18.104.22.168 Fannie Mae Disaster Payment Deferral
The Fannie Mae Disaster Payment Deferral replaces the former loss mitigation options known as the Extend Modification for Disaster Relief and the Cap and Extend Modification for Disaster Relief. It was introduced in detail on July 15, 2020, in Fannie Mae Lender Letter LL-2020-11.118 The Disaster Payment Deferral became effective as of October 1, 2020, and evaluation for this option was mandatory as of that date.119 The Disaster Payment Deferral is described at section D2-3.2-06 of the Servicing Guide.
Lender Letter LL-2020-11 describes the Disaster Payment Deferral as an option created to help borrowers with a disaster-related hardship return their mortgage to a current status after up to twelve months of missed payments. This option is “simple to explain to borrowers, as the amount of their delinquency moves into a non-interest bearing balance, due and payable at maturity of the mortgage loan or earlier payoff; and all other terms of the mortgage remain unchanged.”120 The borrower must confirm that their hardship has ended and that they can resume payments.
The Disaster Payment Deferral does not include a Trial Period Plan. Borrowers who qualify for evaluation for a Disaster Payment Deferral will typically be transitioning from forbearance, but forbearance is not a prerequisite to eligibility.121
Under the Disaster Payment Deferral, the servicer defers up to twelve months of principal and interest payments along with “out-of-pocket escrow advances paid to third parties, provided they are paid prior to the effective date of the disaster payment deferral” and some other third-party fees.122 The deferred balance does not accrue interest and the borrower must pay it at maturity of the loan or at any earlier, specified time. No other term of the loan is changed.
The Fannie Mae Servicing Guide provides eligibility requirements for the Disaster Payment Deferral.123 Among other requirements, the mortgage loan must have been current or fewer than two months delinquent at the time the disaster occurred, and must, as of the date of evaluation, now be equal to or greater than one month delinquent but fewer than or equal to twelve months delinquent. The loan must not have previously received a disaster payment deferral because of the same disaster event, but it may have previously received a non-disaster payment deferral.124
If the servicer is unable to obtain QRPC with a borrower on a disaster-related forbearance plan, and the borrower is otherwise eligible for a Disaster Payment Deferral, the servicer must send an offer for a Disaster Payment Deferral within fifteen days after the forbearance plan expires. The solicitation letter must include language informing the borrower that additional forbearance may be available if the hardship is not resolved, and that a loan modification may be available if the borrower needs payment relief. The servicer must include instructions on how to accept the offer in the Disaster Payment Deferral agreement.125
118 Fannie Mae Lender Letter LL-2020-11, Disaster Payment Deferral (July 15, 2020; updated Aug. 27, 2020), available at https://singlefamily.fanniemae.com.
119 Fannie Mae Servicing Guide Announcement 2020-04 (Nov. 10, 2020), available at https://singlefamily.fanniemae.com.
120 Fannie Mae Lender Letter LL-2020-11, Disaster Payment Deferral (July 15, 2020; updated Aug. 27, 2020), available at https://singlefamily.fanniemae.com.
121 Fannie Mae, Single-Family Servicing Guide, D1-3-01, Evaluating the Impact of a Disaster Event and Assisting a Borrower.
122 Fannie Mae, Single-Family Servicing Guide, D2-3.2-06, Disaster Payment Deferral
123 Fannie Mae, Single-Family Servicing Guide, D2-3.2-06, Disaster Payment Deferral.
124 Fannie Mae, Single-Family Servicing Guide, D2-3.2-06, Disaster Payment Deferral.
125 Fannie Mae, Single-Family Servicing Guide, D2-3.2-06, Disaster Payment Deferral.