There is plenty to worry about as the number of COVID-19 cases in the U.S. ratchets up, a prolonged recession becomes likelier, and more Americans’ jobs are in jeopardy. But to ease some of the pressure, many folks won’t have to fret about the immediate prospect of losing their homes.
The Federal Housing Finance Agency announced on Wednesday that Fannie Mae and Freddie Mac would suspend foreclosures and evictions for at least 60 days for all borrowers who can’t make the monthly payments on their single-family home loans. The suspension applies only to Fannie or Freddie loans, which make up about half of all residential mortgages, or 28 million borrowers.
The FHFA had previously announced that the mortgage giants would provide payment forbearance to homeowners affected by the coronavirus who are struggling to make good on their loans. The forbearance can last up to 12 months.
Fannie Mae borrowers won’t have their late payments reported to credit bureaus when they participate in a forbearance plan. They also won’t incur late fees. When the forbearance ends, borrowers will work with their mortgage servicers to come up with a plan to to reduce their payments or receive a loan modification.
Fannie and Freddie borrowers “tend to be middle-class borrowers, and many of them will be hard-pressed,” says Mark Zandi, chief economist at Moody’s Analytics. “Many of these homeowners are going to lose jobs, they’re going to lose hours, and they’re going to lose pay. So they’re going to need help quickly.”
During the Great Recession, when foreclosures were rampant, Fannie and Freddie suspended foreclosure sales from Nov. 20, 2008 to March 6, 2009.
But foreclosures had plummeted in recent years thanks to a strong economy, high home prices, and many homeowners building up equity in their properties as a result. About a third of homes are owned outright with no mortgages,
But the spread of the COVID-19 virus has since upended the economy, cratered the stock market, and led to widespread business closures and layoffs.
Suspending foreclosures is “a good policy in these uncertain times,” says Lawrence Yun, chief economist of the National Association of Realtors®. “For people who are suffering income losses, it gives them time for unemployment income to come in and the federal stimulus money to come in.”
Homeowners worried about falling behind on their payments should contact their mortgage servicers as soon as possible to make arrangements, say FHFA officials.
The policy will allow folks “to stay in their homes during this national emergency,” says FHFA Director Mark Calabria.