January 19th, 2021: On December 21, 2020, Congress struck a deal on a nearly $900 billion coronavirus relief bill for a new round of support. President Trump signed the bill on December 27, 2020. Read a short summary of the bill here. Congress has passed three relief packages to respond to COVID-19. Bank regulators have also adopted many new policies in light of needs resulting from the COVID-19 crisis. See below for those provisions and actions that are designed to address homebuying, homeowner/landlord, and personal finance issues:
-I’m worried about my credit score. What should I do if a miss a few payments due to the crisis?
The CARES Act implemented provisions to protect credit scores from January 30, 2020 through 120 days after enactment of the national emergency. If customers are making payments, or made arrangement to not make payments, customers must be reported as being current. If a customer was delinquent, but was able to make an arrangement with the servicer and is now current, then their account must be reported as current. The important thing is to reach out to your servicer, bank or credit card company if you are having trouble making your payments.
-My lender indicated that the IRS has shut down and they cannot process loans without an income verification document that only the IRS can generate. Is this true?
Luckily, there is precedence for an IRS shutdown based on several recent government shutdowns. Some lenders may require this document, but Fannie Mae, Freddie Mac, and FHA do not so this is a lender overlay.
Fannie and Freddie both issued guidance in January 2019 following the previous government shutdown to note that they do not require the 4506T IRS tax transcripts at closing. Rather, they only require a request for the document be signed by the borrower. However, they do require the tax transcript be submitted as part of their post-closing review. NAR has asked both Fannie and Freddie to clarify and publish updated guidance given the unique challenges posed by COVID-19.
Furthermore, the IRS recalled critical staff to process tax transcript request on April 27th. The tax transcript issues appears to have eased.
-I’ve been told that I won’t be able to refinance or get a new mortgage if I take forbearance or even look into it or that I would have to wait for 12 to 18 months. Is that true?
No. If your mortgage is backed by Fannie Mae or Freddie Mac and you take forbearance you can refinance or get a new mortgage immediately, if you are current on your payments. If you took forbearance and stopped making payments, but are on a repayment plan and make 3 consecutive payments on that plan, you are eligible for credit to refinance or purchase another home.
The FHA has not clarified its position on this issue, but has indicated that it will come to a decision in the near future. Private lenders may or may not allow a homeowner who took forbearance to get mortgage credit in the future. You should check with your lender.
While Fannie Mae and Freddie Mac do allow for owners who took forbearance to get credit, a lender can place their own restrictions and choose not to refinance the loan or provide a mortgage. In such a case, the consumer can work with a different lender.
-I have heard that the FHA, Fannie Mae, and Freddie Mac have raised rates and fees on borrowers with lower credit scores or smaller down payments?
These claims are not true. To date, neither the FHA nor Fannie Mae and Freddie Mac have made any changes to credit scoring or down payment requirements. The only change they have made for borrowers is to allow MORE flexibility in how a lender can verify employment.
However, some individual lenders are adding their own, higher standards on these products. The rational is that the cost of servicing these loans has surged due to the widespread forbearance that is taxing servicers’ resources. Under forbearance, the servicer must continue to pay PITI to the investor, but the sheer volume of forbearance to deal with the COVID-19 response is unprecedented. Since lower-credit borrowers are more likely to take forbearance and servicing is harder to get, lenders are less willing to extend this credit regardless of the FHA or GSEs’ standards.
NAR sent a letter to the Treasury, Federal Reserve, and the Federal Housing Finance Agency requesting help for servicers dealing with the unprecedented demands on funds due to broad forbearance requests. Improving servicing is one key to improving the flow of funds to borrowers and homeowners.
Ginnie Mae has announced the creation of a new program, that should help alleviate lender concerns and improve access to mortgage financing. The program will provide cover for lenders by advancing them the money so they can make the required pass-through payments to investors during the forbearance period.
-In my area, appraisers have stopped appraising; Now what?
FHFA has directed Fannie Mae and Freddie Mac to utilize appraisal alternatives to reduce the need for appraisers to conduct interior property inspections for eligible mortgages through January 31, 2021. Fannie Mae and Freddie Mac have provided detailed appraisal alternative guidance, including directions on using desktop appraisals and exterior-inspection only appraisals with specific language that appraisers are to use in their reports.
FHA and the Rural Housing Service of the USDA are allowing exterior-only appraisals. The VA is allowing exterior-only appraisals with enhanced assignment conditions, or in limited instances a desktop appraisal to complete the VA loan requirements in light of the COVID-19 crisis.
-What are the federal requirements related to an eviction moratorium?
The CARES Act requires all housing providers with a federally-touched mortgage (including FHA, VA, RHS, Fannie Mae, Freddie Mac), as well as federally-assisted properties (FHA, Freddie Mac, Fannie Mae, RHS, Low-income Housing Tax Credits, etc) to provide 120-days moratorium on evictions, along with 30-days notice before an eviction filing.
-Are rental housing providers eligible for mortgage forbearance?
Multi-family (properties with more than 5 units) housing providers with federally connected –backed mortgages (mortgages insured by federal agencies or held or securitized by Fannie Mae or Freddie Mac) are eligible for up to 90 days forbearance (in an initial 30 day period, one-month increments, with two 30-day extensions upon request). However, if you accept the forbearance, you are also subject to the prohibition on eviction for the length of the forbearance. Multifamily owners with federally-backed mortgages are also subject to a separate 120-day eviction moratorium (plus 30 days’ notice) that expires on March 31, 2021.
Single-family rental providers with federally backed mortgages are eligible for the 180-day forbearance (with another 180 days extension) provided to single-family mortgage holders. They are also required to place a moratorium on evictions for 120 days, up until March 31, 2021 (plus 30 days’ notice). However, they are not required to extend that prohibition throughout their forbearance.
For all your Real Estate needs, Talk To Tammy – 636.931.9100