Fannie Mae Clarifies Long-Term Delay Mortgage Lending Rules

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This week, government-sponsored Fannie Mae released a timing guide for procedures related to requesting borrowers to defer payments in the event of a disaster following termination in circumstances where a loan is 12 months past due.

Among other things, the new guidance, released on Wednesday, makes it clear that when service personnel asks for a borrower who has not paid for a year, the consumer must make one regular monthly payment based on the current written loan terms in good faith. After that, the borrower can get a grace period in which his payments can be temporarily suspended and transferred to the end of the loan.

The guidance was important because the Consumer Financial Protection Bureau expressed concern about the issue and wider confusion over the timing of mortgage servicing– said Jennifer Keys, senior vice president of compliance solutions at Covius.

“This clarification can help reduce CFPB complaints about the timing and details of the deferral right,” Keyes said in an email.

In addition to clarifying the payment, she said, Mortgage Services asked management as to when the deferral should be completed and if they could get more time to process it during the month of processing.

The guidance says that the deferral usually needs to be completed within a month during which the mortgage company asks the late borrower for one and after receiving the borrower’s payment, but servicers may be given some leeway during the month of processing.

“Communication issues related to abstinence plans and the options available at the end of those plans” was one of the common themes in the CFPB. May Complaints Bulletin

“There is still a lot to be done when it comes to clarity with borrowers. You can see that with the COVID-19 deferred payment plan, and now that we are in hurricane season, I think it will be relevant for deferred payments in the event of natural disasters, ”Keyes said in an interview.

Fannie’s guide will help you with this. GSE guarantees payments on mortgages they buy from lenders after those loans are securitized and sold as securities to a large global investor base, so it has some strict rules on how to deal with situations in which borrowers become overdue. These rules are important because the loans Fannie buys make up a significant portion of the mortgages sold in the US.

Delays usually begin to turn into foreclosures after 90 days, but with the coronavirus-related hardships on government loans extended for more than a year, prolonged payment suspensions are becoming more likely. In the same time, the risk of natural disasters has increasedso it is possible that the borrower may have fulfilled a pandemic abstinence plan, reverted to repayment rates, and then faced a weather-related problem such as a hurricane. In addition, deferred payment is a relatively new option for overdue borrowers, so there was a need to develop additional recommendations in relation to them.

While there has been some recovery in long-term delinquency rates thanks to government aid and vaccine rollouts that allowed the economy to open up, they remain historically high.

In the first quarter, 4.7% of all mortgages were 90 days or more past due, 33 basis points lower than in the previous financial period, according to a national survey by the Mortgage Bankers Association. However, this figure for the first quarter of 2020 increased by more than 3% or 303 basis points compared to the first quarter of last year.

The serious delinquency rate has not been as high since the second quarter of 2010, when it stood at 4.82%. The peak of serious delinquencies occurred in the first quarter of the same year and amounted to just over 5%.



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