FHFA Releases Guidance on Mortgage Forbearance Posted by AVCU on 9:50 AM

In the wake of the COVID-19 mortgage forbearance period implemented by the CARES Act, there has been a lot of confusion among credit unions and credit union members alike as to how the repayment of the skipped payments will be structured.  Most credit unions we have spoken with are just adding the missed payments to the end of the loan term, however we have heard of instances where members were told they would have to provide a lump sum payment in the amount of the total of missed payments at the end of the forbearance period.  This provides essentially no relief to a member who is out of work or facing financial hardship due to this crisis.

Luckily, the FHFA has stepped in and issued guidance for loans sold on the secondary market.  The guidance, available here, states that borrowers in forbearance will not be required to pay back the missed payments in a lump sum.  The guidance also states that "while today's statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all mortgage lenders to adopt a similar approach."  Since many credit unions keep loans in portfolio and don't sell to the GSEs, it is important to keep in mind that the agencies are still requiring institutions to work with borrowers even if the loans are not federally-backed.  Credit unions are encouraged to take measures such as setting up repayment plans, making loan modifications that add the payment to the end of the mortgage or making loan modifications that reduce the member's monthly payment.

Please reach out to CUNA Compliance with any questions about mortgage forbearance's or other compliance issues.