The federal housing administration on Thursday set guidelines on how previous forbearance – including forbearance due to coronavirus-related difficulties – will affect borrowers' eligibility for new single-family mortgages.
The guidelines are similar to those set up by the Federal Housing Agency to regulate loans in the government-sponsored corporate market.
The FHA may allow borrowers who have previously been forbidden and abandoned to receive disbursement refinancing, but only after they have made timely monthly payments for at least 12 consecutive months.
Previously lenient mortgage borrowers must make timely payments for at least three consecutive months before they are eligible for a new purchase loan or FHA-insured interest and term insurance.
Homeowners who have given up their forbearance may be eligible for a credit-qualifying rationalization refinance after at least two payments.
However, if borrowers have a modified FHA loan, they may not be eligible for refi rationalization until six payments have been made according to the terms of their modifications.
If borrowers were lenient but continued to make regular payments, they might be able to get a new loan.
The proportion of federally insured extended leniency loans under the coronavirus bailout package passed earlier this year is relatively high at more than 11%, but has declined, according to Black Knight.
GSE loans, by comparison, have a 5% forbearance rate, and the total forbearance rate for loans is 7%.
Under the provisions of the CARES Act, borrowers on government loans were given the right to seek and receive forbearance if they had coronavirus-related difficulties for six months. You can also request an extension of six months.
More than 2 million forbearance plans expire in September. In total, more than 3.7 million borrowers are indulgent. That number represents a decline of more than 22% from the forbearance peak of over 4.7 million at the end of May.