When the federal government rolled out the CARES Act and other programs aimed at helping businesses and individuals get through these uncertain economic times, there was a lot of confusion and misinformation out there. Many homeowners still weren’t sure what they could or couldn’t do because of certain mortgage regulations being put into place and new mortgage forbearance options being offered to those experiencing financial distress.

Can you request forbearance on your current mortgage payments? Can you refinance while in forbearance? Can you apply for a new home loan? These are all simple questions many Americans have been asking these past couple months.

Regulatory Updates and Clarifications

On Tuesday, Federal regulators made some significant rule changes and made efforts to clear up some of the confusion. They addressed certain limits that were placed on more than 4 million borrowers under the mortgage relief programs that have been rolled out thus far.

Certain lending rules were in place before the COVID-19 pandemic, which were complicated by newer regulations added during the pandemic. This week, key announcements were made by the director of the Federal Housing Finance Agency (FHFA), Mark Calabria. The FHFA regulates Fannie Mae and Freddie Mac, so their rulings affect a large percentage of borrowers.

New Home Loans and Refinances

One announcement is that borrowers are now allowed to refinance or buy a home with a new mortgage as long as they have resumed making payments on their current mortgage. Many homeowners requested—and were granted—mortgage forbearance to delay mortgage payments during this period of economic stress. A borrower applying for a new loan or a refi will must have made at least three months’ worth of mortgage payments. This updates the existing rule that said they would have to be current on the mortgage for at least a year.

Here are some other updates to the forbearance requirements for someone seeking a new mortgage loan:

  • Any mortgage in forbearance must be removed for forbearance.
  • Any unpaid payment(s) must be paid to current.
  • Must have verification letter from lender showing no longer in forbearance.
  • Must have credit supplement showing no longer in forbearance and loan current with next payment due listed.
  • Payoff must not show any remaining forbearance balance, payments due or deferred balance listed.

‘Homeowners who are in COVID-19 forbearance but continue to make their mortgage payment will not be penalized,” said Calabria. “Today’s action allows homeowners to access record-low mortgage rates and keeps the mortgage market functioning as efficiently as possible.”

Additional Updates

In addition, the FHFA is also increasing the ability of Fannie Mae and Freddie Mac to purchase single-family mortgages currently in forbearance (with note dates on or before June 30, as long as they are delivered by August 31 and have missed a max of one mortgage payment). We have already been seeing the forbearance numbers going down with now just more than 8% of all borrowers in forbearance according to the Mortgage Bankers Association (MBA) and the number of new applicants shrinking each week. Borrowers who are still seeking mortgage forbearance can do so no proof required of financial hardship. Just remember that loan forbearance is not loan forgiveness. The payments will still need to be made at some point.

“These welcome moves ensure that homeowners who continue to make on-time payments—and those who have successful exited forbearance—can benefit from near record-low mortgage rates,” adds Bob Broeksmit, CEO of the MBA. “It also keeps the mortgage market functioning efficiently and helps ease current credit availability constraints.”

Whether you are in the process of catching up on your forbearance or have been making your mortgage payments this whole time, now is a great time to refinance your loan or apply for a new home loan if you are looking to buy. Interest rates are exceptional and Transparent Mortgage is here to help with all your mortgage needs. Call us today at (619) 701-3906 or email me at beau@tspmortgage.com

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.