The StoneHill Group continually monitors the mortgage industry for changes that impact our clients. Here are the most recent Agency updates.

Origination Agency Updates Related to COVID-19

August 5, 2020

Freddie Mac

We continue to work closely with Fannie Mae under the guidance and direction of the FHFA to address the ongoing economic implications and uncertainty related to the coronavirus disease (COVID-19) pandemic and its impacts on Borrowers and the Mortgage origination process. This Bulletin provides updates regarding certain temporary COVID-19-related requirements and flexibilities announced in previous Bulletins, including:

Extension of temporary provisions from previously published Bulletins

In Bulletin 2020-23, we extended the effective date for some previously announced temporary requirements to Mortgages with Application Received Dates through July 31, 2020.

We are further extending the effective date for Mortgages with Application Received Dates through August 31, 2020 for the following:

Credit underwriting requirements and guidance announced in Bulletins 2020-5 and 2020-8,except that the requirement for verification of the self-employed Borrower’s business being open and operating is amended as stated below:

Self-employed Borrowers: verification the business is open and operating – updated

Effective immediately and remains in place for Mortgages with Application Received Dates on or before August 31, 2020.

In Bulletin 2020-8, we announced that Sellers must now take additional steps to confirm that the Borrower’s business is open and operating within 10 Business Days prior to the Note Date.

Effective immediately, we are updating this temporary requirement to permit the confirmation to take place within 20 Business Days prior to the Note Date to ease timing constraints related to closings. Sellers are encouraged to continue to make this confirmation as close to the Note Date as possible.

Extension of temporary flexibilities regarding Seller’s post-funding quality control requirements – targeted sampling through August 2020

In Bulletin 2020-11, we announced temporary flexibilities for Seller’s related to post-funding quality control reviews. The quality control flexibilities announced in Bulletin 2020-11 were effective immediately for all Mortgages currently in the process of a post-closing Seller in-house quality control review and were to remain in place for all Mortgages selected through June 2020 for post-closing Seller in-house quality control reviews. Bulletin 2020-23 extended this flexibility for Mortgages selected through July 2020.

These flexibilities will now remain in place for all Mortgages selected through August 2020 for post-closing Seller in-house quality control reviews.

We are also reminding Sellers of additional resources, including our Selling FAQs related to COVID-19, which were recently updated based on current guidance.

 Fannie Mae

Extension of temporary policies LL 2020-03

We are extending the temporary policies in this Lender Letter to loans with application dates on or before Aug. 31, 2020 from Jul. 31, 2020. Each applicable date has been updated in the remainder of this Lender Letter.

Requirements for borrowers using self-employment income to qualify

Effective: Lenders are encouraged to apply these requirements to existing loans in process; however, they must be applied to loans with application dates on or after Jun. 11, 2020 until further notice.

Requirements for borrowers using self-employment income to qualify

Effective: Lenders are encouraged to apply these requirements to existing loans in process; however, they must be applied to loans with application dates on or after Jun. 11, 2020 until further notice.

Income Analysis

Self-employment income is variable in nature and generally subject to changing market and economic conditions. Whether a business is impacted by an adverse event, such as COVID-19, and the extent to which business earnings are impacted can depend on the nature of the business or the demand for products or services offered by the business. Income from a business that has been negatively impacted by changing conditions is not necessarily ineligible for use in qualifying the borrower. However, the lender is required to determine if the borrower’s income is stable and has a reasonable expectation of continuance. Due to the pandemic’s continuing impact on businesses throughout the country, lenders are now required to obtain the following additional documentation to support the decision that the self-employment income meets our requirements:

• • an audited year-to-date profit and loss statement reporting business revenue, expenses, and net income up to and including the most recent month preceding the loan application date; or
  • an unaudited year-to-date profit and loss statement signed by the borrower reporting business revenue, expenses, and net income up to and including the most recent month preceding the loan application date, and two business depository account(s) statements no older than the latest two months represented on the year-to-date profit and loss statement
  • For example, the business depository account statements can be no older than Apr. and May for a year-to-date profit and loss statement dated through May 31, 2020.
  • The lender must review the two most recent depository account statements to support and/or not conflict with the information presented in the current year-to-date profit and loss statement. Otherwise, the lender must obtain additional statements or other documentation to support the information from the current year-to-date profit and loss statement.

NOTE: The year-to-date profit and loss statement must be no older than 60 days old as of the note date consistent with current Age of Documentation requirements below.

Lenders must review the profit and loss statement, and business depository accounts if required, and other relevant factors to determine the extent to which a business has been impacted by COVID-19. The lender can use the following guidance when performing the assessment of business operations and stability and must complete the business income assessment based on the minimum additional documentation above. In some instances, the lender may find it necessary to obtain supplemental documentation. See the full communication from Fannie LL2020-03.

Business Income Calculation Adjustment

When the lender determines current year net business income has been impacted by the COVID-19 pandemic and is

• • less than the historical monthly income calculated using Form 1084, but is stable at its current level, the lender must reduce the amount of qualifying income calculated using Form 1084 to no more than the current level of stable income as determined by the lender (see Business Income above).
  • more than the historical income calculated using Form 1084, the lender must use no more than the currently stable level of income calculated using Form 1084 to qualify the borrower.

In all cases, qualifying income must be supported by documentation, including any supplemental documentation obtained by the lender.

Business Assets

We are clarifying that proceeds from the Small Business Administration PPP or any other similar COVID-19 related loans or grants are not considered business assets. Refer to B3-4.2-02, Depository Accounts for details.

Temporary eligibility requirements for purchase and refinance transactions

Effective: Lenders may immediately apply these policies to loans in process and must apply them to loans with application dates on or after Jun. 2, 2020. These policies will be effective until further notice.

In response to lender feedback, we are addressing eligibility requirements for borrowers impacted by the COVID-19 pandemic. With this update we are providing eligibility guidelines for purchase and refinance transactions.

Lenders must continue to review the borrower’s credit report to determine the status of all mortgage loans. In addition to reviewing the credit report, the lender must also apply due diligence for each mortgage loan on which the borrower is obligated, including co-signed mortgage loans and mortgage loans not related to the subject transaction, to determine whether the payments are current as of the note date of the new transaction. For the purposes of these requirements, “current” means the borrower has made all mortgage payments due in the month prior to the note date of the new loan transaction by no later than the last business day of that month

Examples of acceptable additional due diligence methods to document the loan file include:

• • a loan payment history from the servicer or third-party verification service,
  • a payoff statement (for mortgages being refinanced),
  • the latest mortgage account statement from the borrower, and
  • a verification of mortgage.

A borrower who is not current and has missed payments on any mortgage loan is eligible for a new mortgage loan if those missed payments were resolved in accordance with the requirements in the table. See LL2020-03 for the complete information contained within the table relating to this topic.

We are not considering payments missed during the time of a COVID-19-related forbearance that have been resolved to be historical delinquencies for purposes of our excessive mortgage delinquency policy as outlined in B3-5.3-03, Previous Mortgage Payment History. This flexibility does not apply to high LTV refinance loans, which must continue to meet the payment history requirements in B5-7-02, High LTV Refinance Underwriting, Documentation, and Collateral Requirements for the New Loan.

Unemployment benefits as qualifying income

We are reminding lenders of our current policy in the Selling Guide pertaining to the use of unemployment benefits. Per B3-3.1-09, Other Sources of Income, unemployment benefits cannot be used to qualify a borrower unless they are clearly associated with seasonal employment that is reported on the borrower’s signed federal income tax returns. We recognize that many unemployed and furloughed individuals are eligible for unemployment benefits under the CARES Act; however, unemployment compensation is short-term in nature and is therefore not a reliable and predictable source of income for borrowers who are not established seasonal workers.

Furloughed borrowers

The COVID-19 pandemic has resulted in an increase in furloughed employees. A furlough is a suspension from active employment that does not typically guarantee restoration of an employee’s position when the furlough period ends. Until furloughed employees actually return to work, they are unable to provide evidence of a stable and reliable flow of employment-related income and are therefore ineligible under our Temporary Leave Income policy in B3-3.1-09, Other Sources of Income.

Employment validation by the DU validation service

Effective: For new Desktop Underwriter® (DU®) loan casefiles created on or after May 4, 2020 and through Aug. 31, 2020.

To support sustainable homeownership while ensuring prudent risk management during these times of unprecedented unemployment, we are temporarily suspending representation and warranty relief for employment validation within the Desktop Underwriter® (DU®) validation service. Lenders must perform a verbal verification of employment in accordance with B3-3.1-07, Verbal Verification of Employment or follow the temporary policies outlined below.

While representation and warranty relief for employment validation is temporarily suspended, lenders will still be able to take advantage of the income and asset validation services with representation and warranty relief. Income validation for a borrower remains dependent on the borrower being employed. Lenders should continue to verify the employment of the borrower as close to closing as possible. When income or assets are validated, lenders should continue to follow the close-by dates and instructions issued in DU messages. If the lender discovers that the borrower is no longer employed, the associated income can no longer be considered in the qualification of the borrower, and the employment and associated income information should be removed from the Form 1003 and the casefile should be resubmitted to DU.

Refer to the DU Validation Service Release Notes published on May 1, 2020 and Apr. 9, 2020 for additional information.

Age of documentation

Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through Aug. 31, 2020.

In order to ensure that the most up-to-date information is being considered to support the borrower’s ability to repay, we are updating our age of documentation requirements for all loans (existing and new construction) as follows:

• • We are modifying age of document requirements from four months (120 days) to two months (60 days) for most income and asset documentation. If an asset account is reported on a quarterly basis, the lender must obtain the most recently issued quarterly statement.
  • When the lender receives employment and income verification directly from a third-party employment verification vendor, we are now requiring that the information in the vendor’s database be no more than 60 days old as of the note date.
  • There are no changes to the age of documentation requirements for military income documented using a Leave and Earnings Statement, Social Security, retirement income, long-term disability, mortgage credit certificates, public assistance, foster care, or royalty payments, and the lender can continue to apply standard age of document requirements as stated in the Selling Guide.

The following requirement may be applied to loans with application dates through July 31, 2020 (even though the tax filing extension expires July 15). This temporary flexibility no longer applies to loans with application dates on or after August 1, 2020.

• Due to the federal income tax filing extension granted through Jul. 15, 2020, we are eliminating the following documentation requirements. These normally apply for income types that require copies of federal income tax returns when the borrower files an extension with the IRS:
• a copy of the IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Tax Return), and
• IRS Form 4506-T (Request for Transcript of Tax Return) transcript confirming “No Transcript Available” for the 2019 tax year.

All other requirements contained in B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, continue to apply.

Conversion of construction-to-permanent financing – single-closing transactions

The Selling Guide currently allows certain single-closing construction-to-permanent transactions with credit documents dated more than 4 months but no more than 18 months at the time of conversion to permanent financing when certain conditions are met. (See B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions). Among those conditions is a requirement that the credit documents are dated within 120 days of the original closing.

Consistent with the age of credit documentation requirements in this Lender Letter, this requirement is being updated to reflect that the income and asset documentation must be dated within 60 days of the original closing. All other conditions related to the age of credit documents contained in B5-3.1-02 continue to apply.

Verification of self-employment

Effective: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through Aug. 31, 2020.

When a borrower is using self-employment income to qualify, the lender must verify the existence of the borrower’s business within 120 calendar days prior to the note date. Due to latency in system updates or recertifications using annual licenses, certifications, or government systems of record, lenders must take additional steps to confirm that the borrower’s business is open and operating. The lender must confirm this within 20 business days of the note date (or after closing but prior to delivery).

Below are examples of methods the lender may use to confirm the borrower’s business is currently operating:

• • evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment);
  • evidence of current business receipts within 20 days of the note date (payment for services performed);
  • lender certification the business is open and operating (lender confirmed through a phone call or other means); or
  • business website demonstrating activity supporting current business operations (timely appointments for estimates or service can be scheduled).

See B3-3.1-07, Verbal Verification of Employment for our existing requirements.

Market-based assets

Effective: Lenders are encouraged to apply these updates to existing loans in process; however, they must be applied to loans with application dates on or after Apr. 14, 2020 through Aug. 31, 2020.

Stocks, stock options, and mutual funds

In light of current market volatility, we are making the following updates when the borrower is using stocks, stock options, or mutual funds for assets:

• • When used for down payment or closing costs, evidence of the borrower’s actual receipt of funds realized from the sale or liquidation must be documented in all cases.
  • When used for reserves, only 70% of the value of the asset must be considered, and liquidation is not required.

See B3-4.3-01, Stocks, Stock Options, Bonds and Mutual Funds for our existing requirements.

Powers of attorney

These flexibilities are effective immediately for all loans in process and remain in place for loans with application dates on or before Aug. 31, 2020.

Selling Guide, B8-5-05, Requirements for Use of a Power of Attorney, contains our requirements for powers of attorney. For loans with application dates on or before Aug. 31, 2020, see LL2020-03 for additional requirements for using a power of attorney.

Verbal verification of employment

These temporary flexibilities are effective immediately for all loans in process and remain in place for loans with application dates on or before Aug. 31, 2020.

Many lenders are reporting difficulty in obtaining the verbal verification of employment (VOE) due to disruption to operations of the borrower’s employer. We expect lenders to attempt to obtain the verbal VOE in accordance with our existing requirements guidance. However, we will allow the following flexibilities:

• • Written VOE: The Selling Guide permits the lender to obtain a written VOE confirming the borrower’s current employment status within the same timeframe as the verbal VOE requirements. An email directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment status may be used in lieu of a verbal VOE. In addition, the lender may obtain the VOE after loan closing, up to the time of loan delivery (though we strongly encourage getting the verbal VOE before the note date).
  • Paystub: The lender may obtain a year-to-date paystub from the pay period that immediately precedes the note date.
  • Bank statements: The lender can provide bank statements (or other alternative documentation as permitted by B3-4.2-01, Verification of Deposits and Assets) evidencing the payroll deposit from the pay period that immediately precedes the note date.

Continuity of income

Given the current economic climate associated with COVID-19 and its impact on employment and income, we recommend that lenders practice additional due diligence to ensure the most recent information is obtained. Lenders are strongly encouraged to help ensure any disruption to borrowers’ employment (or self-employment) and/or income due to COVID-19 is not expected to negatively impact their ability to repay the loan. During these uncertain times, it is our goal to partner with you to help ensure sustainable homeownership for the borrower.

As an example of additional due diligence for a self-employed borrower, lenders are encouraged to attempt to verify that the borrower’s business is operational closer to the note date rather than rely on our current Guide requirements (e.g., within 15 days instead of 120 days). 

Link to FAQ’s – https://singlefamily.fanniemae.com/media/document/pdf/faqs-covid-originations-policy

FHA

ML 2020-23: Updated Temporary Guidance for Verification of Self-Employment; Rental Income; 203(k) Rehabilitation Escrow Account (07/28/20).

Note: FHA issued an Update on July 30, 2020 to this announcement (ML 2020-24) updating the effective dates: “This ML supersedes ML 2020-23 announced in FHA INFO 20-53 on July 28, 2020. ML 2020-24 updates the effective date for the verification of business operations of self-employed borrowers and rental income guidance for case numbers assigned on or after August 12, 2020 through November 30, 2020”.

The effective date for the 203(k) rehabilitation escrow account has not changed and is still effective as of July 28, 2020. The revised ML is now available on the Mortgagee Letters web page

Purpose

The purpose of this Mortgagee Letter (ML) is to inform Mortgagees of Single Family’s modification of requirements in response to impacts from the Presidentially-Declared COVID-19 National Emergency including:

• • Modification to self-employment income requirements by issuing guidance for verification of business operations;
  • Modification to rental income requirements; and
  • Modification to the Approval of Extension Requests and Release of Funds under FHA 203(k) Rehabilitation Mortgage Insurance Program.

Effective Date – See Updated Announcement reflected above:

The verification of business operations for self-employed borrowers and Rental Income guidance in this ML is effective for cases with Note Dates on or after July 28, 2020 through November 30, 2020.

The administration of the 203(k) Rehabilitation Escrow guidance for borrowers in forbearance in this ML is effective immediately for open escrow accounts through November 30, 2020.

Policy updates in this ML are temporary and will not be incorporated into the HUD Single-Family Housing Policy Handbook 4000.1.

Verification of Self-Employment for Forward Mortgage and HECM

When self-employment income is used to qualify the Borrower, the Mortgagee must verify and document that the income derived from self employment is stable with a reasonable expectation that it will continue.

Due to the continued impact of the COVID-19 National Emergency on economic conditions and businesses throughout the country, in addition to the requirements in SF Handbook 4000.1 Sections II.A.4.c.x(C) and II.A.5.b.x(C) Self-Employment Income – Required Documentation (TOTAL and Manual) and Section 3.26 of the HECM Financial Assessment and Property Charge Guide, the Mortgagee must verify the existence of the borrower’s business within 10 calendar days prior to the date of the Note to confirm that the Borrower’s business is open and operating.

The Mortgagee must obtain one of the following to verify and confirm that the business is open and operating:

• • evidence of current work (executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self employment);
  • evidence of current business receipts within 10 days of the note date (payment for services performed);
  • lender certification that the business is open and operating (lender confirmed through a phone call or other means) business website demonstrating activity supporting current business operations

Rental Income

In addition to the requirements in SF Handbook 4000.1 Sections II.A.4.c.xii(I) and II.A.5.b.xii(I) Rental Income (TOTAL and Manual) and Section 3.50 through Section 3.55 of the HECM Financial Assessment and Property Charge Guide where a borrower is qualifying utilizing rental income, for each property generating rental income the Mortgagee must either:

• • Reduce the effective income associated with the calculation of rental income by 25%, or
  • Verify 6 months PITI reserves (this option is applicable to Forward only), or
  • if the borrower has received the previous 2 months rental payments as evidenced by borrower’s bank statements showing the deposit. (This option is applicable only for borrowers with a history of rental income from the property).

203(k) Rehabilitation Escrow Account

SF Handbook 4000.1, II.A.8.a.xvii(B) Extension Requests, states that if the work is not completed within the rehabilitation period specified in the Rehabilitation Loan Agreement, the Borrower may request an extension of time and must submit adequate documentation to justify the extension. The Mortgagee may grant an extension at its discretion only if the Mortgage Payments are current. Additionally SF Handbook 4000.1, II.A.8.a.xx Servicing, states that if the mortgage is delinquent, the Mortgagee may refuse to make further releases from the rehabilitation escrow account and that the project must stop if the Mortgage is in payment default.

FHA is providing a temporary flexibility allowing Mortgagees to continue administering the Rehabilitation Escrow Account, including the approval of extension requests and release of funds, which will allow the project to continue for mortgages where the Borrower is in forbearance due to the impacts of COVID-19.

The Mortgagee is still required to obtain:

• • An explanation for the delay from the Borrower, contractor, or Consultant when reviewing extension requests; and
  • A new estimated completion date.

ML 2020-20: Re-Extension of the Effective Date of Mortgagee Letter 2020-05, Re-verification of Employment and Exterior-Only and Desktop-Only Appraisal Scope of Work Options for FHA Single Family Programs Impacted By COVID-19

 Effective Date

The re-extension of Appraisal guidance in Mortgagee Letter 2020-05 is effective immediately for appraisal inspections completed on or before August 31, 2020. The extension of re-verification of employment guidance in Mortgagee Letter 2020-05 is effective immediately for cases closed on or before August 31, 2020.

Policy updates in this ML are temporary and will not be incorporated into the HUD Single-Family Housing Policy Handbook 4000.1.

Summary of Changes: 

Re-verification of Employment Forward

FHA is allowing flexibilities related to the Mortgagee’s process of completing re-verification of employment, which includes verbal verification of employment. This is applicable for all FHA Title II forward and reverse mortgage programs, where re-verification of employment is required.

Mortgagees do not need to provide a re-verification of employment within 10 days of the Note date as described in Handbook 4000.1, Sections II.A.4.c.ii(C)(1)-(2) and II.A.5.b.ii(C)(1)-(2) Traditional and Alternative Current Employment Documentations, provided that the Mortgagee is not aware of any loss of employment by the borrower and has obtained:

• • For forward purchase transactions, evidence the Borrower has a minimum of 2 months of Principal, Interest, Taxes and Insurance (PITI) in reserves; and
  • A year-to-date paystub or direct electronic verification of income for the pay period that immediately precedes the Note date, or
  • A bank statement showing direct deposit from the Borrower’s employment for the pay period that immediately precedes the Note date.

Re-verification of Employment HECM

Mortgagees do not need to provide a re-verification of employment within 10 days of disbursement as described in Section 3.8 and 3.9 of the HECM Financial Assessment and Property Charge Guide, provided that the Mortgagee is not aware of any loss of employment by the borrower and has obtained:

• • A year-to-date paystub or direct electronic verification of income for the pay period that immediately precedes the Note date, or
  • A bank statement showing direct deposit from the Borrower’s employment for the pay period that immediately precedes the Note date

HUD Single Family Housing Appraisal Policy

When applicable, as described below, the appraiser may amend the scope of work to perform an Exterior-Only (viewing from the street) or Desktop-Only. The Appraiser may rely on supplemental information from other reliable sources such as Multiple Listing Service (MLS), and Tax Assessor’s Property Record to prepare an appraisal report. The Appraiser may rely on information from an interested party to the transaction (borrower, real estate agent, property contact, etc.) with clear appraisal report disclosure when additional verification is not feasible. The appraisal report must contain adequate information to enable the intended users to understand the extent of the inspection that was performed.

The Exterior-Only and Desktop-Only Appraisal options must continue to be reported on the current FHA approved appraisal forms with amended certifications and scope of work disclosures.

Exterior-Only Option

The required protocols and exhibits under the Exterior-Only Option are:

• • Appraiser will observe the Property and Improvements from the street.
  • The Appraisal will be completed “AS IS” unless Minimum Property Requirements (MPR) related deficiencies are observed from the street or otherwise known.
  • The Appraiser may utilize extraordinary assumptions when necessary.
  • No sketch, interior photos or rear exterior photographs are required.

Desktop-Only Option

The required protocols and exhibits under the Desktop-Only Option are:

• • Appraiser will not physically observe the Property and Improvements.
  • The Appraisal will be completed “AS IS” unless MPR related deficiencies are known.
  • The Appraiser may utilize extraordinary assumptions when necessary.
  • No sketch, interior photos, exterior photographs are required.
  • No comparable viewing nor photos are required.

FHA Purchase Transactions

FHA will accept appraisals for both forward and HECM for Purchase transactions with an optional Exterior-Only or Desktop-Only scope of work by the Appraiser. These flexibilities are not permitted on New Construction, Construction to Permanent, Building on Own Lands and 203(k) purchases.

FHA Refinance and Traditional HECM

FHA will accept appraisals for Traditional HECM, HECM-to-HECM Refinance, Rate and Term Refinance, and Simple Refinance with an optional Exterior-Only scope of work by the Appraiser. These flexibilities are not permitted on Cash out Refinances and 203(k) refinances.

Form 1004D Part B Completion Report

When an Appraisal Update and/or Completion Report (Form 1004D) Part B is required to evidence the completion of required repairs, FHA will permit a letter signed by the borrower affirming that the work was completed with further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits, or other substantially similar documentation. All completion documentation must be retained in the case binder. These flexibilities are not permitted on New Construction, Construction to Permanent, Building on Own Lands, and 203(k) transactions.

Servicing Agency Updates Related to COVID-19

August 17, 2020

Fannie Mae

LL-2020-06: Selling Loans in Forbearance Due to COVID-19 (04/22/20 Updated 07/31/20)

Overview

In accordance with long standing policy, mortgage loans must be current at time of sale to us. Loans that have been placed into forbearance prior to sale are not considered current and are currently ineligible.

Due to the unprecedented and swift nature of the COVID-19 pandemic and its impact on the nation’s employment, we are providing liquidity options for certain loans that have been placed into forbearance after loan closing but prior to loan sale. We will temporarily be purchasing (or securitizing) loans that are in forbearance that would otherwise be ineligible based on our current policies.

Our focus is to provide liquidity to the market, while also managing credit risk. As a result, we will review the volume of loans sold to us under these temporary provisions and may adjust our requirements as necessary.

Please read LL2020-06 updated July 31, 2019 for complete details.

LL-2020-07: COVID-19 Payment Deferral (05/13/20 Updated 07/15/20)

The servicer must not require a complete Borrower Response Package (BRP) to evaluate the borrower for a COVID-19 payment deferral if the eligibility criteria are satisfied.

In order to be eligible for a COVID-19 payment deferral, the following criteria must be met.

The borrower must

• be on a COVID-19 related forbearance plan, or
• have experienced a financial hardship resulting from COVID-19 (for example, unemployment, reduction in regular work hours, or illness of a borrower/co-borrower or dependent family member) that has impacted their ability to make their full monthly contractual payment. The servicer must achieve Quality Right Party Contact (QRPC) to
• NOTE: The servicer is not required to obtain documentation of the borrower’s hardship.
• determine the reason for the delinquency and whether it is temporary or permanent in nature;
• determine whether or not the borrower has the ability to repay the mortgage debt;
• educate the borrower on the availability of workout options, as appropriate; and
• obtain a commitment from the borrower to resolve the delinquency.
• Additionally, the servicer must confirm that the borrower
• has resolved the hardship,
• is able to continue making the full monthly contractual payment, and
• is unable to reinstate the mortgage loan or afford a repayment plan to cure the delinquency.
• NOTE: If the mortgage loan was previously modified pursuant to a Fannie Mae Home Affordable Modification Program (HAMP) modification under which the borrower remains in “good standing,” then the mortgage loan will not lose good standing and the borrower will not lose any “pay for performance” incentives in the following circumstances:
• the borrower was on a COVID-19 related forbearance plan immediately preceding the COVID-19 payment deferral, or
• the borrower has a COVID-19 related hardship and the mortgage loan is less than three months delinquent.
• The mortgage loan must be a conventional first lien mortgage loan, and may be a fixed-rate, a step-rate, or an ARM.The mortgage loan must
• NOTE: The property securing the mortgage loan may be vacant or condemned.
• have been current or less than two months delinquent as of Mar. 1, 2020, the effective date of the National Emergency declaration related to COVID-19; and
• be equal to or greater than one month delinquent but less than or equal to 12 months delinquent as of the date of evaluation.The mortgage loan must not have previously received a COVID-19 payment deferral. The mortgage loan must not be subject to
• NOTE: The mortgage loan may have previously received a non-COVID-19 payment deferral.
• NOTE: If a borrower’s hardship is related to COVID-19 but he or she two or more months delinquent as of the effective date of the National Emergency declaration, and the servicer determines the borrower can maintain his or her full monthly contractual payment, then the servicer must submit a request for a COVID-19 payment deferral through Fannie Mae’s servicing solutions system for review and obtain prior approval from Fannie Mae.
• a recourse or indemnification arrangement under which Fannie Mae purchased or securitized the mortgage loan or that was imposed by Fannie Mae after the mortgage loan was purchased or securitized,
• an approved liquidation workout option,
• an active and performing repayment plan or other non-COVID-19 related forbearance plan,
• a current offer for another retention workout option, or
• an active and performing mortgage loan modification Trial Period Plan.

 Determining eligibility for a COVID-19 payment deferral for a Texas Section 50(a)(6) loan

A Texas Section 50(a)(6) loan is eligible for a COVID-19 payment deferral if

• the requirements described in Determining eligibility for a COVID-19 payment deferral are satisfied, and
• the application of a COVID-19 payment deferral to the mortgage loan complies with applicable law.

 July 31, 2020

Freddie Mac

Bulletin 2020-30: Extension of Temporary Requirements for Purchase of Mortgages in Forbearance

Click here for a printable PDF version.

Under the guidance and direction of the FHFA and in alignment with Fannie Mae, we are extending the temporary requirements for purchase of Mortgages in forbearance announced in Bulletin 2020-12 and subsequently extended in Bulletins 2020-17 and 2020-23. These requirements are now effective for Mortgages with Note Dates on or after February 1, 2020 and on or before August 31, 2020, and Settlement Dates on or after May 1, 2020 and on or before October 31, 2020.

Freddie Mac Selling FAQs related to COVID-19

July 15, 2020

Performing an escrow analysis

If the servicer chooses to perform an escrow analysis, any escrow account shortage that is identified at the time of the COVID-19 payment deferral must not be included in the non-interest bearing balance, and the servicer is not required to fund any existing escrow account shortage. In addition, the servicer is not required to revoke any escrow deposit account waiver.

In the event the servicer identifies an escrow shortage as the result of an escrow analysis in connection with a COVID-19 payment deferral or as part of the next annual analysis, then the servicer must spread repayment of the escrow shortage amount in equal monthly payments over a term of up to 60 months, unless the borrower decides to pay the shortage up-front.

Determining the COVID-19 payment deferral terms

The servicer must defer the following amounts as a non-interest bearing balance, due and payable at maturity of the mortgage loan, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing UPB:

• up to 12 months of past-due principal and interest (P&I) payments;
• out-of-pocket escrow advances paid to third parties; and
• servicing advances paid to third parties in the ordinary course of business and not retained by the servicer, if allowed by state law.

All other terms of the mortgage loan must remain unchanged.

Any existing non-interest-bearing balance amount on the mortgage loan remains due and payable at maturity of the mortgage loan, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing UPB.

Please see the Lender Letter 2020-07 for complete details.

 July 8, 2020

FHA

ML 2020-22: FHA’s COVID-19 Loss Mitigation Options

Effective Date

Mortgagees must offer eligible borrowers the COVID-19 Loss Mitigation Options and procedures set forth in this ML no later than 90 days from the date of this Mortgagee Letter but may begin offering the new options immediately.

The new Single Family Default Monitoring System (SFDMS) Delinquency and Default Reason (DDR) Code 055 – Related to National Emergency Declaration must be used to report delinquencies as a result of impacts of the COVID-19 pandemic effective immediately or no later than the July 2020 reporting cycle. That data is due to HUD no later than August 7, 2020, which is the fifth business day of August 2020. All mortgagees that are unable to report DDR Code 055 – Related to National Emergency Declaration prior to the July 2020 reporting cycle must report DDR Code 010 – Neighborhood Problem until they can begin reporting DDR Code 055.

The use of the new SFDMS Delinquency/Default Status (DDS) Code 053 – Combination Partial Claim/Modification Started (Non-FHA-HAMP) will be effective for the July 2020 reporting cycle. That data is due to HUD no later than August 7, 2020, which is the fifth business day of August 2020.

Upon Borrower request, Mortgagees must offer a COVID-19 Forbearance to any Borrower that experiences an adverse impact on their ability to make on-time Mortgage Payments due to the COVID-19 pandemic, regardless of Default status.

To be eligible for the COVID-19 Loss Mitigation Home Retention and Disposition Options, the Borrower must have been current or less than 30 Days past due as of March 1, 2020 and satisfy the criteria set forth in this section.

COVID-19 Loss Mitigation Options are not incentivized for Mortgagees.

If a Borrower is experiencing a financial hardship negatively impacting their ability to make on-time Mortgage Payments due to COVID-19 and makes a request for a COVID-19 Forbearance, the Mortgagee must offer the Borrower a COVID-19 Forbearance.

The COVID-19 Forbearance allows for one or more periods of reduced or suspended payments without specific terms of repayment.

All FHA-insured Borrowers are eligible for a COVID-19 Forbearance, regardless of the delinquency status of the Mortgage.

The Mortgagee may utilize any available method for communicating with a Borrower regarding a COVID-19 Forbearance to meet these requirements. Acceptable methods of communication regarding a COVID-19 Forbearance include, but are not limited to, emails, text messages, fax, teleconferencing, websites, web portals, etc. If a Mortgagee sends out a general communication advising that a COVID-19 Forbearance is available, the Borrower may reply to that communication requesting a COVID-19 Forbearance, via email, phone call, or any other method of communication clearly made available to the Borrower by the Mortgagee.

The initial COVID-19 Forbearance period may be up to six months. If needed, an additional COVID-19 Forbearance period of up to six months may be requested by the Borrower and must be approved by the Mortgagee.

The term of the initial or extended COVID-19 Forbearance may be shortened at the Borrower’s request.

The Mortgagee must waive all Late Charges, fees, and penalties, if any, as long as the Borrower is on a COVID-19 Forbearance Plan.

Mortgagees must complete a Loss Mitigation Option for eligible Borrowers no later than 90 days from the earlier of the date of completion or expiration of the COVID-19 Forbearance. For Home Disposition Options, a signed Approval to Participate (ATP) Agreement or a signed DIL Agreement will meet this requirement.

Owner-Occupant Borrowers who were current or less than 30 Days past due as of March 1, 2020 must be reviewed for the COVID-19 Standalone Partial Claim, the COVID-19 Owner-Occupant Loan Modification, the COVID-19 Combination Partial Claim and Loan Modification, or the COVID-19 FHA-HAMP Combination Loan Modification and Partial Claim with Reduced Documentation.

Non-Occupant Borrowers who were current or less than 30 Days past due as of March 1, 2020 must be reviewed for the COVID-19 Non-Occupant Loan Modification.

Extension of First Legal Deadline Date For Borrowers participating in the COVID-19 Forbearance, Mortgagees are granted an automatic 90-Day extension to the first legal deadline date, from the earlier of the date of completion or expiration of the COVID-19 Forbearance period, to complete a Loss Mitigation Option, or to commence or re-commence foreclosure. Mortgagees must report the appropriate loss mitigation action in SFDMS. 

See ML 2020-22 for complete details

FHA INFO #20-48 

Loss Mitigation Options for Borrowers: 

This ML announces an expansion of loss mitigation options that are available to assist single family borrowers with FHA-insured forward mortgages impacted by the COVID-19 National Emergency. In addition, this ML updates the guidance for forward mortgages detailed in ML 2020-06. Read today’s Press Release. 

Servicers must begin offering these loss mitigation options to eligible borrowers immediately, but no later than 90 days from the date in ML 2020-22. Additionally, any COVID-19-related delinquencies in the Single Family Default Monitoring System (SFDMS) must be reported by the July 2020 reporting cycle. Refer to the Single Family Default Monitoring System Codes Guide for more information. These policies will be incorporated in a forthcoming update to FHA’s Single Family Housing Policy Handbook 4000.1, Section III.A.3.d, Presidentially-Declared COVID-19 National Emergency.

 June 26, 2020

Fannie Mae

LL-2020-07: COVID-19 Payment Deferral (05/13/20 Updated 06/10/20)

Link to Recent Update

With Lender Letter LL-2020-05, Payment Deferral, we announced payment deferral, a new retention workout option jointly developed with Freddie Mac at the direction of the Federal Housing Finance Agency (FHFA). That workout option was created to assist borrowers who became delinquent due to a short-term hardship that has since been resolved.

In response to the COVID-19 pandemic and servicer feedback, we are introducing COVID-19 payment deferral, a new workout option specifically designed to help borrowers impacted by a hardship related to COVID-19 return their mortgage to a current status after up to 12 months of missed payments. Designed to be simple and efficient for both servicers and borrowers, this solution is for borrowers who have completed a COVID-19 related forbearance plan, or who have a confirmed but resolved COVID-19 financial hardship. COVID-19 payment deferral was jointly developed with Freddie Mac at the direction of FHFA.

While COVID-19 payment deferral is similar to the recently announced payment deferral, we have made several enhancements to assist borrowers who have a COVID-19 related hardship. Key differences include:

The borrower has experienced a financial hardship resulting from COVID-19 that impacted their ability to make their monthly mortgage loan payment, which has been resolved.

• The mortgage loan must have been current or less than 31 days delinquent as of Mar. 1, 2020, the effective date of the National Emergency declaration related to COVID-19.
• The mortgage loan must be 31 or more days delinquent but less than or equal to 360 days delinquent as of the date of evaluation.
• Certain eligibility criteria are not applicable, such as time from mortgage loan origination and rolling delinquency parameters.
• The servicer must defer the delinquent principal and interest payments (P&I) together with any allowable servicing advances paid to third parties as a result of the delinquency into the non-interest-bearing balance.

 Fannie Mae Updates LL-2020-05: Payment Deferral

Determining eligibility for a payment deferral

The servicer is authorized to evaluate the borrower for a payment deferral without receiving a complete Borrower Response Package (BRP). When the servicer offers a payment deferral without receiving a complete BRP, the servicer is not required to send an Evaluation Notice, or equivalent.

If the borrower submitted a complete BRP, then the servicer must evaluate the borrower in accordance with D2-2-05, Receiving a Borrower Response Package. The servicer is authorized to use an Evaluation Notice but must make the appropriate changes as necessary, including to the applicable Frequently Asked Questions, to reflect the terms of the payment deferral.

Determining the payment deferral terms

The servicer must defer the past-due principal and interest (P&I) payments as a non-interest bearing balance, due and payable at maturity of the mortgage loan, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing UPB. All other terms of the mortgage loan must remain unchanged.

Any existing non-interest-bearing balance on the mortgage loan remains due and payable at maturity of the mortgage loan, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing UPB.

NOTE: If the servicer chooses to perform an escrow analysis, any escrow account shortage that is identified at the time of the payment deferral must not be included in the non-interest bearing balance and the servicer is not required to fund any existing escrow account shortage. In addition, the servicer is not required to revoke any escrow deposit account waiver.

Completing a payment deferral

The servicer must complete (i.e., submit the case via Fannie Mae’s servicing solutions system) a payment deferral in the same month in which it determines the borrower is eligible.

The servicer is authorized to use an additional month to allow for sufficient processing time (“processing month”) to complete a payment deferral. In this circumstance

• the borrower must make his or her full monthly contractual payment during the processing month, and
• the servicer must complete the payment deferral within the processing month after receipt of the borrower’s full monthly contractual payment due during that month.

The servicer must send the payment deferral agreement, or equivalent, to the borrower no later than five days after the completion of the payment deferral.

While use of the payment deferral agreement is optional, it reflects the minimum level of information that the servicer must communicate and illustrates a level of specificity that complies with the requirements of the Servicing Guide. Also, the servicer must ensure the payment deferral agreement complies with applicable law. 

NOTE: If the servicer determines the borrower’s signature is required on the payment deferral agreement, it must receive the executed agreement prior to completing the payment deferral. 

The servicer’s application of a payment deferral to the mortgage loan must not impair our first lien position or enforceability against the borrower(s) in accordance with its terms.

The servicer must record the payment deferral agreement if the servicer determines that recordation is required to comply with law and ensure that the mortgage loan retains its first lien position. The servicer must obtain a title endorsement or similar title insurance product issued by a title insurance company if the payment deferral agreement will be recorded.

Processing a payment deferral for an MBS mortgage loan

The servicer must not make a manual reclassification request for mortgage loans subject to a payment deferral. In addition, MBS mortgage loans subject to a payment deferral will not be scheduled for automatic reclassification as described in A1-3-06, Automatic Reclassification of MBS Mortgage Loans.

June 10, 2020

Incentive fees

The servicer is eligible for a $500 incentive fee upon completion of a payment deferral. See Lender Letter LL-2020-09, Incentive Fees for Retention Workout Options for the new temporary structure for incentive fees for completed repayment plans, payment deferrals / COVID-19 payment deferrals, and Fannie Mae Flex Modification.

Servicing fees for a payment deferral

The servicer will continue to receive the servicing fee it was receiving prior to completing a payment deferral after a payment deferral becomes effective.

Requesting reimbursement for payment deferral expenses

The servicer must pay any actual out-of-pocket expenses in accordance with the Servicing Guide associated with the execution of a payment deferral, including, but not limited to:

• required notary fees,
• recording costs,
• title costs, or
• any other allowable and documented expense.

We will reimburse the servicer for allowable out-of-pocket expenses in accordance with F-1-05, Expense Reimbursement.

Fannie Mae’s workout hierarchy

The servicer must consider a reinstatement when the mortgage loan is delinquent and it has determined that the borrower has the ability to bring the mortgage loan current.

The servicer must see Chapter D2-3, Fannie Mae’s Home Retention and Liquidation Workout Options for the applicable workout option requirements. The following table provides guidance and the order of evaluation for available workout options for a conventional first lien mortgage loan. A complete BRP may not be required for each workout option.

Borrower Solicitation Letter (Form 745)

We have posted a Borrower Solicitation Letter (Form 745) with the payment deferral option incorporated for use upon your implementation of this workout option.

Reporting a Mortgage Loan Eligible for a Payment Deferral

Loan activity reporting must continue on a delinquent mortgage loan that is subject to a payment deferral. If the mortgage loan is in an MBS pool, then the servicer must not request a reclassification.

The final “pre-payment deferral” UPB and LPI values in Fannie Mae’s servicing solutions system must match the last reported UPB and LPI in Fannie Mae’s investor reporting system. If the values do not match, this will cause an exception in Fannie Mae’s servicing solutions system and the payment deferral case cannot close until this discrepancy is resolved.

In our investor reporting system, the servicer must report a payment LAR with the UPB and a delinquent LPI Date equal to or less than two months. This payment LAR must be reported in the evaluation month, or the processing month if applicable, at least one business day prior to the last day of the calendar month. Failure to do so will result in the payment deferral not being processed in Fannie Mae’s servicing solutions system.

The following table provides additional instructions based on what is processed in the current reporting month prior to acceptance of the payment deferral in Fannie Mae’s investor reporting system.

Reporting a Mortgage Loan After a Payment Deferral

A payment deferral creates a non-interest bearing balance (referred to in the Investor Reporting Manual as “principal forbearance”) amount due and payable at the maturity of the mortgage loan, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing UPB. The servicer must not calculate interest on the principal forbearance amount.

In the reporting month following the acceptance of a payment deferral, the servicer must report the mortgage loan’s

• net UPB (gross UPB minus the principal portion of the payment deferral amount) in the “Actual UPB” field on the LAR if there is no LPI movement; or
• amortized UPB based on the net UPB (gross UPB minus the principal portion of the payment deferral amount) in the “Actual UPB” field on the LAR if there is LPI movement.

 

Fannie Mae Updates LL-2020-02: Guidance Related to the Impact of COVID-19 on Servicing

Link to Recent Update

Additions to Lender Letter on Jun. 10, 2020

• Sending a payment reminder notice: Clarifying that the servicer is authorized to not send a payment reminder notice to the borrower during an active forbearance plan term.

Lender Letter content published Mar. 18, 2020, updated Mar. 25, 2020, Apr. 8, 2020, May 14, 2020, Jun. 24, 2020

• Forbearance plan terms: Expanding eligibility for a forbearance plan for borrowers impacted by COVID-19. UPDATED Apr. 8, 2020 in response to the CARES Act to clarify the servicers responsibilities related to providing a forbearance plan to a borrower impacted by COVID-19.
• Evaluating the borrower for a payment deferral or mortgage loan modification after a forbearance plan: Clarifying the mortgage loan modifications that must be considered near the conclusion of a forbearance plan term. UPDATED Mar. 25, 2020 to require that a borrower be evaluated for payment deferral prior to these mortgage loan modifications. UPDATED Apr. 8, 2020 to eliminate the requirement that the servicer determine the occupancy status of the property when achieving QRPC and evaluating a borrower impacted by COVID-19 for a workout option prior to expiration of the forbearance plan. UPDATED May 14, 2020 to clarify the evaluation hierarchy with the introduction of COVID-19 payment deferral and to reflect the effective date of the National Emergency declaration related to COVID-19 in the eligibility criteria (rather than the declaration date of Mar. 13).
• Credit bureau reporting: Clarifying that servicers must suspend credit reporting when the hardship is related to COVID-19. UPDATED Apr. 8, 2020 to require that the servicer comply with the requirements of the Fair Credit Reporting Act (“FCRA”), as amended by the CARES Act for borrowers affected by the COVID-19 pandemic.
• Suspension of foreclosure activities and certain bankruptcy requirements: Instructing servicers to not allow any foreclosure sales within the next 60 days. UPDATED Apr. 8, 2020 to require that the servicer suspend foreclosure- related activities in accordance with the requirements of the CARES Act and suspend the requirement that servicers file motions for relief from the automatic stay in bankruptcy cases. UPDATED May 14, 2020 to extend the suspension of foreclosure-related activities and the requirement that servicers file motions for relief from the automatic stay in bankruptcy cases. UPDATED Jun. 24, 2020 to extend the suspension of foreclosure-related activities.
• Sending a payment reminder notice 
• Servicing Guide D2-2-03, Sending a Payment Reminder Notice requires the servicer to send a payment reminder notice to the borrower no later than the 17th day of delinquency if the payment has not been received. In response to servicer inquiries, we are clarifying that the servicer is authorized to not send a payment reminder notice to the borrower during an active forbearance plan term. This applies to active forbearance plans without regard to whether the borrower’s monthly payment is reduced or suspended during the forbearance plan term.

 June 6, 2020

Freddie Mac

Bulletin 2020-25: Servicing (06/24/20)

Click here for a printable PDF version.

TO: Freddie Mac Servicers

SUBJECT: TEMPORARY SERVICING GUIDANCE RELATED TO COVID-19 AND EDR CLARIFICATIONS FOR ALL HARDSHIP REASONS

Guide Bulletins 2020-4, 2020-7, 2020-10, 2020-15, 2020-16 and 2020-21 provided temporary Servicer guidance in response to the National Emergency Declaration resulting from the outbreak and spread of COVID-19. As we continue to monitor and assess the situation, and in response to Servicer questions, with this Bulletin we are announcing an extension to the COVID-19 foreclosure moratorium.

We are also providing the guidance regarding EDR requirements that apply to all eligible hardship reasons, including COVID-19 related hardships for:

• EDR reporting of a Mortgage that is current – October 1, 2020
• Required EDR reporting when sending a streamlined offer for a Freddie Mac Flex Modification®

EFFECTIVE DATE

All of the changes announced in this Bulletin are effective immediately unless otherwise noted.

EXTENSION OF THE COVID-19 FORECLOSURE MORATORIUM

We are extending the foreclosure moratorium announced in Bulletins 2020-4, 2020-10 and 2020-16. Servicers must suspend all foreclosure actions, including foreclosure sales, through August 31, 2020. This includes initiation of any judicial or non-judicial foreclosure process, move for foreclosure judgment or order of sale. This foreclosure suspension does not apply to Mortgages on properties that have been determined to be vacant or abandoned.

EDR

Current Mortgages

Effective October 1, 2020

In response to Servicer inquiries, we are clarifying that Guide Section 9102.7 requires Servicers to report all alternatives to foreclosures, which includes forbearance plans, via EDR, on all Mortgages, including those that are not delinquent. Additionally, we are updating our reporting requirements to require Servicers to include the reason for default when reporting a forbearance via EDR, regardless of delinquency status or length. These updated requirements apply to all Mortgages regardless of the reason for default.

Within the first three Business Days each month, Servicers must report all status and event codes for Mortgages that are on a forbearance plan in the prior month, including Mortgages that are not delinquent.

Servicers must include the following information when reporting a forbearance to Freddie Mac:

• Default reason code (see Guide Exhibit 82, Electronic Default Reporting Transmission Code List)
• Default action code: 09 (Forbearance)
• Default action date – Servicers must report the Due Date of the first payment due under the forbearance plan. For Mortgages with Due Dates other than the first day of the month, Servicers must report the default action date as the first day of the month in which the payment is due.

Note: If the Servicer has previously reported Mortgages on forbearance plans that do not reflect the default action date as outlined above, the Servicer must update the default action date in their next EDR submission.

For example, the Servicer should report the following for a Borrower who is current on his/her June 2020 payment* and requests the Servicer on June 24, 2020 to be placed on a forbearance plan beginning with his/her July 1, 2020 payment due to COVID-19 related hardship:

• Default reason code: 032 (National Emergency Declaration)
• Default action code: 09 (Forbearance)
• Default action date: 7/1/2020

*If the Borrower has not made his/her June 2020 payment, the Servicer would report 6/1/2020 as the default action date.

Servicers must continue to report this information each month until the forbearance plan has ended or until the Mortgage is current and no longer on a forbearance plan.

Servicers are encouraged to adopt these reporting requirements immediately but must do so no later than their October 2020 EDR submission, which reflects September 2020 activity.

We will update Section 9102.7 and Exhibit 82 in a future Bulletin.

ADDITIONAL RESOURCES

We encourage Servicers to review the following COVID-19 resources:

• Freddie Mac Single-Family web page on COVID-19 resources
• Freddie Mac Servicing FAQs on COVID-19

 May 27, 2020

Reporting a delinquency status code for a payment deferral

The servicer must report delinquency status information to us through our servicing solutions system in accordance with D2-4-01, Reporting a Delinquent Mortgage Loan to Fannie Mae.

Unlike Fannie Mae’s other workout options, payment deferral does not have a unique workout option delinquency status code. If no other delinquency status code is applicable to a mortgage loan subject to a payment deferral, the servicer must continue to report delinquency status code 42 – Delinquent, No Action until the payment deferral has been completed and the mortgage loan is brought current.

Reporting a payment deferral to Fannie Mae

The servicer must submit an eligible payment deferral case to our servicing solutions system by entering loan-level information, including the applicable campaign ID to identify a payment deferral. The case must be entered in the month of evaluation, after the borrower has made any required full monthly contractual payment.

If the servicer chooses to use a processing month, the servicer must submit the payment deferral case during the processing month after receipt of the full monthly contractual payment that is due for such month.

The servicer must remit and report to us via a Loan Activity Record (LAR) the borrower’s full monthly contractual payment due in the month of evaluation (or due in the processing month, if applicable) prior to completing a payment deferral in Fannie Mae’s servicing solutions system.

Processing a payment deferral for a mortgage loan with mortgage insurance

We have obtained delegation of authority on behalf of all servicers from the following mortgage insurers for payment deferral: Arch MI, Essent Guaranty, Genworth, MassHousing, MGIC, National Mortgage Insurance, Radian Guaranty, RMIC, and United Guaranty.

If we have not obtained delegation of authority from the mortgage insurer for any particular workout option, the servicer must obtain this delegation or seek mortgage insurer approval.

Handling fees and late charges in connection with a payment deferral

The servicer must not charge the borrower administrative fees. It must waive all late charges, penalties, stop payment fees, or similar charges upon completing a payment deferral.