The following temporary updates are effective for loan applications on or after June 2, 2020 and remain in effect until further notice.
The following temporary updates are effective for loan applications on or after June 2, 2020 and remain in effect until further notice.
On May 19, 2020, Fannie Mae issued updated Lender Letter LL-2020-03 and Freddie Mac issued Bulletin 2020-17 detailing temporary guidance related to purchase and refinance eligibility for borrowers with existing mortgage(s) who may have been impacted by the COVID-19 pandemic.
- The NewRez requirement for a borrower with a forbearance less than 30 days from the application date is being removed.
- A borrower’s credit report must be reviewed to determine the status of all mortgage loans. In addition to reviewing the credit report, it is required that additional due diligence for each mortgage loan on which the borrower(s) is obligated, including co-signed mortgage loans and mortgage loans not related to the subject transaction, to determine whether the payments are current as of the Note date of the new transaction.
- “Current” is defined as the borrower(s) having made all mortgage loan payments due in the month prior to the Note date of the new loan transaction by no later than the last business day of the month.
- Acceptable documentation to satisfy the additional due diligence requirements include any of the following:
- a loan payment history from the servicer or third-party verification service
- a payoff statement (for mortgages being refinanced)
- the latest mortgage account statement from the borrower
Eligibility Requirements
Once the status of all mortgages have been confirmed for which the borrower is obligated, regardless of the AUS Findings, the table on the following page details the eligibility requirements and use of proceeds based on the status of each existing mortgage as of the Note date of the subject transaction:
|
If any existing mortgage… |
Eligibility requirements |
Use of proceeds if the subject loan is a no cash-out or cash out refinance |
|
Is current as of the Note date (i.e., the borrower made all mortgage payments due in the month prior to the Note date no later than the last Business Day of that month) and not in a Repayment Plan, Loan Modification Trial Period Plan, Payment Deferral, or subject to another loss mitigation program |
No additional eligibility requirements |
Follow standard guideline requirements |
|
Is not current as of the Note date (as defined above) OR is in a Repayment Plan, Loan Modification Trial Period Plan or Payment Deferral |
The new mortgage is ineligible unless the amounts outstanding on any existing mortgage are resolved by meeting the applicable additional eligibility requirements below |
NA |
|
Was fully reinstated on or after the Application Received Date but prior to the Note date |
The source of funds used for reinstatement must be from an eligible source in accordance with standard guideline requirements and documented. |
Proceeds from the transaction may not be used to reinstate the mortgage being refinanced or any other mortgage |
|
Additional Eligibility Requirements |
||
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Is subject to a Repayment Plan |
The borrower must either: i. Have successfully completed the repayment plan, OR ii. Be performing under the plan (i.e., has not missed any payments due under the plan) and must have made at least three consecutive payments |
In connection with the mortgage being refinanced, proceeds may be used to pay off the remaining payments under the repayment plan |
|
Is subject to a Payment Deferral |
The borrower must have made at least three consecutive timely payments following the approval of the payment deferral agreement |
In connection with the mortgage being refinanced, proceeds may be used to pay off the deferred amount under the Payment Deferral |
|
Is subject to a Modification Trial Period Plan |
The borrower must have successfully completed the Trial Period Plan |
In connection with the mortgage being refinanced, proceeds may be used to pay off the modified mortgage |
|
Is subject to a Loss Mitigation Program not mentioned above |
The borrower must either: i. Have successfully completed the loss mitigation program, OR ii. Be performing under the program (i.e. has not missed any payments due under the program) and must have made at least three consecutive full monthly payments |
In connection with the Mortgage being refinanced, proceeds may be used to pay off the remaining payments under the program |