Fannie, Freddie will buy loans in forbearance

Fannie Mae (OTCQB:FNMA +2.9%) and Freddie Mac (OTCQB:FMCC +3.8%) can now buy some single-family mortgages in forbearance that meet certain eligibility criteria, a move intended to “provide liquidity to mortgage markets and allow originators to keep lending,” the Federal Housing Finance Agency said.

Some borrowers have requested payment forbearance soon after closing on their mortgages and before the lender could deliver the loan to Fannie or Freddie.

Under GSE requirements, mortgage loans either in forbearance or delinquent are ineligible for GSEs to acquire.

Today’s action lifts that restriction for a limited period of time and only for mortgages meeting certain eligibility criteria.

Those loans will also be priced to mitigate the increased risk of loss to Fannie and Freddie.

Under the CARES Act, borrowers of government-backed loans can delay monthly payments for up to a year.

With more than 3M loans already in the forbearance program, the two GSEs wouldn’t buy recently closed loans that soon entered forbearance.

That tightened credit for all borrowers, as lenders were afraid that new mortgages will go into forbearance before they can deliver them to Fannie or Freddie.

https://seekingalpha.com/news/3563163-fannie-freddie-will-buy-loans-in-forbearance