Fannie, Freddie extend purchases of mortgages in forbearance

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The Federal Housing Finance Agency has extended Fannie Mae and Freddie Mac’s temporary ability to buy loans in forbearance to Dec. 31.

There have been several extensions of the policy since it was put into place in April as a way to sustain originations amid a wave of forbearance allocated to borrowers with government-related loans by the CARES Act. The new delivery deadline date for the loans is Feb. 28, 2021.

Lower prices paid for such purchases remain for the time being, but some consultants think the Biden administration may be open to taking measures to improve pricing.

While a relatively small number of loans go into forbearance in the period after closing but before delivery to the GSEs, it’s a circumstance that can be quite costly for lenders. It’s also particularly burdensome for smaller players with fewer financial resources.

The FHFA also has extended to year-end several processing flexibilities aimed at reducing risks associated with the pandemic amid a resurgence in U.S. infections.

Forbearance rates for the government-sponsored enterprises’ mortgages have been low relative to other loan types but the dollar volume of loans affected is higher, and there remains concern that there could be another uptick due to the second wave of infections.

The share of GSE loans in forbearance was 3.5% in Black Knight’s latest weekly snapshot of its daily forbearance tracking data. In comparison, 9.1% of loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs were in forbearance.

The unpaid principal balance of GSE loans in forbearance is $208 billion, compared to $190 billion for FHA and VA loans. There were 990,000 loans in forbearance at the GSEs and nearly 1.1 million FHA and VA loans in forbearance recorded in Black Knight’s latest report.

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GSEs Fannie Mae Freddie Mac Secondary market Capital markets Distressed Originations CARES Act Black Knight