StoneHill is continuously monitoring the COVID-19 pandemic to anticipate any adverse impact to our clients, employees, or business processes. We have proactively migrated our team to remote work to ensure their safety and to adhere with various public health directives. We are currently operating at FULL STRENGTH and are prepared to serve our client’s current and future needs across all our lines of business. Please let us know if we can assist your organization as you navigate these unprecedented times.
As a result of the COVID-19 pandemic, Fannie and Freddie have issued temporary flexibilities around certain items noted below. At the end of this information there are links directly to the Lender Letters issued by the Agencies for further review.
Fannie Mae and Freddie Mac Guidance:
These temporary flexibilities are effective immediately for all loans in process and remain in place for loans with application dates on or before May 17, 2020
Verbal Verification of Employment:
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 Selling Guide B3-4.2-01) evidencing the payroll deposit from the pay period that immediately precedes the note date.
NOTE: If employment has been validated by the Desktop Underwriter® (DU®) validation service, the validation will remain eligible for representation and warranty relief on employment provided the lender complies with the “close by” date in the DU message. Otherwise, the guidance provided above applies.
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).
Temporary Appraisal Requirements Flexibility:
Effective immediately, we are allowing temporary flexibilities to our appraisal inspection and reporting requirements. As described below, we will accept an alternative to the traditional appraisal required under Selling Guide Chapter B4-1, Appraisal Requirements, when an interior inspection is not feasible because of COVID-19 concerns. We will allow either a desktop appraisal or an exterior-only inspection appraisal in lieu of the interior and exterior inspection appraisal (i.e., traditional appraisal).
If a traditional appraisal is not obtained and there is insufficient information about the property for an appraiser to be able to complete an appraisal assignment with a desktop or exterior-only inspection appraisal, the loan will not be eligible for delivery to us.
For purchase money transactions when an interior and exterior appraisal is not available, lenders are encouraged to obtain a desktop appraisal rather than an exterior-only appraisal.
The minimum scope of work for a desktop appraisal does not include an inspection of the subject property or comparable sales. The appraiser relies on public records, multiple listing service (MLS) information, and other third-party data sources to identify the property characteristics.
When a desktop appraisal is performed, reported on Form 1004 or Form 1073, and submitted to us through the Uniform Collateral Data Portal® (UCDP®), the appraisal will be scored by Collateral Underwriter® (CU®). All loans with a CU risk score of 2.5 or less will receive value representation and warranty relief under Day 1 Certainty. With desktop appraisals, lenders will have the added risk management and efficiency benefit of being able to use CU to aid in the appraisal review process.
Each desktop appraisal report must include the following exhibits: a location map indicating the location of the subject and comparables, and photographs of the subject property. We recognize that it may be challenging in some instances to obtain photographs; however, it is expected that the appraiser utilizes available means to obtain relevant pictures of the subject property.
Exterior Only Inspection Appraisals:
An exterior-only inspection appraisal may be obtained in lieu of an interior and exterior inspection appraisal for the following transactions: Purchase money loans Limited cash-out refinances where the loan being refinanced is owned by Fannie Mae Lenders will not receive value representation and warranty relief under Day 1 Certainty® for loans with exterior-only appraisals
Lenders are reminded that the following exhibits to the appraisal report are required for an exterior-only inspection appraisal:
- A street map that shows the location of the subject property and of all comparable sales that the appraiser used,
- clear, descriptive photographs (either in black and white or color) that show the front of the subject property, and that are appropriately identified (photographs must be originals that are produced either by photography or electronic imaging); and
- any other data−as an attachment or addendum to the appraisal report form−that are necessary to provide an adequately supported opinion of market value.
We recognize that the existing appraisal report forms do not accommodate the revised scope of work, statement of assumptions and limiting conditions, and certifications for some of the scenarios presented. To accommodate the temporary flexibilities in this Lender Letter, Freddie Mac and Fannie Mae have jointly developed the following documents that include modified language to be used with desktop appraisal reports and exterior-only appraisal reports:
- Modified Set of Instructions, Scope of Work, Statement of Assumptions and Limiting Conditions and Certification for Desktop Appraisals
- Modified Set of Instructions, Scope of Work, Statement of Assumptions and Limiting Conditions and Certification for Appraisals with Exterior-only Inspection
These documents include modified language for the scope of work, statement of assumptions and limiting conditions, and certifications. It is important to note that certification #10 has been removed in recognition that the appraiser may have relied on information from an interested party to the transaction (borrower, realtor, property contact, etc.) and additional verification may not have been feasible. Appraisal reports submitted to us using the flexibilities provided in this Lender Letter must include these documents with the modified language for scope of work, statement of assumptions and limiting conditions, and certifications
We require the Appraisal Update and/or Completion Report (Form 1004D) to evidence completion when the appraisal report has been completed “subject to.” For all loans for which a completion certification is not available due to issues related to COVID-19, with the exception of HomeStyle® Renovation and HomeStyle Energy loans, we will permit a letter signed by the borrower confirming that the work was completed. Lenders must also provide 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 loan file.
As per a recent communication by the IRS, Clients should expect to see delays in receiving Tax Transcripts. The IRS has closed one of its locations and have routed requests to other locations. As a result, the IRS has communicated that it is expecting delays relating to Tax Transcript’s.
Links related to updates:
Freddie Mac Temporary Servicing Guidance Related to COVID-19
The credit reporting, forbearance plan, and loan modification guidance announced in this Bulletin is effective immediately.
Freddie Mac will continue to monitor the situation and may revise or revoke this temporary guidance at any time, as appropriate.
In response to the challenges resulting from the outbreak and spread of the coronavirus disease (COVID-19), under FHFA direction and in alignment with Fannie Mae, Freddie Mac is announcing guidance with respect to the following items to assist impacted Borrowers:
- Credit reporting requirements
- Forbearance plans
- Loan modifications
- Foreclosure sale moratorium
These temporary measures will support Servicers’ efforts to assist Borrowers who experience a hardship resulting from COVID-19. This includes both Borrowers who have and have not contracted COVID-19, provided their ability to make timely Mortgage payments has been negatively affected as a result of COVID-19 (“COVID-19 related hardship”). The Servicer will determine what constitutes a COVID-19 related hardship and must treat all Borrowers equally when making this determination.
Credit Reporting Requirements:
The Servicer must not report to the credit repositories a Borrower who is on an active forbearance plan, repayment plan or Trial Period Plan as a result of a COVID-19 related hardship.
In response to industry inquiries, we are clarifying that a COVID-19 related hardship is an eligible hardship under existing Guide requirements. Impacted Borrowers meet Freddie Mac’s forbearance hardship requirements as described in Guide Section 9202.2. This may include long-term or permanent disability/serious illness of a Borrower/co-Borrower or dependent family member, reduction in income, death or other eligible hardship reasons. The Servicer must achieve quality right party contact with the Borrower to verify the hardship, and once verified must work with the Borrower to apply the appropriate solution, including the application of a forbearance plan, if applicable. In accordance with existing Freddie Mac forbearance plan requirements described in Section 9203.13, no documentation is required from the Borrower in order to verify the hardship.
As part of our temporary guidance announced in this Bulletin, we are further authorizing Servicers to approve forbearance plans for all Borrowers who have a COVID-19 related hardship, regardless of property type. While the Guide currently provides that only Mortgages secured by Primary Residences are eligible for a forbearance plan, until further notice the Mortgaged Premises may be a Primary Residence, second home or Investment Property.
Guide Bulletin 2017-25 announced the Freddie Mac Extend Modification for Disaster Relief (“Extend Modification”). Section 9206.4 provides the requirements for the Freddie Mac Capitalization and Extension Modification for Disaster Relief (referred to in the Bulletin as the “Disaster Relief Modification,” but referred to herein as the “Cap and Extend Modification”). These modifications were developed as tools for Servicers to assist Borrowers who were impacted by an Eligible Disaster.
With this Bulletin, we are requiring Servicers to evaluate Borrowers with a COVID-19 related hardship for the Extend Modification and the Cap and Extend Modification in accordance with the requirements described in Bulletin 2017-25 and Section 9206.4 (and all additional Guide sections referenced therein), including the order of evaluation provided in the “Borrower contact requirements and disaster loss mitigation hierarchy” section of Bulletin 2017-25. For Servicer convenience, we have reproduced this guidance in this Bulletin, in the below section, titled “Borrower contact requirements and COVID-19 loss mitigation hierarchy.” Servicers must conduct Extend Modification and Cap and Extend Modification evaluations in accordance with all existing requirements, with the following adjustments:
|Current requirement||Requirement for Borrowers impacted by COVID-19|
|The Borrower’s Mortgaged Premises or place of employment must be located in an Eligible Disaster Area.|
Note: For Extend Modifications only, the Eligible Disaster Area designation must have been made on or after August 25, 2017.
|The Borrower must have a COVID-19 related hardship (e.g., unemployment or reduction in regular work hours).|
Note: The Servicer is not required to obtain documentation to verify the borrower’s hardship.
|The Borrower must have been current or less than 31 days delinquent (i.e., must not have missed more than one monthly payment) at the time of the disaster and the Borrower’s hardship must have been caused by an Eligible Disaster||The Borrower must have been current or less than 31 days delinquent (i.e., must not have missed more than one monthly payment) as of the date of the National Emergency declaration related to COVID-19, March 13, 2020|
|Processing and reporting|
|Processing and reporting requirements for the Extend Modification are described in Bulletin 2017-25, and for the Cap and Extend Modification in the Workout Prospector Users’ Guide and Freddie Mac’s Disaster Relief Reference Guide.||Servicers must continue to follow existing processes, with the following exception:|
When instructed to provide program title information in the Workout Prospector or Guide Form 1128, Loss Mitigation Transmittal Worksheet, as applicable, the Servicer must label the modifications as “Extend Modification for COVID-19” and “Cap and Extend Modification for COVID-19,” respectively.
BORROWER CONTACT REQUIREMENTS AND COVID-19 LOSS MITIGATION HIERARCHY
The Servicer must initiate outreach attempts no later than 30 days prior to the end of the Borrower’s COVID-19 related forbearance. The Servicer must attempt to contact the Borrower until quality right party contact (QRPC) has been established or until the forbearance plan has expired.
If QRPC is established with a Borrower who was 31 days or more delinquent (i.e., had missed more than one monthly payment) prior to the National Emergency declaration, then the Borrower is not eligible for the Extend Modification (or Cap and Extend Modification), and the Servicer must evaluate the Borrower in accordance with the standard evaluation hierarchy.
If QRPC is established with a Borrower who was current or less than 31 days delinquent (i.e., the Borrower had not missed more than one monthly payment) prior to the National Emergency declaration, and the Borrower is unable to resolve the Delinquency through a reinstatement or repayment plan, the Servicer then must evaluate the Borrower for the loss mitigation options set forth in the following COVID-19 related evaluation hierarchy:
- Extend Modification
- Cap and Extend Modification
- Freddie Mac Flex Modification®
- Short sale
- Deed-in-lieu of foreclosure
If QRPC is not established at the end of the COVID-19 related forbearance, and the Borrower is eligible for a streamlined offer for a Flex Modification, the Servicer must send the Borrower an offer for a Flex Modification.
Foreclosure sale moratorium
Servicers must suspend all foreclosure sales for the next 60 days. This foreclosure suspension does not apply to Mortgages on properties that have been determined to be vacant or abandoned.
Links to related updates:
Fannie Mae Temporary Servicing Guidance Related to COVID-19
The policies in this Lender Letter are effective immediately and are effective until Fannie Mae provides further notice.
Forbearance Plan Eligibility:
To assist borrowers who have experienced a hardship resulting from COVID-19 (for example, unemployment, reduction in regular work hours, or illness of a borrower/co-borrower or dependent family member) which has impacted their ability to make their monthly mortgage loan payment, the servicer should evaluate the borrower for a forbearance plan in accordance with Servicing Guide D2-3.2-01, Forbearance Plan. The servicer must achieve quality right party contact (QRPC) with the borrower prior to offering a forbearance plan. With this Lender Letter, when determining eligibility for a forbearance plan for a borrower impacted by COVID-19, the property securing the mortgage loan may be a principal residence, a second home, or an investment property. The servicer must otherwise follow the requirements in D2-3.2-01, Forbearance Plan.
NOTE: The servicer is not required to obtain documentation of the borrower’s hardship.
For borrowers who have received a forbearance plan in response to COVID-19, the servicer must begin attempts to contact the borrower no later than 30 days prior to the expiration of the forbearance plan term, must continue outreach attempts until either QRPC is achieved or the forbearance plan term has expired, and analyze each case carefully in accordance with the requirements in the table below before determining which mortgage loan modification is most appropriate for the borrower.
With LL-2017-09R Fannie Mae introduced the Fannie Mae Extend Modification for Disaster Relief (Extend Mod), a temporary post-disaster forbearance mortgage loan modification, as well as the order of evaluation for Extend Mod and other post forbearance mortgage loan modifications when the property securing the mortgage loan or the borrower’s place of employment is located in a FEMA-Declared Disaster Area eligible for Individual Assistance. With this Lender Letter, we are extending the availability of these post-forbearance mortgage loan modifications to borrowers impacted by COVID-19. The following table provides guidance and the order of evaluation for the mortgage loan modification.
Utilize this link: https://singlefamily.fanniemae.com/media/22261/display to access the tables that more fully define the guidance and the order of evaluation for the mortgage loan modification.
Credit Bureau Reporting:
The servicer must suspend reporting the status of a mortgage loan to credit bureaus during an active forbearance plan, or a repayment plan or Trial Period Plan where the borrower is making the required payments as agreed, even though payments are past due, as long as the delinquency is related to a hardship resulting from COVID-19.
Suspension of Foreclosure Sales:
Servicers must suspend all foreclosure sales for the next 60 days. This foreclosure suspension does not apply to mortgage loans on properties that have been determined to be vacant or abandoned.
Link to the related updates: