Fannie Mae and Freddie Mac Update COVID-19 Servicing Guidance

On June 10, 2020 Fannie Mae in Lender Letter 2020-09 and Freddie Mac in Bulletin 2020-21 announced the servicer incentive for their previously announced COVID-19 payment deferral, and temporary updates to other servicer incentives. Freddie Mac also provides guidance on Home Affordable Modification Program (HAMP) good standing for a COVID-19 impacted borrower, and late notices/payment reminder letters. Fannie Mae addresses these points in updates to Lender Letters 2020-02 and 2020-07.

The new incentive structure is effective July 1, 2020, with additional details specified in the guidance. For the COVID-19 payment deferral and standard payment deferral, the servicer incentive is $500. The incentive for a repayment plan is also $500, and Fannie Mae specifies various conditions. For a Flex Modification the servicer incentive is $1,000. Servicer total incentives per mortgage loan will be capped at $1,000. However, workout options in process before the effective date of the new incentives will not be subject to the cumulative incentive cap. Fannie Mae provides examples of the incentive cap in an Appendix to Lender Letter 2020-09. Fannie Mae also issued an updated version of Lender Letter 2020-05 to reflect the incentive fee for a payment deferral.

Both Fannie Mae and Freddie Mac provide an updated version of the COVID-19 payment deferral agreement—Fannie Mae through a link in updated Lender Letter 2020-07 and Freddie Mac in an attachment to Bulletin 2020-21.

With regard to HAMP, Fannie Mae advises that if the mortgage loan was previously modified pursuant to a HAMP modification under which the borrower remains in “good standing,” then the mortgage loan will not lose good standing and the borrower will not lose any “pay for performance” incentives in the following circumstances:

• The borrower was on a COVID-19 related forbearance plan immediately preceding the COVID-19 payment deferral; or
• The borrower has a COVID-19 related hardship and the mortgage loan is fewer than 90 days delinquent.

Freddie Mac summarizes the HAMP good standing guidance that it provided in Bulletin 2020-16, and then advises it is further clarifying that if a borrower with a COVID-19 related hardship was not on a forbearance plan, but is fewer than 90 days delinquent and has not lost good standing upon entering into a COVID-19 payment deferral, the borrower will retain good standing.

Fannie Mae and Freddie Mac advise that servicers are authorized not to send a payment reminder notice to the borrower during an active forbearance plan term, and that this authorization applies to active forbearance plans without regard to whether the borrower’s monthly payment is reduced or suspended during the forbearance plan term. The Freddie Mac guidance also specifically refers to late notices.

In Bulletin 2020-21, Freddie Mac notes that it is updating Workout Prospector® to modify how it calculates delinquent interest for the processing of the payment deferral and the Flex Modification in the automated fields. While Freddie Mac is in the process of updating Workout Prospector to reflect the edits, it reminds servicers to in the meantime adjust the automated fields to adhere to applicable law. Freddie Mac also addresses continued solicitation requirements for a Flex Modification.

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