Responding to pressure from industry groups and members of Congress, the Federal Housing Finance Agency (FHFA) announced on April 21, 2020 that servicers of Freddie and Fannie mortgage loans will only be required to advance four months of missed payments for single family mortgage loans.  The action by the FHFA aligns the servicer advance requirements for mortgage loans in both Freddie Mac and Fannie Mae issued mortgaged-backed securities (MBS).  Prior to the change, Freddie Mac servicers were limited to a four months advance obligation while Fannie Mae servicers with scheduled payment remittance obligations were responsible for advancing missed payment regardless of borrower payments.

 Coronavirus, Eligibility

The FHFA announcement also reverses April 10, 2020 servicer guidance and specifies that mortgage loans with COVID-19 payment forbearance shall be treated like a natural disaster event and will remain in the MBS pool for at least the duration of the forbearance plan.

The mortgage industry is still expecting an FHFA announcement  later this week specifying when Freddie Mac and Fannie Mae will buy mortgage loans in forbearance.  Further, industry participants remain hopeful that a mortgage servicer liquidity facility will be included in the Federal Reserve and Treasury’s fourth economic relief package expected to be released in the coming weeks.

As you are aware, things are changing quickly and there is no clear-cut authority or bright line rules.  This is not an unequivocal statement of the law, but instead represents our best interpretation of where things currently stand.

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*This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship. Please contact your Sheppard Mullin attorney contact for additional information.*