On March 25, 2020, Fannie Mae and Freddie Mac announced a new payment deferral loss mitigation option. The Fannie Mae announcement is in Lender Letter 2020-05, and the Freddie Mac announcement is in Bulletin 2020-6 and a related attachment. Servicers must begin evaluating borrowers for the option no later than January 1, 2021, but may begin borrower evaluations as early as July 1, 2020.
The payment deferral approach is designed for borrowers who have experienced a temporary financial hardship that they have resolved and can resume making the contractual payments, but are not able to afford a repayment plan or full reinstatement of the loan. An eligible borrower will be brought current by the deferral of the past-due principal and interest as a non-interest bearing balance, and that balance is due and payable at the earlier of the loan maturity, the loan payoff, or the transfer and sale of the home. While the option may be used for borrowers with a hardship related to the COVID-19 crisis, it is not limited to such borrowers.
A complete Borrower Response Package is not required to evaluate a borrower for the payment deferral option. However, if a servicer receives a complete Borrower Response Package, the servicer must evaluate the borrower in accordance with applicable Guide requirements.
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