Fannie, Freddie Announce Enforcement Relief for COVID-19 Forbearance Mortgages

On October 18, 2023, Freddie Mac’s Bulletin 2023-21 and Fannie Mae’s Lender Letter LL-2023-08 announced that, effective immediately, certain mortgages previously or currently in COVID-19 forbearance are eligible for enforcement relief.  This enforcement relief from certain breaches of underwriting and eligibility representations and warranties is available to Fannie Mae and Freddie Mac single-family sellers for loans that meet the requirements, generally the same criteria established for disaster-related forbearance.

In reference to this recent change, FHFA Director Sandra L. Thompson stated that, “Servicers went to great lengths to implement forbearance quickly amid a national emergency, and the loans they service should not be subject to greater repurchase risk simply because a borrower was impacted by the pandemic.”

This enforcement relief applies to certain eligible loans that (i) entered COVID-19 forbearance between March 13, 2020 and October 31, 2023, based on servicer reporting; (ii) are active; (iii) were delivered in COVID-19 forbearance (according to stated requirements) or were delivered and then entered COVID-19 forbearance; and (iv) meet relief requirements applicable to disaster-related forbearance.  Freddie Mac requires that the mortgage is fully reinstated, as defined in Freddie Mac’s Single-Family Seller/Servicer Guide, or restored to current status, which includes (i) repayment plan completion; (ii) COVID-19 Payment Deferral completion, or (iii) moving to permanent modification.  Fannie Mae will now include COVID-19 payment deferral and disaster payment deferral as eligible loss mitigation solutions that can bring the loan to current status after COVID-related or disaster-related forbearance.

By January 31, 2024, sellers will be informed, on a loan-level basis, of the mortgages this relief affects through Freddie Mac’s and Fannie Mae’s technology platforms.