Federal regulators have just made it a bit easier for homeowners in forbearance -- and there are now more than 4 million of them -- to refinance their existing mortgage or buy a new house.
Fannie Mae and Freddie Mac -- the government-sponsored enterprises that back trillions of dollars in Americans' home mortgages -- issued temporary guidance last week that says borrowers in forbearance can refinance or buy a new home if they are current on their mortgage.
They also can refinance or buy a new home three months after their forbearance ends and they have made three straight payments under their repayment plan, payment deferral option, or loan modification, the Federal Housing Finance Agency (FHFA) said in a statement on May 19.
Stimulating a slumping market
"Homeowners who are in COVID-19 forbearance but continue to make their mortgage payment will not be penalized," FHFA Director Mark Calabria said in the May 19 announcement. "Today's action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as efficiently as possible."
The FHFA, the GSEs' parent agency, also extended from May 31 until June 30 the ability for Fannie Mae and Freddie Mac to themselves buy single-family mortgages that already are in forbearance. That effort to stimulate a slumping market had originally been announced on April 22.
While interest rates are at record lows, credit has been reported to be tightening, so adding the estimated 4 million homeowners in forbearance agreements to the rolls of potential new borrowers is a bid to add liquidity and activity to a market that some reports show has begun to crater.