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12.2.3.4 Mortgage Forbearance

The Seller/Servicer Guide outlines certain activities that a servicer is required to take “to appropriately manage the Borrower’s Delinquency if the Servicer believes the disaster resulted in a hardship for the Borrower and the disaster is an Eligible Disaster.”140 One of these activities is the consideration of a mortgage forbearance plan that includes either reduced or no monthly payments for a specific time period.

Chapter 8404 of Freddie Mac’s Seller/Servicer Guide provides that servicers must utilize the requirements set forth in Chapter 9203 when offering forbearance relief to borrowers impacted by a disaster.141 The property securing the mortgage loan is still eligible even if it is vacant, but it may not be abandoned or condemned. Mortgages secured by second homes or investment properties are ineligible for a disaster forbearance.142 The borrower may be current or delinquent, but the forbearance plan must not result in an overall delinquency that exceeds 360 days (i.e., to be in an active forbearance plan, the borrower must not have missed more than twelve contractual payments).143

The servicer is not required to collect a complete Borrower Response Package to evaluate the borrower for a forbearance plan or a forbearance plan extension. However, the availability of the mortgage forbearance extended by the servicer will depend upon whether or not the servicer has been in contact with the borrower—that is obtained “quality right party contact” (QRPC). Freddie Mac’s Seller/Servicer Guide states that, in the event of a disaster, “it is imperative that Servicers be considerate of the Borrower’s circumstances and work to obtain quality right party contact with the Borrower as soon as possible.”144

Where QRPC has been obtained, and the borrower requires a relief option or the property has damage that would pose a risk of property ownership to Freddie Mac, the servicer has the discretion to suspend collection and foreclosure proceedings and place the borrower in a forbearance plan for up to twelve months, based on the circumstances.145 However, a servicer must obtain Freddie Mac’s approval if it seeks to extend the forbearance plan beyond a date that would cause the delinquency to exceed a cumulative total of twelve months of the borrower’s contractual monthly mortgage payment, including taxes and insurance.146

Servicers should reassess each impacted borrower on a regular basis during the forbearance period to determine if forbearance should be extended up to a total of twelve months or if the hardship has been resolved. If the servicer believes that forbearance beyond a period of twelve months is warranted, it should present that recommendation to Freddie Mac for consideration.147

Where the servicer has not obtained QRPC with a borrower who is or becomes at least thirty-one days delinquent after being impacted by the disaster, the servicer has the discretion to place the borrower in a forbearance plan for up to ninety days, in accordance with the requirements of sections 8404.4, 8404.6, and 9203.12 through 9203.17 of the Seller/Servicer Guide. Provided the servicer has relevant information regarding the borrower’s financial circumstances and/or the extent of the property damage caused by the disaster, the servicer should consider these factors in evaluating whether to provide forbearance. Any forbearance plan must not exceed ninety days unless the servicer receives approval from Freddie Mac.148

Based on the borrower’s individual circumstances and ability to pay, the servicer must determine whether a reduced payment is required, or whether to allow the borrower to choose not to make any monthly payments during the plan.149 The forbearance agreement must be provided to the borrower in writing and signed by the servicer, but it does not need to be signed by the borrower or returned to the servicer. The agreement must state the plan’s duration, including the effective date and expiration date, and, if applicable, the due date and amount of the first payment. The agreement must state that, at the end of the forbearance term, the borrower must either cure the delinquency (through full reinstatement, partial reinstatement plus repayment plan, or a repayment plan or mortgage payoff) or submit a complete Borrower Response Package to be evaluated for a workout option before the forbearance plan ends.150

The agreement must state that foreclosure proceedings are suspended during the forbearance period if the borrower complies with the agreement, but that the servicer may recommence foreclosure at the point it was suspended if the borrower defaults on the agreement. The agreement may include a requirement to pay any accrued late charges due at the time the forbearance agreement is entered, but the servicer must not accrue or collect late charges during the forbearance period, or any subsequent repayment plan period, if the borrower is complying with the terms of such agreement. If the borrower defaults on the forbearance agreement, late charge accrual may restart from the date of such default.151

Footnotes

  • 140 Freddie Mac, Single-Family Seller/Servicer Guide, § 8404.4, Delinquency management activities following a disaster.

  • 141 Freddie Mac, Single-Family Seller/Servicer Guide, § 8404.4(c), Delinquency management activities following a disaster. Section 9203.13 is entitled “Requirements for a forbearance plan” and section 9203.17 is entitled “Other forbearance plan conditions and requirements.”

  • 142 Freddie Mac Single-Family Seller-Servicer Guide, § 9203.13(b), Requirements for a forbearance plan.

  • 143 Freddie Mac Single-Family Seller-Servicer Guide, § 9203.13(a), Requirements for a forbearance plan.

  • 144 Freddie Mac, Single-Family Seller/Servicer Guide, § 8404.4, Delinquency management activities following a disaster.

  • 145 Freddie Mac, Single-Family Seller/Servicer Guide, § 8404.4(b), Delinquency management activities following a disaster.

  • 146 Freddie Mac, Single-Family Seller/Servicer Guide, § 8404.4(b), Delinquency management activities following a disaster.

  • 147 Freddie Mac, Single-Family Seller/Servicer Guide, § 8404.4(a), (b), Delinquency management activities following a disaster.

  • 148 Freddie Mac, Single-Family Seller/Servicer Guide, § 8404.4(a), Delinquency management activities following a disaster. See also Freddie Mac Bulletin 2020-34, COVID-19 Foreclosure Moratorium Extension and Disaster Forbearance Updates (Aug. 27, 2020) (“In the event a disaster strikes, it is important that Servicers be considerate of the Borrower’s circumstances and work to obtain quality right party contact (QRPC) with the Borrower as soon as possible. However, we are aware that achieving timely QRPC is not always possible in disaster situations; therefore, in circumstances where the Servicer has not yet achieved QRPC and believes that the Borrower’s hardship is the result of an Eligible Disaster, the Servicer may place a Borrower who becomes 31 or more days delinquent after being impacted by an Eligible Disaster in a forbearance plan for up to 90 days.”).

  • 149 Freddie Mac Single-Family Seller-Servicer Guide, § 9203.13(d), Requirements for a forbearance plan.

  • 150 Freddie Mac Single-Family Seller-Servicer Guide, § 9203.13(c), Requirements for a forbearance plan.

    Note that the borrower is not required to provide a Borrower Response Package to be considered and offered a Disaster Payment Deferral if the servicer has evaluated the borrower in accordance with all of the requirements described in Freddie Mac Bulletin 2020-28 and the eligibility criteria have been satisfied. See Freddie Mac, Disaster Relief Reference Guide 10 (updated Nov. 2020), available at https://sf.freddiemac.com (“The borrower is not required to provide a Borrower Response Package to be considered for and offered a Disaster Payment Deferral, if you have evaluated the borrower in accordance with all requirements described in Guide Bulletin 2020-28, and the eligibility criteria has been satisfied.”); Freddie Mac Bulletin 2020-28, Eligible Disasters and other Servicing Guidance Related to COVID-19 (July 15, 2020), available at https://guide.freddiemac.com. For a description of the Freddie Mac Disaster Payment Deferral, see § 12.3.1.6, infra.

  • 151 Freddie Mac Single-Family Seller-Servicer Guide, section 9203.13(c), Requirements for a forbearance plan.

    Note that the Freddie Mac Disaster Relief Reference Guide clarifies that all accrued and unpaid late charges must be waived if the mortgage is modified and, additionally, the servicer must waive all accrued and unpaid late charges upon completion of a Disaster Payment Deferral. For a description of the Disaster Payment Deferral, see § 12.3.1.6, infra.