COVID-19 has us all yearning for the normalcy of a few months ago. In the state of Ohio alone, more than 1.3 million people have filed for unemployment in the past 3 months and we have distributed over $4.1 billion in unemployment checks. These startling statistics have resulted in over 4 million homeowners who have applied for mortgage forbearance. With the current state of financial vulnerability, there has been much trepidation and confusion about how homeowners continue to go forward.
Temporary Changes to Refinance Policy
Fortunately, the Federal Housing Finance Agency announced temporary changes to the forbearance policy of two of the largest government-backed mortgage lenders, Fannie Mae and Freddie Mac on May 19th. These changes allow borrowers to refinance out of their loans that were in forbearance if they 1) were current on their modified payments or 2) had reached the end of their forbearance period.
These borrowers are eligible to refinance or buy a new home three months after their forbearance ends, providing they have made three consecutive payments under their repayment plan, their payment deferral option or their loan modification.
In the Past
In the past, loans that had gone into forbearance were not able to be refinanced for at least a year after the borrower’s forbearance period had ended. Under the old rules, borrowers who had deferred or modified their payments would not have been able to take advantage of current low interest rates.
How These Temporary Changes Can Help
These changes will enable borrowers who have already been hit with the economic impact of COVID-19 to get the benefit of recent low rates. Because so many loans that are in forbearance are due to temporary shutdowns in the economy and most of these borrowers expect to be able to get back to their former jobs when the economy reopens, the FHFA put these temporary guidelines into place to assist them.
“The NAR (National Association of Realtors) applauds the FHFA and Director Calabria for taking additional steps to secure the U.S. housing market and ensure mortgage and refinance options remain available to creditworthy Americans,” said NAR President Vince Malta. “Homeowners who have been forced into forbearance by no fault of their own but continue to make payments should not be penalized because of this pandemic. With the real estate industry driving nearly one-fifth our national GDG, assurances that homebuyers can access credit and capitalize on record low mortgage rates remain critical to America’s economic recovery.”
If You Took Advantage of Forbearance Options
If you took advantage of the CARES Act forbearance options, this can be very good news for you. With today’s unprecedented low-interest rates, borrowers who demonstrated that they could be financially responsible during this economic downturn will be rewarded for their efforts.
If you have questions about refinancing after forbearance or any other mortgage needs, call the licensed Columbus, OH mortgage brokers at Liberty Capital Services. We would be glad to walk you through your options. Call us today at (614) 505-0620.
