22.214.171.124.3 Eligibility for Fannie Mae’s COVID-19 Deferral
Fannie Mae’s initial option for addressing forborne payments is its COVID-19 Deferral program.52 Fannie Mae offers this option for borrowers who are “able to continue making the full monthly contractual payment.”53 Under this option, up to twelve months of forborne payments are deferred and become due, at zero percent interest, at the loan’s maturity (or at payoff). Essentially, the borrower resumes making the pre-forbearance monthly payment, and the forborne payments become due as a balloon payment when the loan is paid off. There is no trial plan for the deferral, and none of the mortgage terms are modified (other than the final payment due). A borrower is only entitled to one COVID-19 Deferral. The deferral must bring the borrower current.54 The option is available only for first lien mortgages.
Borrowers need not be in an official forbearance plan or have participated in one in the past in order to be eligible for a deferral. Borrowers need only “have experienced a financial hardship resulting from COVID-19 . . . that has impacted their ability to make their full monthly contractual payment.”55 In order to qualify, borrowers must have been less than two months delinquent in payments as of March 1, 2020; however, Fannie Mae provides a potentially broad exception to this standard. In a note, it states “[i]f a borrower’s hardship is related to COVID-19 but he or she was two or more months delinquent . . . and the servicer determines the borrower can maintain his or her full monthly contractual payment, then the servicer must submit a request for a COVID-19 payment deferral through Fannie Mae’s servicing solutions system for review and obtain prior approval from Fannie Mae.”56 Fannie Mae provides no standard for when it will approve a deferral pursuant to this request, but it is critical for advocates to recognize that it is mandatory for the servicer to make the request if conditions are met.
52 Fannie Mae Payment Deferrals Matrix (Sept. 1, 2020), available at https://singlefamily.fanniemae.com. Prior to servicer implementation of the COVID-19 Deferral option, Fannie Mae required servicers to consider borrowers for disaster-related modification programs.
53 Fannie Mae Lender Letter 2020-07 (updated Nov. 18, 2020), available at https://singlefamily.fanniemae.com.
54 This is also a requirement under Regulation X for providing a deferral option. See 12 C.F.R. § 1024.41(c)(2)(v)(A)(3); § 126.96.36.199.4, supra.
55 Fannie Mae Lender Letter 2020-07 (updated Nov. 18, 2020), available at https://singlefamily.fanniemae.com.
56 Fannie Mae Lender Letter 2020-07 (updated Nov. 18, 2020), available at https://singlefamily.fanniemae.com.