Fannie and Freddie Forbearance Rule Eased to Allow New Mortgages
(Bloomberg) -- U.S. homeowners who’ve opted to delay their mortgage payments won’t be shut out of the housing market after all.
The Federal Housing Finance Agency -- Fannie Mae and Freddie Mac’s regulator -- said Tuesday that borrowers will be able to obtain new loans three months after their forbearance period ends. The announcement responds to concerns that Fannie and Freddie rules might have made borrowers ineligible for new mortgages, or to refinance existing loans, for a year.
“Homeowners who are in Covid-19 forbearance but continue to make their mortgage payment will not be penalized,” FHFA Director Mark Calabria said in a statement. “Today’s action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning.”
Fannie and Freddie, the U.S. mortgage giants that have been under government control since the 2008 financial crisis, have policies to not buy loans made to borrowers who are coming out of forbearance. The constraint has triggered worries over what might happen to consumers who’ve taken advantage of relief provided by Congress that allows homeowners to postpone their mortgage payments for as long as 12 months if they’re dealing with financial hardships stemming from the coronavirus pandemic.
In Tuesday’s statement, the FHFA made clear that borrowers in forbearance should face no issues buying a new home or refinancing an existing loan if they are current on their payments. The regulator also said that borrowers are eligible within three months of their forbearance period ending if they have made three consecutive mortgage payments.
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