On April 8, 2020, Fannie Mae, in an update to Lender Letter 2020-02, and Freddie Mac, in Bulletin 2020-10, announced updates to their temporary servicing guidance due to COVID-19. The revised guidance accounts for the adoption of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). Fannie Mae and Freddie Mac remind servicers of the requirement to comply with applicable law, and Fannie Mae notes this requirement applies even if a provision of the Servicing Guide may conflict with applicable law.
Forbearance. As provided for in the CARES Act, a borrower with a federally backed mortgage loan who is experiencing a financial hardship due, directly or indirectly, to the COVID-19 national emergency may, regardless of delinquency status, request a forbearance. To request a forbearance, a borrower must submit a request to the servicer and affirm that the borrower is experiencing a financial hardship due to the COVID-19 national emergency. The forbearance period is up to 180 days and, during the covered period, the borrower can request an extension for an additional period of 180 days.
While a borrower may request a CARES Act forbearance regardless of whether they are delinquent on their federally backed mortgage loan, Fannie Mae and Freddie Mac have requirements to establish qualified right party contact (QRPC) with delinquent borrowers and to work with such borrowers to determine the best solution. Fannie Mae and Freddie Mac advise as follows:
Fannie Mae: “As described in Servicing Guide D2-2-01, Achieving Quality Right Party Contact with a Borrower, QRPC is a uniform standard for communicating with the borrower, co-borrower, or a trusted advisor (collectively referred to as “borrower”) about resolution of the mortgage loan delinquency. We reaffirm the applicability of QRPC when working with a borrower impacted by COVID-19 to ensure the servicer understands the borrower’s circumstances and determines the best possible workout option for resolving the borrower’s delinquency. In the event that the servicer is unable to achieve full QRPC and offers a forbearance plan to a borrower impacted by COVID-19 in compliance with the CARES Act, the servicer is considered to be in compliance with our Servicing Guide.”
Freddie Mac: Freddie Mac provides guidance similar to the Fannie Mae statement, and Freddie Mac also states: “As required by the Guide, Bulletin 2020-4 and this Bulletin, the Servicer must make good faith efforts to establish QRPC with the Borrower in order to evaluate the Borrower for a forbearance plan, and the length of each forbearance plan term must be for an appropriate length, based on the Borrower’s individual circumstances and nature of the hardship, and must be agreed upon with or requested by the Borrower. In the event the Servicer and Borrower cannot agree on an appropriate forbearance length, or further communication with the Borrower is not possible under the circumstances, the Servicer must provide the term requested by the Borrower, not to exceed 180 days.”
Fannie Mae advises that it is temporarily eliminating the requirement that servicer must receive prior written approval for a forbearance plan that would result in the mortgage loan becoming greater than 12 months delinquent. Similarly, Freddie Mac advises that it is temporarily waiving the requirement that a forbearance plan may not extend beyond a date that would cause the delinquency to exceed a cumulative total of 12 months of the borrower’s contractual monthly mortgage payment.
Fannie Mae instructs servicers that they must inform a borrower who a received a CARES Act forbearance of the ability to shorten the forbearance plan term at any time to reduce the amount of payments that are being delayed or reduced. Fannie Mae also advises that it is eliminating the requirement set forth in prior guidance that the servicer determine the occupancy status of the property when achieving QRPC and evaluating a borrower impacted by COVID-19 for a workout option prior to expiration of the forbearance plan.
Foreclosure Activities. Fannie Mae and Freddie Mac advise that servicers must suspend foreclosure activities through May 17, 2020 in accordance with the CARES Act. For borrowers who are in bankruptcy, (1) Fannie Mae advises that it is temporarily suspending the requirement that servicers file motions for relief from the automatic stay, and (2) Freddie Mac advises that it is temporarily relieving servicers of their responsibility to meet the timelines in the guide for filing a motion for relief from the automatic stay, and that servicers must continue to work with bankruptcy counsel to determine the appropriate time to file such a motion.
Credit Reporting. The CARES Act amended the Fair Credit Reporting Act (FCRA) to provide that, if a furnisher makes an accommodation with respect to one or more payments on a credit obligation or consumer account, the furnisher should continue to report the account as current if the consumer fulfills the terms of the accommodation. However, for accounts that already were delinquent before the accommodation was made, the furnisher is permitted to continue reporting the account as delinquent, unless the consumer brings the account current
Fannie Mae and Freddie Mac advise servicers that they must comply with the requirements of the FCRA, as amended by the CARES Act.
Disaster Guidance. Freddie Mac advises that, while it leveraged some of its guidance for disasters with regard to addressing the COVID-19 national emergency, its requirements for the emergency differ from the requirements regarding disasters and that servicers should follow the disaster guidance in connection with the emergency only when expressly advised to do so by Freddie Mac.
Forbearance. As provided for in the CARES Act, a borrower with a federally backed mortgage loan who is experiencing a financial hardship due, directly or indirectly, to the COVID-19 national emergency may, regardless of delinquency status, request a forbearance. To request a forbearance, a borrower must submit a request to the servicer and affirm that the borrower is experiencing a financial hardship due to the COVID-19 national emergency. The forbearance period is up to 180 days and, during the covered period, the borrower can request an extension for an additional period of 180 days.
While a borrower may request a CARES Act forbearance regardless of whether they are delinquent on their federally backed mortgage loan, Fannie Mae and Freddie Mac have requirements to establish qualified right party contact (QRPC) with delinquent borrowers and to work with such borrowers to determine the best solution. Fannie Mae and Freddie Mac advise as follows:
Fannie Mae: “As described in Servicing Guide D2-2-01, Achieving Quality Right Party Contact with a Borrower, QRPC is a uniform standard for communicating with the borrower, co-borrower, or a trusted advisor (collectively referred to as “borrower”) about resolution of the mortgage loan delinquency. We reaffirm the applicability of QRPC when working with a borrower impacted by COVID-19 to ensure the servicer understands the borrower’s circumstances and determines the best possible workout option for resolving the borrower’s delinquency. In the event that the servicer is unable to achieve full QRPC and offers a forbearance plan to a borrower impacted by COVID-19 in compliance with the CARES Act, the servicer is considered to be in compliance with our Servicing Guide.”
Freddie Mac: Freddie Mac provides guidance similar to the Fannie Mae statement, and Freddie Mac also states: “As required by the Guide, Bulletin 2020-4 and this Bulletin, the Servicer must make good faith efforts to establish QRPC with the Borrower in order to evaluate the Borrower for a forbearance plan, and the length of each forbearance plan term must be for an appropriate length, based on the Borrower’s individual circumstances and nature of the hardship, and must be agreed upon with or requested by the Borrower. In the event the Servicer and Borrower cannot agree on an appropriate forbearance length, or further communication with the Borrower is not possible under the circumstances, the Servicer must provide the term requested by the Borrower, not to exceed 180 days.”
Fannie Mae advises that it is temporarily eliminating the requirement that servicer must receive prior written approval for a forbearance plan that would result in the mortgage loan becoming greater than 12 months delinquent. Similarly, Freddie Mac advises that it is temporarily waiving the requirement that a forbearance plan may not extend beyond a date that would cause the delinquency to exceed a cumulative total of 12 months of the borrower’s contractual monthly mortgage payment.
Fannie Mae instructs servicers that they must inform a borrower who a received a CARES Act forbearance of the ability to shorten the forbearance plan term at any time to reduce the amount of payments that are being delayed or reduced. Fannie Mae also advises that it is eliminating the requirement set forth in prior guidance that the servicer determine the occupancy status of the property when achieving QRPC and evaluating a borrower impacted by COVID-19 for a workout option prior to expiration of the forbearance plan.
Foreclosure Activities. Fannie Mae and Freddie Mac advise that servicers must suspend foreclosure activities through May 17, 2020 in accordance with the CARES Act. For borrowers who are in bankruptcy, (1) Fannie Mae advises that it is temporarily suspending the requirement that servicers file motions for relief from the automatic stay, and (2) Freddie Mac advises that it is temporarily relieving servicers of their responsibility to meet the timelines in the guide for filing a motion for relief from the automatic stay, and that servicers must continue to work with bankruptcy counsel to determine the appropriate time to file such a motion.
Credit Reporting. The CARES Act amended the Fair Credit Reporting Act (FCRA) to provide that, if a furnisher makes an accommodation with respect to one or more payments on a credit obligation or consumer account, the furnisher should continue to report the account as current if the consumer fulfills the terms of the accommodation. However, for accounts that already were delinquent before the accommodation was made, the furnisher is permitted to continue reporting the account as delinquent, unless the consumer brings the account current
Fannie Mae and Freddie Mac advise servicers that they must comply with the requirements of the FCRA, as amended by the CARES Act.
Disaster Guidance. Freddie Mac advises that, while it leveraged some of its guidance for disasters with regard to addressing the COVID-19 national emergency, its requirements for the emergency differ from the requirements regarding disasters and that servicers should follow the disaster guidance in connection with the emergency only when expressly advised to do so by Freddie Mac.
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