COVID-19 Servicing – Forbearance FAQ

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. For borrowers on an active COVID-19 forbearance plan as of February 28, 2021, Freddie Mac provides up to 18 months of forbearance for borrowers with a COVID-19-related hardship. 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, COVID-19 Payment Deferral, or loan modification.

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 applicable post forbearance when 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.

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.

Forbearance plans, whether for a COVID-19-related hardship or otherwise, do not restrict borrowers from eligibility based on previous hardships or corresponding loss mitigation solutions.

No, previous delinquency does not impact forbearance plan eligibility for a borrower with a COVID-19-related hardship.

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, COVID-19 Payment Deferral, Flex Modifications and other alternatives.

Question: If a borrower already has a pending loss mitigation application, can they still be reviewed for the pending application as well as a forbearance? How will a COVID-19 issue be weighed for anyone that is already in a loss mitigation trial period? And for those that are already in a modification?

Answer: An eligible borrower may transition directly from an active Trial Period Plan to a forbearance plan, and at the conclusion of the forbearance plan, that borrower may be evaluated for a new Trial Period Plan without the previous one being considered as “failed.” Borrowers subject to other active loss mitigation options must communicate to the servicer that they would prefer the forbearance plan, and the alternative option may be canceled by the servicer in favor of the forbearance plan. A borrower must not be subject to multiple active loss mitigation solutions at one time (note: a previously completed modification is not considered an “active” loss mitigation option, as the loan is permanently modified at settlement).

No, a borrower may make payments during the forbearance period. The forbearance plan will continue to term and the payment must be applied as usual in accordance with Guide Section 8103.4.

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.

During a forbearance plan, interest is not paid but still accrues.

Question: If a Servicer provides a COVID-19 related forbearance plan with an incremental period shorter than 180 days, and the Servicer is unable to achieve QRPC prior to the expiration of such incremental period, can the Servicer automatically extend the forbearance period?

Answer: Servicers are responsible for complying with the requirements of Guide Bulletins 2020-4, 2020-10 and 2020-21 and applicable law, including the CARES Act, when providing borrowers with an initial or extended forbearance plan.