Homeowners in forbearance on their mortgage will have an easier time refinancing loans backed by mortgage giants Fannie Mae and Freddie Mack under certain conditions issued by the Federal Housing Finance Agency
The Federal Housing Finance Agency issued guidance Tuesday that Fannie Mae and Freddie Mac will now allow borrowers who are in forbearance or have recently exited forbearance, to refinance their loan or buy a new home as long as they are also current on their mortgage, meaning they’ve continued making payments.
This means borrowers who went into forbearance as a safety net but are current on their mortgage would suffer no loss of creditworthiness. Borrowers who missed payments in forbearance could still be eligible to refinance or buy a new home three months after their forbearance ends and they have made three consecutive payments.
Typically, borrowers can only get a new mortgage, whether it’s to refinance or to buy a home, a year after their payments are up to date after they exit forbearance. This rule may have created headaches for many homeowners who chose to enter into forbearance as a safety net.
Now, borrowers don’t have to wait for 12 months because GSEs are cutting nine months off of that waiting period. More borrowers can take advantage of the market’s low-interest rates.
“Homeowners who are in COVID-19 forbearance but continue to make their mortgage payment will not be penalized,” FHFA Director Mark Calabria said in a statement. “Today’s action allows homeowners to access record-low mortgage rates and keeps the mortgage market functioning as efficiently as possible.”
The coronavirus pandemic has triggered forbearance help from Fannie Mae and Freddie Mac making lenders more flexible with borrowers, reducing or even suspending mortgage payments for a certain time period, and not initiating a foreclosure during the forbearance period. More than 4.1 million mortgages are currently in forbearance, according to the Mortgage Bankers Association.
Click here for more details on how borrowers who either requested and/or accepted forbearance may be eligible for a refinancing or new mortgage according to Fannie Mae.
Refinancing your mortgage?
What do you need to refinance your house? Find more information here: How to refinance your mortgage.
Like buying a home, mortgage refinancing is complex and requires due diligence if you are considering this path. Speak with your lender to get more information. This will help you make the important decision as to whether refinancing is right for you.