FHFA Announces Four Month Advance Obligation Limit for Loans in Forbearance to Address Servicer Liquidity Concerns

In response to growing industry concerns regarding servicer liquidity due to CARES Act mortgage forbearances, the FHFA announced a four-month limit to advance monthly principal and interest obligations on Fannie Mae loans in forbearance, making Fannie Mae policy “consistent with the current policy at Freddie Mac.” 

Once a servicer has made four months of payments on loans in forbearance pursuant to the CARES Act, it will have no further obligation to advance those payments.  This applies to all Fannie Mae and Freddie Mac servicers, “regardless of type or size.”

Today’s announcement noted that FHFA has instructed Fannie Mae and Freddie Mac to keep loans in COVID-19 forbearance plans in MBS pools for the duration of the plan, and “clarifies that mortgage loans with COVID-19 payment forbearance shall be treated like a natural disaster event and will remain in the MBS pool.”  FHFA believes that this action will reduce “the potential liquidity demands on the Enterprises resulting from loans in COVID-19 forbearance and delinquent loans.” 

The announcement is available here.