This Article Is About Waiting Period After CARES ACT Forbearance To Qualify For Mortgage
- The CARES ACT is a financial economic relief act created by Congress and signed into law by President Donald Trump to Americans affected by the coronavirus outbreak
- The U.S. economy was booming prior to the coronavirus outbreak in February 2020
- The Dow Jones Industrial Average topped 29,000 which is a historic high
- Other stock market indices followed the Dow Jones and hit record territories
- Unemployment under the Trump Administration was under 3.5%, again a historic low unemployment rate in the history of the United States
- Never in history of the U.S. had we had such a booming bull market
- Then in February 2020, the coronavirus outbreak hit the nation
- Most state governors shut down their states
- The whole country was shut down and at a stand still
- Congress and the Trump Administration needed to think something quick and save the U.S. economy
- The Dow Jones Industrial Average hit as low as 18,000
- Other stock markets followed on the downturn
- The CARES ACT was drafted and the bill went to President Trump
- President Trump signed the CARES ACT into law
- Included in the CARES ACT was giving guaranteed forbearance to any homeowners with a government-backed home mortgage as well as mortgages that are owned by Fannie Mae and/or Freddie Mac
- The bottom line is any homeowner and/or property owner with a mortgage who suffered financial hardship due to the economy had a right to get a forbearance on their mortgage under the CARES ACT
About Fannie Mae And Freddie Mac
The role of Fannie Mae and Freddie Mac is to provide liquidity in the mortgage markets so lenders can make residential loans to hard-working Americans at low mortgage rates.
- Fannie Mae and Freddie Mac’s mission and role is to make homeownership possible for millions of Americans
- Fannie Mae and Freddie Mac buys home mortgage that has been funded by lenders
- Lenders use their warehouse line of credit to fund home loans
- After lenders fund home mortgages, they need to sell it to the secondary mortgage bond market
- The biggest buyers of mortgages are Fannie Mae and Freddie Mac
- By buying mortgages from lenders, it relieves lenders to pay down their warehouse line of credit
- Paying down the warehouse line of credit enables lenders to originate and fund more loans
Both Fannie Mae and Freddie Mac partners with lenders to make positive changes in the home buying and mortgage process to make homeownership easier and minimizing risks for lenders.
Fannie Mae Waiting Period After CARES ACT Forbearance In Qualifying For A New Mortgage
Many homeowners were afraid in taking up on the forbearance offer under the CARES ACT due to the repercussions it may have on them qualifying for another mortgage after the forbearance period was over.
- The initial Fannie Mae Waiting Period After CARES ACT Forbearance was a three month waiting period in order for a borrower to qualify for a new mortgage
- What this means is if a homeowner got a forbearance under the CARES ACT and missed monthly mortgage payments, once the forbearance period is over, the borrower can qualify for a mortgage after they start making regularly scheduled payments for three months
- The mortgage servicer cannot report the fact a homeowner had a forbearance on consumer credit reports
Taking up a mortgage forbearance cannot affect consumer credit scores and/or payment history under the CARES ACT.
Flexibility On Waiting Period After CARES ACT Forbearance On Home Purchase And Refinance
On May 19th, 2020, Fannie Mae announced flexibilities for home purchase and refinance eligibility guidelines on homeowners who have taken advantage of the CARES ACT mortgage forbearance program.
- Fannie Mae announced flexibilities for homeowners who have taken forbearance because of having financial hardship due to the coronavirus outbreak
- What this means if Fannie Mae will offer flexibilities to homeowners to finance a new home mortgage on either a home purchase or refinance mortgage transactions
- Fannie Mae also announced a one-month extension to flexibilities which allows mortgage lenders to sell to Fannie Mae single-family loans currently in forbearance
What Happens After Forbearance Period Is Over
Once homeowners regain employment and can start repaying their home mortgages, they can end the forbearance. Lenders will do a workout for missed payments during the forbearance period.
- Missed payments during the forbearance period need to be paid back
- Missed payments are not forgiven. Lenders will do a workout on a realistic repayment plan over a period of time
- Each homeowner’s repayment plan on the missed payments will be worked out on a case by case scenario depending on the borrower’s ability to repay
- Homeowners with missed payments will enter into a loss mitigation repayment loan program
- Some loss mitigation solutions include an amortized repayment plan over a few years, payment deferral program, or a loan modification
Once a repayment plan is entered between the homeowner and the mortgage servicer, the homeowner is eligible for a new home purchase and/or refinance mortgage after they have made three timely monthly payments with the new repayment plan.
There Is No Waiting Period After CARES ACT Forbearance For Borrowers Who Paid The Full Amount Of Missed Payment Once Forbearance Period Was Over
The three months waiting period after CARES ACT Forbearance to qualify for a home purchase and/or refinance mortgage is waived under the following conditions.
- Homeowners who took part in the CARES ACT forbearance program because of financial hardship due to the COVID-19 outbreak but have since completed reinstatement by repaying the full amount of the outstanding missed payments during the forbearance period have no waiting period requirements to qualify for a mortgage
- The homeowner under forbearance could have missed monthly mortgage payments
- However, as long as the homeowner has paid all of the missed payments at once to the mortgage servicer, the homeowner can qualify for a new mortgage right away
The three months of payments and three month waiting period is waived.
Fannie Mae Working With Lenders And Borrowers To Stabilize The Mortgage Markets
As mentioned earlier, missed payment under the forbearance plan need to be paid back.
- Missed payments during forbearance are not forgiven
- Once the forbearance period is over, homeowners are never required to repay them all at once
- Mortgage servicers will do a workout on a repayment plan
- The mortgage servicer will discuss with each homeowner and go over their finances and work out a mutually beneficial repayment plan of the missed payments
- The homeowner’s financial situation will pay a big role in structuring a repayment plan
Fannie Mae has put out useful information for homeowners, owners of investment properties, landlords, and renters on the options each interested party may find useful. Visit Fannie Mae’s KnowYourOptions.com for useful resources and information on options that is available during the COVID-19 outbreak.
Moratorium On Foreclosure And Evictions During The COVID-19 Pandemic
Fannie Mae and Freddie Mac has taken action to help renters and homeowners facing financial hardship due to the coronavirus outbreak in the United States. Mortgage giants Fannie Mae and Freddie Mac took action to suspend foreclosures and evictions affecting homeowners. Fannie Mae and Freddie Mac also extended eviction protections to multifamily renters when the real estate investor received a forbearance. Fannie Mae and Freddie Mac also reminded homeowners they are never required to repay missed payments during a forbearance period all at once. Informational news announcements were released via media networks on tips to help homeowners avoid foreclosure fraud or scams. Fannie Mae and Freddie Mac did everything to accommodate homeowners and put them at ease including creating and implementing a new COVID-19 payment deferral option to help mortgage borrowers structure a repayment plan on their missed payment once the coronavirus forbearance term was over. HUD, the parent of FHA, had similar moratorium on Foreclosure and Evictions during the coronavirus outbreak. Since March 2020, HUD also took action to suspend foreclosures and evictions affecting renters and homeowners due to the COVID-19 outbreak. In August, HUD made an announcement the agency will extend its foreclosure and eviction moratorium through Dec. 31, 2020, for property owners with FHA Loans. This latest extension by HUD marks as the third extension of its kind to help homeowners affected by the economic impact of the widely contagious coronavirus. Each four month extension is granted to help homeowners who are financially impacted due to the COVID-19 pandemic.
