Announcement 2020-072 - Conforming Forbearance Frequently Asked Questions (FAQ)

Q1.

For purposes of determining eligibility, is a borrower considered current if they have been making partial payments during forbearance?

A1.

No. To be considered current for purposes of the requirements in NewRez Announcement 2020-069, the borrower must have made all mortgage payments due in the month prior to the Note date of the new transaction by no later than the last business day of that month.

Q2.

Can missed payments during forbearance on an existing mortgage be refinanced into the new loan amount?

A2.

No. Missed payments during a forbearance may not be refinanced into the new loan amount in a limited cash-out or cash-out refinance transaction.

However, if a borrower has initiated a repayment plan or accepted a loss mitigation solution (e.g., payment deferral, modification, etc.) and has made three (3) timely payments, the entire existing loan amount, including any remaining outstanding payments under a repayment plan or deferred amounts, may be refinanced into the new loan.

Q3.

If a borrower’s existing mortgage is in forbearance but the borrower has continued to make payments to keep the loan current, does the borrower need to exit forbearance to be eligible for a new purchase or refinance transaction?

A3.

No. If the borrower continued to make payments and is current on all existing mortgages there is no requirement to exit forbearance.

Q4.

What responsibility does the lender have if the borrower entered forbearance on an existing mortgage after applying for a new loan?

A4.

Follow the guidance in NewRez Announcement 2020-069 to determine whether the existing mortgage is current or if the borrower has entered into and made three (3) full timely payments under a loss mitigation solution as of the Note date of the new mortgage.

Q5.

Does the additional due diligence required to confirm a borrower’s mortgage is current apply to all mortgages or only mortgage in forbearance?

A5.

The requirement to confirm that mortgages are current and do not have unresolved missed payments applies to every loan on which the borrower is obligated.

Q6.

If the borrower has entered into a repayment plan to resolve missing payments during a forbearance, must it be completed before they are eligible for a new purchase or refinance transaction?

A6.

No. If the borrower has entered into a repayment plan to resolve missed payments, the borrower is eligible for a new purchase or refinance transaction after making three (3) timely payments. Alternatively, if the repayment plan is completed in fewer than three (3) payments, then the borrower is eligible upon completion.

Q7.

What is a reinstatement of a mortgage?

A7.

A mortgage is considered reinstated if the borrower has paid all missed payments and any associated fees or other expenses in a lump sum payment in order to return the mortgage to a current status under the terms of the original note.

Q8.

What eligible sources of funds may be used to reinstate a mortgage with missed payments?

A8.

When a lump sum payment was made to reinstate a mortgage on or after the loan application date for the new transaction, the source of funds must be documented in accordance with eligible sources of funds. Any source of funds eligible for down payment and closing costs may be used for reinstatement, provided the source is properly documented. If the mortgage was reinstated before the application date of the new mortgage, verification of source of funds is not required.

Q9.

If the borrower missed one payment and brings it current in the following month, does the borrower have to make three (3) timely, consecutive payments?

A9.

No. See Question 7 and Question 8 for reinstatement

Q10.

For loss mitigation solutions other than repayment, deferral, or modification, what is meant by “full payments” in accordance with the program?

A10.

If another type of loss mitigation solution has been agreed to by the servicer and the borrower to resolve the missed payments, three “full payments” must be made in an amount no less than the required payment due under the terms of the Note, or any other agreement that permanently alters the payment amount, such as a Loan Modification agreement.

Q11.

What if a borrower completes a non-retention loss mitigation solution such as a Mortgage Release (deed-in-lieu of foreclosure) or short sale?

A11.

In these cases, the borrower must continue to meet the requirements for Significant Derogatory Credit Events – Waiting Periods and Re-establishing Credit.

Q12.

When a borrower refinances after a payment deferral, is the new loan considered a cash-out refinance or a limited cash-out refinance? 

A12.

When a borrower refinances a loan that has a payment deferral and the amount of the deferred payments is included in the new loan, the new loan is eligible as a limited cash-out if it otherwise meets all of the requirements for a limited cash-out. See Question 2. Funds applied to pay off the prior loan, including the deferred portion, are not considered cash out.

Q13.

If the borrower has entered a repayment plan or other loss mitigation solution described in NewRez Announcement 2020-069, must the required three (3) timely payments be consecutive?

A13.

Yes. Regardless of the loss mitigation solution, the borrower must make three (3) consecutive payments to be eligible for the new transaction. If a borrower misses one (1) or more of the three (3) required payments, the loan is not eligible, and the borrower should contact their mortgage servicer to discuss an appropriate loss mitigation solution.

Q14.

Can I still rely on a DU Approve/Eligible or LPA Accept recommendation?

A14.

Yes. However, then you must comply with the additional due diligence requirements outlined in NewRez Announcement 2020-069 to determine if all mortgages are current and that any missed payments have been resolved. These additional eligibility requirements are currently not automated in DU or LPA and must be manually applied.

Q15.

If the borrower is on a repayment plan on another mortgage, does the higher payment amount need to be used in qualifying?

A15.

Yes. If the borrower is on a repayment plan temporarily requiring higher payments to repay missed amounts, the PITIA under the terms of the repayment plan must be used in qualifying. You must ensure that the requirements in NewRez Announcement 2020-069 are met and that the borrower has made three (3) timely, consecutive payments under the repayment plan agreement to be eligible for a new purchase or refinance transaction.

Q16.

Do the temporary eligibility requirements for purchase and refinance transactions in NewRez Announcement 2020-069 apply to mortgages secured by a property that will be sold prior to the note date of the new transaction?

A16.

No, as long evidence is provided to document that the property was sold and the mortgage was paid off prior to the note date of the new transaction, the additional eligibility requirements in NewRez Announcement 2020-069 are not applicable.

Q17.

Is forbearance considered an “other loss mitigation solution” not specifically listed in the table in NewRez Announcement 2020-069?

A17.

No. If a borrower is obligated on a mortgage that is in forbearance, but the borrower has continued to make payments and the mortgage is current, the new mortgage is eligible.

If the borrower is obligated on a mortgage that is in forbearance and the mortgage is not current, the new mortgage is not eligible unless the missed payments on the existing mortgage are resolved by meeting the applicable additional eligibility requirements in NewRez Announcement 2020-069.

Q18.

Can the three (3) consecutive payments be made in one lump sum?

A18.

Three (3) consecutive, timely payments must be made. One lump sum will not meet the requirement of three (3) payments made.