COVID-19 Servicing-related Frequently Asked Questions (FAQ)

Any financial hardship that impacts the homeowner’s ability to make mortgage payments, including illness of the homeowner or a dependent, is an eligible hardship that would qualify them for forbearance and/or consideration for other Freddie Mac loss mitigation offerings.

For new hardships identified on or after November 1, 2023, Servicers must discontinue use of default reason code 032 for reporting new delinquencies related to COVID-19 and instead use the applicable default reason code for the underlying hardship (e.g., unemployment).

In Bulletin 2023-17 we announced the phased retirement of the temporary COVID-19-related requirements. Some requirements, such as COVID-19 forbearance plans and extensions and the use of Default Reason Code 032 for COVID-19 hardships in the reporting of new delinquencies, were retired on November 1, 2023. Others, such as evaluations for COVID-19 payment deferral and COVID-19 Flex Modification, will be retired later to allow Borrowers with an ongoing COVID-19-related hardship to transition to the related COVID-19 loss mitigation option.

Effective November 1, 2024, all requirements pertaining to the COVID-19 Payment Deferral and to COVID-19 provisions for the Flex Modification as described in the associated Bulletins (e.g., Bulletin 2020-7, Bulletin 2020-15, Bulletin 2021-8) will be retired. For all loss mitigation evaluations conducted on or after November 1, 2024, the Servicer must evaluate the Borrower in accordance with payment deferral and Flex Modification requirements as described in Freddie Mac’s Servicing Guide.

Eligibility for a COVID-19 payment deferral or a Flex Modification is contingent upon the following:

• The Mortgage must have been continuously reported with default reason code 032 for a hardship identified prior to November 1, 2023, and continue to be reported as 032 until the evaluation date, and
• The evaluation date must be before November 1, 2024. 
• All COVID-19 Flex Modifications must have an Effective Date on or before May 1, 2025.

Note: if a Borrower becomes 60 days delinquent within six months of a payment deferral’s effective date and the Servicer is unable to establish QRPC, the above requirement for continuous reporting of default reason code 032 prior to November 1, 2023 and up to the evaluation date does not apply and the Borrower may be evaluated (and if eligible, solicited) for a COVID-19 Flex Modification.

Question: Several state and local governments have instituted mortgage assistance programs with funds appropriated to the states via the CARES Act for COVID-19 impacted borrowers, most of which programs make payments directly to the servicer on a borrower’s behalf. Is a Servicer authorized to accept and apply these funds toward the borrower’s mortgage payment?

Answer: Servicers must accept such funds on behalf of a borrower and apply the funds in accordance with the state mortgage assistance program requirements, so long as doing so will not impair the borrower’s rights under the CARES Act. 

Additionally, if a Servicer accepts mortgage assistance funds that are less than the Borrower’s full contractual monthly payment, the Servicer must not waive any delinquent principal, interest or escrow due, nor waive any future right to collect these amounts. Funds paid on the Borrower’s behalf must be treated the same as borrower-paid funds.

Yes, Servicers should continue to rely on the payment history exceptions for COVID-19 related hardships published in Bulletin 2020-46 when evaluating Borrower requests to cancel Borrower-paid mortgage insurance (based on original or current value) for up to 24 months following the resolution of a delinquency related to a COVID-19 hardship that was reported prior to 11/1/2023:

No payment 30 days or more past due in the preceding 12 months except when the Delinquency is a direct result of the Mortgage being subject to a COVID-19-related hardship (including Mortgages on COVID-19 forbearance plans), and, following the COVID-19-related hardship, transition to a relief or workout option to cure the Delinquency (e.g., repayment plan or Trial Period Plan); and

No payment 60 days or more past due in the preceding 24 months except when the Delinquency is a direct result of the Mortgage being subject to a COVID-19 related hardship (including Mortgages on COVID-19 forbearance plans), and, following the COVID-19 related hardship, transition to a relief or workout option to cure the Delinquency (e.g., repayment plan or Trial Period Plan)

For Mortgages restored to current status under the COVID-19 Payment Deferral, the Borrower must make three consecutive payments following the settlement of the COVID-19 Payment Deferral to meet this qualification requirement.

A forbearance plan is when the borrower’s monthly payment is reduced or suspended for an agreed upon time period, usually between one and six months. It is important to note that the suspended payments become due at the end of the forbearance period and can be resolved by a reinstatement, repayment plan, payment deferral, or loan modification.

COVID-19 forbearance requirements will be retired for all forbearance evaluations with an evaluation date on or after November 1, 2023, including evaluations for new forbearance plans and evaluations for extensions to existing COVID-19 forbearance plans. On and after November 1, 2023, all Borrowers who meet the requirements for forbearance must be evaluated in accordance with Guide Chapter 9203 for all eligible hardships and Chapter 8404 if the hardship is the result of an Eligible Disaster.

A forbearance plan (as stated above) is the reduction or suspension of the payment for a certain period of time for when a borrower is not able to make their scheduled mortgage payment. A COVID-19 payment deferral is available once a COVID Hardship is resolved and the borrower is able to resume making their mortgage payments. It is a relief program that reinstates the mortgage by “deferring” those missed payments into a non-interest bearing balloon.

Effective November 1, 2024, all requirements pertaining to the COVID-19 payment deferral and to COVID-19 provisions for the Flex Modification as described in the associated Bulletins (e.g., Bulletins 2020-7, 2020-15, 2021-8, etc.) will be retired. For all loss mitigation evaluations conducted on or after November 1, 2024, the Servicer must evaluate the Borrower in accordance with payment deferral and Flex Modification requirements as described in the Guide.

To offer a forbearance plan in conjunction with a COVID-19-related hardship, the Servicer must make good faith efforts to establish QRPC with the borrower in order to evaluate the borrower for a forbearance plan, including the verification of the borrower’s hardship. However, we acknowledge that there may be scenarios where the Servicer is unable to establish QRPC and must offer a forbearance plan in compliance with applicable law without full QRPC. The Servicer is considered to be in compliance with our Guide when bypassing requirements in order to adhere to applicable laws and regulations.

For all other loss mitigation evaluations, a COVID-19-related hardship can be verified via the “limited QRPC” requirements described in Bulletin 2020-10. Such hardships, as stated in Bulletin 2020-4, include situations where the homeowners’ ability to make timely mortgage payments has been negatively impacted as a result of COVID-19, which could include any of the eligible hardship reasons described in Guide Section 9202.2. Specific examples may include long-term or permanent disability/serious illness, reduction in income, death, or other eligible hardship reasons.

A borrower does become increasingly delinquent on their mortgage as they miss payments on a forbearance plan, and while the delinquency needs to be resolved following the forbearance plan, there are several options for reinstating, including reinstatement, repayment plans, payment deferral, Flex Modifications and other alternatives.

When the mortgage loan has an escrow account, the Servicer must ensure the timely payment of all escrow and related charges in accordance with applicable law.

However, regardless of whether the mortgage has an escrow account, the Servicer must protect Freddie Mac’s first lien position and the property securing the mortgage by monitoring the status of all escrow and related charges; this includes advancing escrow to protect Freddie Mac’s first lien position.

For new hardships identified on or after November 1, 2023, Servicers must discontinue use of default reason code 032 for reporting new delinquencies related to COVID-19 and instead use the applicable default reason code for the underlying hardship (e.g., unemployment).

If a Servicer has been reporting a Borrower’s hardship as a COVID-19-related hardship under default reason code 032 prior to November 1, 2023, the Borrower must continue to be reported delinquent using default reason code 032 as long as the COVID-19 hardship continues.

No, Servicers must report a "full-file" status to the four major credit repositories in accordance with the Fair Credit Reporting Act and credit bureau standards as provided by the Consumer Data Industry Association (CDIA).