Fannie Mae extends purchasing loans in forbearance
The Federal Housing Finance Agency originally decreed in April that the GSEs could purchase forborne mortgages in order to ease origination pressure amid stricter underwriting standards from lenders.
Although opinions differ, this move was intended to put more capital back into the market so that lenders could continue originating with fewer complications. Historically, Fannie Mae and Freddie Mac haven't accepted loans in forbearance, but the pandemic ushered in an exception.
"Our focus is to provide liquidity to the market, while also managing credit risk. As a result, we will review the volume of loans sold to us under these temporary provisions and may adjust our requirements as necessary," Fannie Mae's latest lender letter stated.
For a mortgage in forbearance to be eligible for purchase or mortgage-backed security execution by Fannie Mae, the loan must have been closed between Feb. 1 and Nov. 30 and cannot be delinquent for more than 30 days at the time of submittal. Only purchase and limited cash-out refinances qualify. Cash-out refinances are not eligible.
This marks the fifth update since the first announcement on Apr. 22. The latest extension pushes out the payment installment date for loans to Dec. 1, 2020 and submittal dates to Jan. 25, 2021 for MBS pools and Jan. 31, 2021 for whole loans.
For mortgages meeting requirements, Fannie will impose an additional loan-level price adjustment of 5% for mortgages of first-time homebuyers and 7% for non-first-time homebuyers. Fannie will price eligible mortgages commensurate with their risk level to mitigate any potential losses.
The GSEs currently boast the lowest forbearance rate of any loan type as their share of conforming mortgages went to 3.77% as of Oct. 11.