The guidelines are effective immediately and considered permanent until further notice for FHA and VA.
CARES Act Forbearances in Refinance Mortgage Payment Histories
The following guidelines apply for FHA, VA, and USDA refinance applications when evaluating the impact of a CARES Act or other type of mortgage payment forbearance appearing on the borrower’s mortgage payment history and its impact for meeting product eligibility requirements. The guidelines are effective immediately and considered permanent until further notice for FHA and VA. The USDA guidelines are effective for applications dated on or before November 30, 2020.
FHA Transactions
All Refinances
- A borrower who was granted a forbearance and continues to make payments as agreed under the terms of original note is not considered delinquent or late and will be treated as if not in forbearance status, provided that the forbearance plan is terminated prior to closing.
- Payments not made during a forbearance granted by a servicer that do not require payments to be made during the forbearance period (such as the CARES Act) are not considered delinquent for the purpose of credit underwriting. Forbearance plans that require partial payments are not considered delinquent as long as payments are made in accordance with the terms of the forbearance plan.
- Borrowers cannot remain in active mortgage payment forbearance plans for mortgages secured by their other real estate owned after the closing of the FHA refinance mortgage. Evidence of forbearance terminations are required.
- Always apply due diligence when reviewing the borrower’s credit report, servicer payment histories, CAIVRS and payoff statements for evidence of prior forbearance or modification events.
- When a mortgage payment history indicates missed payments under a forbearance or modification plan within 12 months of case number assignment, the following documentation is required:
- a copy of the forbearance or modification agreement; and
- evidence of the payment amount and date of payments during the agreement term, if applicable.
A copy of the forbearance plan is not required if the forbearance was due to a COVID-19 impact. It is also important to identify between a forbearance and modification event since each event has a different “wait-time” after occurrence for refinance eligibility. See Product Profile for details.
Individual Refinance Type Requirements
The following requirements must be met for each refinance type as outlined below. Loans with TOTAL Mortgage Scorecard Accept/Approve findings not meeting the payment history requirements below would be subject to a manual downgrade, which NewRez currently does not permit.
Non-Credit Qualifying Streamline Refinance
- A borrower who was granted a forbearance must have:
- exited from the forbearance plan; and
- made at least three (3) consecutive mortgage payments within the month due since exiting the forbearance plan as of the case assignment date.
- Deferred mortgage payments (P&I, escrow shortages, late charges) reported on the payoff statement may be included in the new base loan amount for owner-occupied properties, provided that the maximum base loan amount does not exceed the original principal balance (including financed UFMIP) of the existing mortgage. The maximum base loan amount for investment or non-owner-occupied properties remains at the lesser of outstanding principal balance only or original principal balance minus any refund of UFMIP.
- On the date of Case Number assignment:
- the borrower must have made at least six (6) payments on the mortgage that is being refinanced;
- Deferred or skipped mortgage payments due to forbearance are not counted toward the above requirements for seasoning and minimum number of payments to be made.
- For FHA mortgages that have been modified the borrower must have made at least six (6) payments under the modification agreement.
- at least six (6) full months must have passed since the first payment due date of the mortgage that is being refinanced;
- at least 210 days must have elapsed since the closing date of the mortgage that is being refinanced; and
- if the borrower assumed the mortgage that is being refinanced, six (6) payments must have been made since the time of assumption.
- the borrower must have made at least six (6) payments on the mortgage that is being refinanced;
- The standard Streamline mortgage payment history requirements for months 7-to-12, if applicable, prior to case number assignment still apply.
Credit Qualifying Streamline Refinance
- A borrower who is still in forbearance at the time of case number assignment or has made less than three (3) consecutive monthly mortgage payments within the month due since exiting from the forbearance is eligible for a Credit Qualifying Streamline Refinance provided that the borrower:
- made all mortgage payments within the month due for the six (6) months prior to forbearance; and
- had no more than one 30-day late payment within the 7-12 months prior to forbearance.
- Deferred mortgage payments (P&I, escrow shortages, late charges) reported on the payoff statement may be included in the new base loan amount for owner-occupied properties, provided that the maximum base loan amount does not exceed the original principal balance (including financed UFMIP) of the existing mortgage. The maximum base loan amount for investment or non-owner occupied properties remains at the lesser of outstanding principal balance only or original principal balance minus any refund of UFMIP.
- On the date of Case Number assignment:
- the borrower must have made at least six (6) payments on the mortgage that is being refinanced;
- Deferred or skipped mortgage payments due to forbearance are not counted toward the above requirements for seasoning and minimum number of payments required to be made.
- for FHA mortgages that have been modified, the borrower must have made at least six (6) payments under the modification agreement and at least six (6) full months must have passed since the first payment due date of the mortgage that is being refinanced;
- at least 210 days must have elapsed since the closing date of the mortgage that is being refinanced; and
- if the borrower assumed the mortgage that is being refinanced, six (6) payments must have been made since the time of assumption.
- the borrower must have made at least six (6) payments on the mortgage that is being refinanced;
Cash-out Refinance
- A borrower who was granted a forbearance plan must have:
- exited from the forbearance plan on the subject property; and
- made at least 12 consecutive mortgage payments within the month due on the mortgage since exiting the forbearance.
- For a mortgage that has been modified, the payment history since the modification agreement must be used in determining compliance with the 12-month paid as agreed payment history requirement.
Simple Refinance and Rate and Term Refinance
- A borrower who was granted a forbearance plan must have:
- exited from the forbearance plan on the subject property; and
- made at least three (3) consecutive mortgage payments within the month due on the mortgage since exiting from the forbearance plan.
- TOTAL Mortgage Scorecard Accept/Approve findings for Simple Refinances and Rate and Term Refinances must be downgraded to a manual underwrite, and are ineligible per NewRez policy, if during the 12 months prior to case number assignment, any mortgage lien secured by subject property or other real estate owned by borrower reflects:
- 3x30, or 1x60 plus 1x30, or 1x90 late payments; or
- the borrower has made less than three (3) consecutive payments since exiting from a forbearance plan.
- For a mortgage that has been modified, the payment history since the modification agreement must be used in determining payment history requirements. When a mortgage has been modified, the borrower must have made at least six (6) payments under the modification agreement to be eligible for a Simple Refinance or Rate and Term Refinance.
VA Transactions
All Refinances
- A Veteran who was granted a forbearance and continues to make payments as agreed under the terms of original note is not considered delinquent or late and will be treated as if not in forbearance status, provided that the forbearance plan is terminated prior to closing.
- Refinance of mortgages that are in a current forbearance status, where mortgage payments are not being made, including mortgages under the CARES Act forbearance protection program, are not eligible. The forbearance plan must be completed and all mortgages that are to be refinanced must be current at the time of loan application. In addition, NewRez requires the following:
- One (1) payment must have been made in the month due after the date of forbearance completion and prior to loan application.
- Missed mortgage payments under the protection of a forbearance plan (such as the CARES Act) are not considered delinquent for the purpose of credit underwriting and evaluating compliance with NewRez mortgage payment history requirements.
- For IRRRL and Cash-out Refinances, a minimum of six (6) consecutive monthly mortgage payments paid in the month due and a passing of 210 days after first payment date of the loan being refinanced must have occurred as of the closing of the new loan.
- Any interruption in the monthly payments before the initial six (6) months of seasoning will require the Veteran to reset the minimum loan seasoning time frame. Six (6) consecutive monthly mortgage payments paid within the month due is required after the last missed payment to meet the statutory seasoning requirement. For example, if the Veteran, under a forbearance plan, missed making the sixth payment of the mortgage that was due in August 2020, but was then able to exit from the forbearance and resume regularly scheduled payment in September, 2020, the Veteran would have to wait until March 2021 to refinance after making six (6) consecutive mortgage payments post forbearance. If the mortgage seasoning requirement had already been met prior to the forbearance, a reset would not be needed.
- Always apply due diligence when reviewing the credit report, servicer payment histories, CAIVRS and payoff statements for evidence of prior forbearance or modification events in the Veteran’s mortgage payment history.
IRRRL
- Any deferred mortgage payments or late charges covered under a CARES Act forbearance plan may be included in the maximum loan amount calculation and entered as part of Line 1 of the IRRRL Refinancing Worksheet (26-8923).
USDA Transactions
All Refinances (USDA has issued the following under temporary guidance in effect until November 30,2020)
- Refinance of mortgages that are in a current forbearance status, including mortgages under a CARES Act forbearance plan are not eligible.
- A borrower who was granted a mortgage payment forbearance and continues to make payments as agreed under the terms of original note is not considered delinquent or late and will be treated as if not in forbearance status, provided that the forbearance plan is terminated prior to closing.
Non‐Streamlined and Streamlined Refinances
- A borrower who has deferred mortgage payments as result of a recent forbearance:
- must have closed at least 12 months prior to the application date;
- resumed making payments for a period of at least three (3) months; and
- have a total 180‐day period of satisfactory payments, excluding the time the loan was in forbearance.
Streamlined‐assist Refinances
- For Streamlined‐assist refinance transactions, the borrower must have resumed making payments for a period of at least three (3) months and not have any defaults in the previous 12‐month period, excluding the time the loan was in forbearance.