The Federal Housing Finance Agency's recent grace period extension for multi-family loans bought by state-sponsored companies Fannie Mae and Freddie Mac went into effect on Friday with no set end date.
As long as homeowners with properties financed by Fannie and Freddie have agreed to offer certain protection to tenants in need, borrowers with pandemic hardship can extend payments on their loans indefinitely, according to the FHFA statement.
This is one of the first steps the FHFA and GSEs took to make a pandemic-related measure permanent. Previously, the use of multi-family indulgence was rather limited and was mostly used to deal with natural disasters.
"As the financial and economic uncertainties associated with COVID-19 persist, Fannie Mae is committed to continuing to offer forbearance options to multi-family borrowers," said Michele Evans, executive vice president at Fannie Mae, in a press release.
The tenant protection, which is granted as a condition of forbearance, must be given to the tenants in writing and contain an agreement not to evacuate solely because of non-payment. In the event of non-payment, no reminder fees or contractual penalties can be levied. In addition, the repayment must be flexible, which is not necessarily a flat rate.
Multi-family loan deferral rates have been extremely low and deferral loan take-up has slowed.
"Very few loans initiated a new forbearance arrangement, and no new forbearance arrangements were initiated in August, a first for the program," noted Freddie Mac in a separate press release Friday.
Master Servicers report that Freddie Mac's securitisations as of Aug. 25, 304 deferred loans totaling $ 2.3 billion after credit count.
As of June 30, Fannie Mae's Forbearance Multi-Family UPB percentage was 1.2%, the GSE filed with the Securities and Exchange Commission in the second quarter of the 10th quarter.
Fannie's figure reflects the total number of forbidden loans since the pandemic began, excluding those that were liquidated before the end of the period but including those that are in foreclosure. Freddie Mac's number reflects active loans deferred.