This BREAKING NEWS covers buying or refinancing after forbearance mortgage guidelines. Buying or refinancing after forbearance is a major concern for homebuyers and homeowners. Forbearance is not a mortgage default. Under the federal coronavirus stimulus CARES Act, mortgage borrowers can qualify for forbearance for six months and can extend it for another six months for a total of one year. This holds true for federally-backed mortgages. Federally-backed mortgages are FHA, VA, USDA, Fannie Mae, Freddie Mac mortgages.Forbearance is not mortgage forgiveness or mortgage default workout. Forbearance is not a loan modification.
Under the CARES Act federal forbearance mortgage program, borrowers affected by the COVID-19 pandemic do not have to make any mortgage payments until they are financially stable.
Once the forbearance period term is over, the borrower needs to repay the missed payments including the escrow shortage. Lenders will normally spread the missed payments over a period of time such as six to twelve months. Lenders are not supposed to report borrowers under forbearance as late on the credit reports. However, many borrowers are concerned if they take up the federally-backed forbearance program whether they will have a waiting period requirement when buying or refinancing after the forbearance.
FHFA Announces Buying or Refinancing After Forbearance Mortgage Guidelines
The Federal Housing Finance Agency (FHFA) has announced Fannie Mae and Freddie Mac will have two new mortgage policy changes to help homeowners who have been impacted by the coronavirus pandemic. Over 41 million Americans have filed unemployment claims in the past nine weeks. Unemployment claims are expected to increase in the weeks to come before stabilizing. The once record low unemployment rate of under 3.5% has now led to record high unemployment numbers in the weeks and months to come due to the pandemic.
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Unemployment Rate During Coronavirus Outbreak
Nobody knows what the unemployment rate will be in the weeks and months to come. However, there are talks by experts and economists that unemployment rates can reach between 15% to 25%. Under the CARES Act, homeowners of federally-backed mortgages are eligible to qualify for forbearance up to one year.
Without the forbearance program, economists fear a housing market crash and mortgage meltdown due to the skyrocketing foreclosure numbers.
Many homeowners are afraid of taking upon the federally-backed forbearance program due to the consequences of qualifying for a mortgage at a later date after the forbearance. The borrower needs to have made three timely payments to the mortgage servicer after the end of the term of their mortgage forbearance.
FHFA Guidelines on Conventional Loans on Buying or Refinancing After Forbearance
The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will now have a three-month waiting period after forbearance to qualify for a federally-backed mortgage loan. Federally-backed mortgages are FHA, VA, USDA, and Conventional loans. Borrowers under forbearance will be eligible to qualify for a home purchase and/or refinance mortgage after the forbearance period has expired.
Waiting Period Requirements To Qualify Buying or Refinancing After Forbearance
Over 4.7 million homeowners have their mortgages in forbearance due to the financial impact of the coronavirus pandemic. Prior to this article, the waiting period requirements to qualify for a mortgage after forbearance was 12 months. To qualify for a home purchase or refinance mortgage after a forbearance, there was a 12 month waiting period after the forbearance term was over.
12 months of timely mortgage payments needed to be made to the mortgage servicer after the forbearance term expired.
However, with these newly updated guidelines by the FHFA, the waiting period has been shortened to a 3-month waiting period. If a homeowner has forbearance but continued making their monthly payments or reaffirmed their mortgage, there is no waiting period after the forbearance term is over. Basically, what this means is borrowers under forbearance who continued making their monthly scheduled payments and did not miss any payments, there are no waiting period requirements.
More Homeowners Are Expected To Take Advantage of Buying or Refinancing After Forbearance
After the announcement of the newly updated waiting period after forbearance by the FHFA, housing analysts expect more homeowners will take advantage of the CARES Act forbearance program. Up until now, many homeowners were leery and hesitant in applying for the forbearance program due to the one-year waiting period after forbearance guidelines.
However, with the waiting period after forbearance being shortened to three months, more homeowners should take advantage of the federally-backed mortgage forbearance program.
Mortgage rates are in chaos due to the pandemic. However, analysts expect mortgage rates to stabilize in the coming weeks. Many homeowners have rates in the 5.0% range. When FHA and VA Streamline rates stabilize in the coming weeks, many homeowners should be able to refinance their home loans in the 3.0% range. With the shortened waiting period requirements, homeowners can take advantage of the forbearance and be eligible to refinance when rates stabilize.
Will The Economy and Housing Market Go Through a Correction?
The housing and mortgage markets will not be crashing due to the government’s swift actions with its coronavirus stimulus economic programs. The housing market still remains strong. The chaotic mortgage markets are expected to stabilize in the coming weeks. Mortgage rates for lower credit borrowers are expected to stabilize and return to normalcy. This is a developing story. We will be updating you on any developments in the coming days and weeks. STAY TUNED!!!
This guide on buying or refinancing after forbearance mortgage guidelines was updated on January 10th, 2024.