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12.3.4.3.5 The Fannie Mae Flex Modification in the COVID-19 context

Significant Law Change

Borrowers who cannot afford the current payment, do not accept a COVID-19 Deferral, or are otherwise ineligible to receive the deferral should be evaluated for a Fannie Mae Flex Modification. The Flex Modification seeks to provide payment relief to borrowers, and the method for calculating the financial terms of a Fannie Mae Flex Modification is discussed in § 7.3.1, supra.

Under Fannie Mae’s rules, borrowers facing COVID-19 related hardships will not have to satisfy particular Flex Modification eligibility requirements unless they were more than two months behind on their loans as of March 1, 2020 or the loan is less than three months behind on payments when they apply. Borrowers who fit either of those categories will be reviewed under standard Flex Modification guidelines.

Although not directly stated in the Fannie Mae lender letters, the eligibility requirements that do not apply include the requirements that: 1) the mortgage was originated more than twelve months from the time of evaluation, 2) the mortgage loan must not have been modified three or more times, 3) the borrower had not failed a Flex Modification Trial Plan within twelve months of review, and 4) the borrower must not have become sixty days behind within the first twelve months of a Flex Modification without reinstatement.65

As with the COVID-19 Deferral, even if the servicer fails to obtain QRPC or does not respond to the deferral, the servicer should evaluate the borrower for a Flex Modification.

For those borrows who cannot afford to keep their home through retention options, Fannie Mae also has Short Sale and Mortgage Release (deed-in-lieu) options as described in § 7.4.4, supra.66

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