Servicers of Fannie Mae mortgages will now have more authority to provide forbearance on home loans where the borrowers has lost his or her job.
Both Fannie and its secondary sister, Freddie Mac, announced in 2012 that mortgage servicers could approve forbearance for borrowers who become unemployed.
Fannie provided servicers with the authority to reduce or suspend the borrower’s monthly payments for a specified period when the borrower suffers a financial hardship due to unemployment.
Originally, Fannie only allowed servicers to approve an initial forbearance term of six months.
Servicers could recommend an extension of the forbearance for another six months if the borrower remained unemployed, though Fannie had to approve the extension.
However, the Washington, D.C.-based company issued Servicing Guide Announcement SVC-2014-10 on Wednesday indicating that it would delegate to servicers the authority to extend forbearance.
The term of the extension is up to six months.
“The servicer is now authorized to approve an unemployment forbearance extension without obtaining Fannie Mae approval, if all other applicable unemployment forbearance extension eligibility requirements are met, as stated in the servicing guide,” the notice stated. “As a reminder, an extension of any unemployment forbearance must not be for a term that would cause the delinquency to exceed 12 months of the borrower’s contractual monthly mortgage loan payment, including taxes and insurance if the servicer is collecting escrows for such expenses.”
Fannie noted that loans in pools of mortgage-backed securities must be removed from the pool after six months of forbearance.
The updated policy must be implemented by Sept. 1, though servicers are encouraged to implement it immediately.
