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12.2.3.6 Freddie Mac Disaster Payment Deferral

The Freddie Mac Disaster Payment Deferral replaces the former loss mitigation options known as the Extend Modification and the Disaster Relief Modification. It was introduced in detail on July 15, 2020, in Freddie Mac Bulletin 2020-28.160 The Disaster Payment Deferral became effective as of October 1, 2020, and evaluation for this option was mandatory as of that date.161 The Disaster Payment Deferral is described at section 9203.26 of the Seller/Servicer Guide.

The Disaster Payment Deferral is designed to assist borrowers who were current or fewer than sixty days delinquent (i.e., have not missed more than one monthly mortgage payment) as of the date of the disaster. The Disaster Payment Deferral is designed to cure the delinquency by deferring the delinquent principal and interest amounts of the monthly mortgage payment(s) into a newly created or an existing non-interest-bearing unpaid principal balance. Those amounts will become due and payable at the earlier of the mortgage maturity date, payoff date, or upon transfer or sale of the premises. In implementing the Disaster Payment Deferral, the servicer must defer the delinquent principal and interest (P&I) and any other expenses or amounts due that are permitted to be capitalized under Freddie Mac Flex Modification capitalization rules.162 The maximum number of monthly payments that may be deferred as part of a Disaster Payment Deferral is twelve.163 All other terms of the existing mortgage must remain unchanged.164 Note that borrowers who qualify for evaluation for a Disaster Payment Deferral will typically be transitioning from forbearance, but forbearance is not a prerequisite to eligibility.165

The Disaster Payment Deferral does not include a Trial Period Plan. Thus, the borrower does not need to complete a Trial Period Plan prior to entering into a Disaster Payment Deferral.166

There are several eligibility requirements for a Disaster Payment Deferral;

  • • The servicer must obtain QRPC;
  • • The servicer must confirm that the borrower has a resolved hardship, that the borrower can resume making the existing monthly mortgage payment, and that the borrower is unable to afford a repayment plan or to reinstate the mortgage fully;
  • • The hardship must have been caused by an eligible disaster;
  • • The mortgaged property must be a primary residence, second home, or investment property;167
  • • The mortgage must be a conventional first-lien mortgage currently owned or guaranteed by Freddie Mac; the mortgage may be a fixed-rate, adjustable-rate, or step-rate mortgage;
  • • The mortgage must have been current or fewer than sixty days delinquent (i.e., the borrower must not have missed more than one monthly payment) as of the date of the disaster;
  • • The mortgage must have been thirty or more days (one payment) delinquent and fewer than or equal to 360 days (twelve payments) delinquent as of the date the servicer evaluated the borrower for the Disaster Payment Deferral.168

Mortgages that are ineligible for a Disaster Payment Deferral include:

  • • FHA/VA and Guaranteed Rural Housing loans;
  • • Mortgages subject to recourse;
  • • Mortgages subject to an approved short sale or deed in lieu of foreclosure;
  • • Mortgages subject to a previous Disaster Payment Deferral related to the same eligible disaster event;
  • • Mortgages currently subject to an unexpired offer to the borrower for a mortgage modification or other alternative to foreclosure; and
  • • Borrowers currently performing under a modification Trial Period Plan, a non-disaster forbearance plan, or repayment plan.169

The borrower is not required to provide a Borrower Response Package to be considered for and offered a Disaster Payment Deferral if the servicer has evaluated the borrower and the eligibility criteria have been satisfied.170

The servicer must send a Disaster Payment Deferral Agreement to the borrower no later than five business days after the servicer closes or settles the Disaster Payment Deferral. The servicer may require the borrower to sign and return the Agreement.171

Footnotes

  • 160 Freddie Mac Bulletin 2020-28, Eligible Disasters and other Servicing Guidance Related to COVID-19 (July 15, 2020), available at https://guide.freddiemac.com.

  • 161 Freddie Mac Disaster Relief Reference Guide 5 (updated Nov. 2020), available at https://sf.freddiemac.com.

  • 162 These rules are described at section 9206.15(b) of the Seller/Servicer Guide.

  • 163 Freddie Mac, Single-Family Seller/Servicer Guide, § 9203.26(b), Disaster Payment Deferral.

  • 164 Freddie Mac, Single-Family Seller/Servicer Guide, § 9203.26, Disaster Payment Deferral.

  • 165 Freddie Mac, Single-Family Seller/Servicer Guide § 9203.26(d), Disaster Payment Deferral.

  • 166 Freddie Mac, Disaster Relief Reference Guide 7 (updated Nov. 2020), available at https://sf.freddiemac.com.

  • 167 Id. Note that the property may be vacant or condemned.

  • 168 Freddie Mac, Single-Family Seller/Servicer Guide, § 9203.26(a)(iii), Disaster Payment Deferral.

  • 169 Freddie Mac, Single-Family Seller/Servicer Guide, § 9203.26(a)(v), Disaster Payment Deferral.

  • 170 Freddie Mac, Single-Family Seller/Servicer Guide, § 9203.26(a)(iv), Disaster Payment Deferral.

  • 171 Freddie Mac, Single-Family Seller/Servicer Guide § 9203.26(c), Disaster Payment Deferral.