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FHFA Limits Servicer Obligations for Loans in Forbearance
Tuesday, April 21, 2020
The Federal Housing Finance Agency (FHFA) has
clarified the obligations of Fannie Mae and Freddie Mac's (the GSEs') servicers to investors during the COVID-19 crisis. Servicers have been told to
extend forbearance to homeowners who are experiencing financial distress as the
result of the pandemic and, as of last Friday, approximately 5 percent of GSE loans
had entered forbearance agreements.
Servicers are contractually required to forward monthly principal and
interest payments to mortgage-backed security (MBS) investors even when homeowners
are not making payments on the underlying loans. While servicers maintain
reserves for this purpose, it has been feared that the expected high utilization
of forbearances may become an unmanageable burden, especially for smaller companies.
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