In a significant move today, the Federal Housing Finance Agency announced that it will purchase qualified single-family mortgages in forbearance in order to support mortgage markets during the coronavirus pandemic.
Generally, loans in forbearance or delinquency may not be sold Fannie Mae or Freddie Mac. However, FHFA said it would ease this restriction “for a limited period of time and only for mortgage meeting certain eligibility criteria.” FHFA also noted that loans in forbearance that are sold to Fannie Mae and Freddie Mac will “be priced to mitigate the heightened risk of loss to the Enterprises.”
According to the guidelines issued by the GSEs, Fannie and Freddie will impose a loan-level pricing adjustment of 500 basis points for first-time buyers and 700 basis points for all others. In addition, borrowers cannot be behind by more than one payment and the transaction must involve either a purchase transaction or a no-cash-out refinance.
“We are focused on keeping the mortgage market working for current and future homeowners during these challenging times,” said FHFA Director Mark Calabria. “Purchases of these previously ineligible loans will help provide liquidity to mortgage markets and allow originators to keep lending.”