie Mae and Freddie Mac: Servicers must contact borrowers at least thirty days before the forbearance ends and must evaluate borrowers for one of several loan modification options. These are summarized for Fannie Mae in Lender Letter LL-2020-07 (May 13, 2020 updated May 27, 2020) and Lender Letter LL-2020-02 as updated May 14, 2020. For Freddie Mac, see Bulletin 2020-15 (May 13, 2020) and Bulletin 2020-4, as modified by Bulletin 2020-16 (May 14, 2020).
- Options available until July 1, 2020 include an Extend Mod and a Cap and Extend Mod. Beginning July 1, 2020, a new Covid-19 Payment Deferral program will go into effect. To qualify for the Covid-19 Payment Deferral the borrower must have been current or less than thirty-one days delinquent as of March 1, 2020. In addition, the borrower must be able to resume making the pre-forbearance payment. The Covid-19 Payment Deferral may be offered without receiving a complete loss mitigation application (called a “Borrower Response Package”) from the borrower. Borrowers who reach the end of all their forbearance periods and cannot resume making the pre-forbearance payment (or were more than thirty-one days delinquent as of March 1, 2020) may apply for a GSE Flex Mod. The Flex Mod allows for a long-term reduction in payments.
- VA loans: Servicers should review borrowers for loss mitigation options at least thirty days before the end of the forbearance. This includes all loss mitigation options described in the standard VA Servicer Handbook, including those related to disasters. VA Circular 26-20-12 explicitly states that servicers must not require a borrower who receives a CARES Act forbearance to make a lump sum payment after the forbearance period ends.
- FHA loans: Before the end of the forbearance, the servicer must evaluate the borrower for a COVID-19 National Emergency Standalone Partial Claim, as discussed in Mortgagee Letter 2020-06. Borrowers who can afford their pre-crisis payment and who were less than thirty days past due as of March 1, 2020 may be offered the Covid-19 Standalone Partial Claim. If that is not sufficient to bring the borrower current, or if the borrower is not eligible for a partial claim, the servicer must evaluate the borrower for all other loss mitigation options available under the standard waterfall discussed in Handbook 4000.1 (Section III.A.2.k).
For more information on COVID-19 mortgage forbearance and alternatives, contact the Law Office of Ira J. Metrick today.