GSE Disaster Response to the COVID-19 National Emergency
Updated: Aug 13, 2020
The GSEs have released an expanded payment deferral option that is just for the COVID-19 National Emergency.
GSE – Fannie Mae and Freddie Mac
Any borrower who had difficulty making their mortgage payment because of the business shutdowns and stay at home orders during the National Emergency that was declared on 3/13/2020, is entitled to Forbearance Relief under the CARES Act. This relief allowed for a forbearance of up to 6 mortgage payments with an extension of up to another 6 payments.
Once the forbearance period ends or the borrower is no longer in need of this relief, there needed to be a method to easily and efficiently bring the loan current.
The GSE's expanded their new payment deferral program to assist these borrowers. The program allows the borrower to defer making the forborne payments until the loan matures or otherwise is paid in full. It creates a balloon payment for the total of the past-due P&I and out of pocket escrow advances, along with servicing advances paid to third parties (if allowed by state law) at maturity. To qualify for the deferral, the borrower must have been paid through 2/1/2020 (or later) as of the date the national emergency was declared, the borrower states they can afford to resume making their normal monthly payment and the deferral can be for no more than a total of 12 monthly payments.
For those borrowers who become more than 12 months delinquent or who have suffered a continued loss of income, the Flex modification for disasters can also be offered.
WaterfallCalc.com performs all of these calculations and compliance checks. To process a GSE Covid-19 Resolution option perform the following steps:
Processing an GSE Disaster:
Begin entering the data as usual within the Loss Mitigation Entry module of WaterfallCalc.com (WFC).
~At the top of the first page, Key Loan Details tab:
Offer No Doc FB is defaulted to “NO” should remain “NO”
Has Loan been affected by federally declared disaster & loan was less than 30 days delinquent at time of disaster?” defaulted to “NO” Change this to “YES”.
The RFD must either be “FEMA Disaster” or “Pandemic”.
If the borrower can resume making their monthly payment, then “Resolved” should be “YES”. If they have experienced a permanent loss of income, then it should be “NO”.
Default tab, page 2: At the bottom of the 2nd page:
Last Paid Installment Date: To qualify for the streamlined options, the borrower must have been paid through 2/1/2020 (or later)
Borrower Financial Info tab, page 3:
Income information is not required but optional to enter.
Leave “Recv’d Complete LM Pkg” to default the of “NO”
Selecting this option will allow you to move through the system without requiring fields that are not required to create the streamlined resolution options.
Escrow Analysis tab, page 4.
Enter escrow as “Annual” disbursement amounts (i.e. even if the borrower pays their taxes quarterly, in even amounts every 3 months, it is important to enter the annual sum of all four of those payments).
We recommend using the Suggested Shortage Spread listed however the user has the ability to adjust based on the loan’s individual circumstances. The GSE’s permit the servicer to spread any projected shortage from 12 to 60 months. Some borrowers need to spread large shortages over longer periods of time.
When entering the Disaster Information on the Disaster tab, you will enter the disaster name EXACTLY as follows: COVID-19, Otherwise your calculations may be incorrect. (Include the hyphen and no extra spaces)
Date Declared: 3/13/2020. (FHA had indicated 3/1/2020 in their announcements – either option will work)
Current at Declaration: Should be YES; In order to say 'Yes' to this field for COVID-19, the loan must have been paid thru 2/1/2020, or later, otherwise it should be “NO”. If the response is no, the borrower can be reviewed only with a full loss mitigation application received.
Has the borrower paid or will they pay one full contractual payment this month? If the borrower has already begun making their payment or they have reinstated an auto payment option, then the response should be “YES”, otherwise leave the default to “NO”. This will include the expected payment in the reinstatement calculations.
Hardship resolved, borrower can continue making payments, but can't reinstate? Should be “YES”
GSE Disaster- Payment Deferral Reporting:
GSE Deferral Report: Exclusively designed to be an attachment to your cover letter, it includes all the necessary terms and acknowledges acceptance of the deferral if that was the option calculated.
Reporting to Fannie Mae:
There is no need to re-enter this information into SMDU. Once WaterfallCalc.com calculates the appropriate response, you may enter the resolution into HSSN, until the end of this year (12/31/2020). WaterfallCalc.com is working a full integration of our system with SMDU, but that has been delayed and expected later this fall.