To say we’re in a critical time period right now is an understatement. And no one feels the weight of these challenging times like a homeowner who is facing a COVID-19-related hardship and is struggling to make mortgage payments to their Servicer. Thankfully, there are relief options available to these homeowners, ranging from extended payment relief to permanent solutions.

Reality Accelerates Solutions

We understand that one size doesn’t fit all – not for the borrower of the future and not for current homeowners. This reality became even more apparent as of the COVID-19 national emergency declaration (effective March 1, 2020). As part of Reimagine Servicing® and our efforts to respond to the needs of today and tomorrow, we’re fast-tracking a new solution to get homeowners back on track with their mortgage – the Freddie Mac COVID-19 Payment Deferral.

A Little Bit of History

Payment Deferral began as a concept in response to clients’ needs to address a unique situation: how to bring homeowners who have resolved a short-term hardship to be current, but where a repayment plan or loan modification was not a viable option to cure the delinquency. Given the current climate, the solution has evolved into two different relief options: Payment Deferral and COVID-19 Payment Deferral. The nature of the hardship will determine which solution is right for the homeowner. The main difference, aside from the COVID-19 Payment Deferral being specific to COVID-19-related hardships only, is that it allows for more time to defer monthly payments (i.e., up to 12 months).

To simplify the process for Servicers, we’re aligned with Fannie Mae at the direction of the Federal Housing Finance Agency (FHFA). On July 1, both solutions – Payment Deferral and COVID-19 Payment Deferral – will be available for Servicers to offer eligible homeowners.

Payment Deferral in Action

Let’s look at a common scenario: a homeowner loses their job due to the COVID-19 pandemic and cannot make mortgage payments to their Servicer. They get another job after a few months and can resume making their monthly mortgage payment but cannot afford a lump sum payment (i.e., reinstatement) or increase their existing monthly mortgage payments to bring the mortgage current (i.e., a repayment plan); furthermore, they don’t have the option to extend the mortgage term like a loan modification. This is where the COVID-19 Payment Deferral comes into play. The homeowner may be able to defer up to 12 months of missed payments in order to bring them back to current status. The deferred delinquent amounts create a non-interest-bearing forborne balance that will come due later – at the earlier of the mortgage maturity date, payoff or refinance date, or date the ownership of the property is otherwise transferred. Regardless, this solution greatly reduces their stress and helps them get back on their feet more quickly.

 “We’re getting our organization ready to offer this solution to homeowners – it will be even more critical during our current environment.” –  Freddie Mac Servicer, Home Retention Specialist

Ramping Up

With all that’s happening around us, it’s important that we take the right steps toward a brighter future. We encourage Servicers to prepare staff and processes so you’re ready to evaluate and offer the Payment Deferral solutions to homeowners by July 1, 2020. You’ll find valuable training and resources to help you ramp up on the Payment Deferral web page.

Keep in mind with these programs that your loss mitigation evaluation hierarchy will change. And just like the hardships differ, the hierarchy also differs between the COVID-19 Payment Deferral and the standard Payment Deferral solutions.

#HelpStartsHere

As we navigate this pandemic together, we’re staying attuned to the needs of our clients and the communities you serve. We’re committed to helping you help your borrowers. #HelpStartsHere with Freddie Mac.