Fannie and Freddie: What You Need to Know

On March 23rd in an effort to provide market liquidity during the coronavirus emergency, the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to provide alternative flexibilities to satisfy appraisal requirements and employment verification requirements through May 17, 2020. Fannie and Freddie will use alternatives to reduce the need for appraisers to inspect the inside of homes at a time when an increasing number of states have issued shelter-in-place directives or ordered the closing of non-essential businesses. This will allow for purchases and homes to be refinanced as the nation deals with the COVID-19 pandemic. In addition, lenders may now obtain employment verification by email from an employer, a recent year-to-date paystub from the borrower or a bank statement showing a recent payroll deposit. This is in lieu of the required verbal verification that may be hard to obtain when many businesses are closed.

Fannie Mae and Freddie Mac both released statements earlier in March detailing the help they will offer borrowers. Fannie Mae said it will suspend foreclosure sales and evictions of borrowers for 60 days, according to the company statement. Additionally, homeowners are eligible for a forbearance plan to reduce or suspend their mortgage payments for up to 12 months. Freddie Mac is also offering mortgage forbearance for up to 12 months for people who are unable pay their mortgages. Both GSEs will waive late fees and suspend the reporting of past due payments of borrowers in a forbearance plan. This move will provide much needed flexibility to buyers and lenders so that they can continue the homebuying process, which is crucial to keeping the real estate market moving during this pandemic.

This also relates to multi-family property owners who need relief at this time, as the GSEs would offer mortgage forbearance to some multifamily landlords—on the condition that the landlord completely suspend evictions on the basis of nonpayment of rent. If you or a client is a landlord whose multifamily properties are financed through the enterprises, they may be eligible to defer loan payments for up to three months. Landlords who want to take advantage must show hardship as a consequence of the virus and gain lender approval. Owners of multifamily properties who are approved to participate in the relief plan are not allowed to evict tenants “based solely on non-payment of rent during the forbearance period,” according to Freddie Mac’s announcement. More details are found on the respective enterprises’ website.

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