Thanks to the pandemic, many homeowners were unable to keep up with their mortgage payments, and as of September 2020, 3.5 million Americans have a home loan in forbearance under the CARES Act stimulus bill. Eventually, these homeowners will have to catch up with all of those paused payments, and refinancing could help lessen the burden.
Due to COVID-19, refinance eligibility rules have temporarily changed for government-backed mortgages. To alleviate some of the confusion, Fannie Mae and Freddie Mac released an FAQ section on their website, that will be updated as new information becomes available. Here are some of the important takeaways from the site:
Eligibility for Refinancing
To be eligible for refinancing your entire loan amount, your loan can no longer be in forbearance. If you have negotiated a forbearance repayment plan with your lender and have made three or more consecutive and on-time payments, you’ll be considered eligible. In this case, the entirety of your loan can be refinanced, including the outstanding amounts under your repayment plan.
Borrowers are also eligible if they have accepted a loss mitigation solution like a deferment or modification. All of those outstanding payments will also be included in your refinancing.
Those who have been making partial payments during forbearance, but have not accepted a repayment plan or loss mitigation solution, will not be considered “current” on their loan, making them ineligible for refinancing.
So, if you’ve been paying what you can during your forbearance that’s great–you’ll have less to catch up on. However, if you want to refinance (and you should, because mortgage rates are historically low right now) make sure to work out your repayment plan or accept a loss mitigation solution with your lender so you can do so.
Are You Eligible For Refinancing?
If you’ve been in forbearance and still aren’t sure if you’re eligible to refinance, check out the full COVID-19 FAQs on Fannie and Freddie’s website. You can also you can email us or gives us a call at (323) 412-9060 and we can discuss your unique situation and figure out your options together.