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12.3.5.2.3 Eligibility for Freddie Mac Covid-19 Deferral

Significant Law Change

Freddie Mac’s initial option for addressing forborne payments is its COVID-19 Deferral program.76 Freddie Mac offers this option for borrowers who are “capable of continuing to make the existing contractual monthly Mortgage payment.”77 Under this option, up to eighteen months of forborne payments are deferred and become due, at zero percent interest, at the loan’s maturity (or at payoff).78 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. A borrower is no longer entitled to one COVID-19 Deferral, and instead the limit is on the number of months that can be deferred. 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. It is only necessary that their delinquency was “the result of a COVID-19 related hardship, as described in Bulletin 2020-4, and that hardship must be resolved.”79 In order to qualify, borrowers must have been less than two months delinquent in payments as of March 1, 2020. It appears, unfortunately, that Freddie Mac eliminated a reference to an exception to this standard. Nonetheless, advocates should still seek an exception to the two months or more behind rule when their clients would benefit from deferral.80

Borrowers do not need to submit documentation of hardship or a borrower response package (BRP) or other financial documentation to access this option. Fannie Mae guidelines state that Quality Right Party Contact (QRPC) is required in order to determine basic information about the borrower’s finances, including whether the borrower can afford the pre-forbearance monthly payment. However, if the servicer does not make QRPC with a borrower who is otherwise eligible for a deferral, the servicer must send the borrower a deferral offer within fifteen days after any forbearance ends.

In determining eligibility for the “blind offer” of a COVID-19 Deferral when there is no QRPC, the servicer can ascertain from its records whether the borrower was current or less than thirty-one days delinquent as of March 1, 2020, and whether, at the time of the offer, the borrower is at least one month, but not more than twelve months, in arrears. Notably, the offer is not contingent on the servicer’s first determining that the borrower has a Covid-19 related hardship, that the borrower can now afford the regular scheduled payment, and that the borrower is unable to reinstate with a lump sum payment or payment plan.

Freddie Mac suggests a form solicitation letter for blind offers of a deferment.81 The letter outlines the basic terms of the Freddie Mac Covid-19 Deferral and discusses alternative workouts, such as a modification, if the borrower cannot afford to resume regular payments. Similarly, Freddie Mac provides a standard form servicers can use to memorialize the deferment agreement terms.82 The form reflects the “minimal level of information” the servicer needs to communicate regarding the option.83 The use of the Freddie Mac COVID-19 Deferral agreement form is optional for servicers, as is a requirement that a borrower sign a formal deferment agreement. In response to the servicer’s blind offer the borrower may accept the deferral by executing an agreement, by verbal notification of acceptance, or by simply making the first monthly payment in compliance with the timing directive set out in the offer letter.

Footnotes

  • 76 Freddie Mac Bulletin 2020-15 (May 13, 2020), available at https://guide.freddiemac.com. Prior to servicer implementation of the COVID-19 Deferral option, Freddie Mac required servicers to consider borrowers for disaster-related modification programs.

  • 77 Freddie Mac Bulletin 2020-15 (May 13, 2020), available at https://guide.freddiemac.com.

  • 78 Freddie Mac Bulletin 2021-8 (Feb. 25, 2021), available at https://guide.freddiemac.com. Prior to February 25, 2021, Freddie Mac authorized deferral of only twelve months of arrears; however, they expanded to eighteen months in line with their decision to authorize extended forbearance.

  • 79 Freddie Mac Bulletin 2020-15 (May 13, 2020), available at https://guide.freddiemac.com.

  • 80 Compare Freddie Mac Bulletin 2021-8 (Feb. 25, 2021), with Freddie Mac Bulletin 2020-15 (May 13, 2020), available at https://guide.freddiemac.com (emphasis added). The note in Bulletin 2020-15 states “if a Mortgage was originated after March 1, 2020 and otherwise meets all criteria to receive a COVID-19 Payment Deferral, the Servicer must evaluate the Borrower for a COVID-19 Payment Deferral and offer it if they are eligible. i]f a Borrower had a COVID-19 related hardship but was 31 or more days delinquent as . . . March 1, 2020 . . . and the Servicer determines the Borrower can maintain the existing monthly contractual payment, the Servicer must transmit an exception request via Workout Prospector® to Freddie Mac.” This note does not appear in the subsequent guidance.

  • 81 Freddie Mac Bulletin 2020-15 Attachment A (May 13, 2020), available at https://guide.freddiemac.com.

  • 82 Freddie Mac Bulletin 2020-15 Attachment B (May 13, 2020), available at https://guide.freddiemac.com.

  • 83 Freddie Mac Bulletin 2020-15 (May 13, 2020), available at https://guide.freddiemac.com.