FHFA: Servicers obligated to advance only four months of payments on loans in forbearance

Federal Issues Mortgage Servicing Forbearance FHFA Fannie Mae Freddie Mac GSE Covid-19 CARES Act

On April 21, the Federal Housing Finance Agency (FHFA) announced it has aligned Fannie Mae’s and Freddie Mac’s (GSEs) “policies regarding servicer obligations to advance scheduled monthly principal and interest payments for single-family mortgage loans.” The plan, which is applicable to all GSE servicers regardless of type or size, limits servicers’ obligations to advance scheduled principal and interest payments to mortgage-backed securities (MBS) investors after a servicer has advanced four months of missed borrower payments on a loan. FHFA further clarifies that loans in forbearance due to Covid-19 will not be purchased out of MBS pools by the GSEs, but will instead “be treated like a natural disaster event and will remain in the MBS pool,” reducing potential liquidity demands on the GSEs. FHFA notes that both the agency and the GSEs will continue to monitor Covid-19’s impact on the housing finance market and will make policy updates as necessary.