May 22, 2020

From the Desk of Mike Donoghue

Fannie Mae and Freddie Mac have issued temporary guidance regarding the eligibility of borrowers who are in forbearance, or have recently ended their forbearance, looking to purchase a new home or refinance their existing home.

If the borrower entered into a forbearance plan and falls in to one of the below categories, they are eligible to get a mortgage for the purchase of a new home or refinance their existing mortgage

Borrower made all mortgage payments due and is not in a repayment plan, payment deferral or loan modification. 

Borrower is immediately eligible for a new mortgage loan to purchase a home or refinance their existing mortgage

 

                                              

Reinstatement

If the borrower resolved any missed mortgage payments through a reinstatement (i.e. brought all missed payments current) they are immediately eligible for a new mortgage loan. The lender will have to  document the source of funds used to bring the mortgage payments current if the  reinstatement was completed after the application date of the new transaction. Proceeds from a refinance may not be used to reinstate any mortgage loan. 

 

Loss Mitigation Solution

If outstanding payments will be or have been resolved through a loss mitigation solution, the borrower is eligible for a new mortgage loan if they have made at least three timely payments as of the note date of the new transaction as follows: 

  • For a repayment plan, the borrower must have made either three payments under the repayment plan or completed the repayment plan, whichever occurs first. Note that there is no requirement that the repayment plan be completed. 
  • For a payment deferral, the borrower must have made three consecutive payments following the effective date of the payment deferral agreement. 
  • For a modification, the borrower must have completed the three-month trial payment period. 
  • For any other loss mitigation solution not listed above, the borrower must have successfully completed the program, or made three consecutive full payments in accordance with the program. 

 

If these requirements are met on an existing mortgage loan being refinanced, the new loan amount can include the full amount required to satisfy the existing mortgage.