Many difficult homeowners who delay their mortgage payments through a so-called patience program will get a new payment option, which allows them to make payments that are missed when the home is sold or the loan period expires, the Federal Housing Finance Agency said Wednesday.
The deferral option applies to homeowners who have mortgages supported by two government-controlled mortgage companies controlled by FHFA: Fannie Mae and Freddie Mac.
Under the CARES Act stimulus law, borrowers with government-supported loans – through the Federal Housing Administration, Department of Veterans Affairs, US Department of Agriculture, Fannie Mae or Freddie Mac – have the right to defer mortgage payments up to years if they have financial difficulties related to coronavirus pandemic.
Most homeowners have government-backed loans and millions have signed up to be patient. But there is great confusion about how borrowers will make up for the payments they have missed.
Consumer advocates say some mortgage companies have incorrectly told borrowers that they must repay all missed payments at once once the patience period ends or have made unclear comments that cause stressed consumers to think that’s the problem. Government agencies insist that borrowers with government-supported loans do not have to pay at once, and there are several payment options.
In a statement, FHFA Director Mark Calabria said the additional suspension option “responsibly simplifies options for homeowners while providing additional equipment for mortgage officers.”
Under that option, after the patience period ends if the borrower with a loan supported by Fannie Mae or Freddie Mac is unable to make payments on top of their original mortgage payments, a suspension must be offered starting July 1, according to the FHFA.
Fannie Mae and Freddie Mac had previously announced the suspension option, but at that time the soldier said there was no need to offer it until next year.
The new option, which is similar to the one offered by FHA, keeps the borrower’s original monthly mortgage payment the same. When a loan ends, such as at the end of 30 years or when a homeowner sells their home, missed payments must be paid at once. In the case of refinancing, missed payments will be added to the new loan principal.
Before the suspension option, borrowers who can only make their original monthly payments may have received loan modifications. That will keep mortgage payments the same as extending loans, which stands to increase the total amount to be paid by the borrower.
If after the patience period the borrower is still unable to pay their original mortgage payments, loan modification is available that will reduce monthly payments by extending the term of the loan. The modification has a limit on how far payments can be reduced, so someone who never gets back a job can still lose their home.
Asset Mortgage Bankers. President Robert Broeksmit said the suspension options for Fannie Mae and Freddie Mac would “ease the burden on homeowners.”
A group of public lawyers, including Atty California. General Xavier Becerra, wants the regulator to go further. They say that mortgage servants already seem overwhelmed by the surge in patience requests and doubt that companies can effectively evaluate borrowers for various payment options.
In a letter to the FHFA, the attorney general requested that the agency ask officers to automatically handle missed payments until the end of the borrower’s loan in the form of monthly payments – so that a 30-year loan, for example, becomes a 30½-year loan if someone loses six months.
Then, if people still need help, more complicated modifications can be considered, the attorney general wrote.
