On Wednesday, FHFA announced that it would allow reduced interest rates for borrowers with loans backed by the government sponsored enterprises (GSEs). Under prior regulation, only borrowers with market-to-market loan-to-value (MTMLTV) ratios of 80% or higher were eligible for the reduction, but due to the unprecedented nature of the COVID-19 pandemic, the regulator is making it available to all borrowers regardless of the LTV ratio.
FHFA is joined by other federal housing agencies currently working to avoid a wave of evictions and foreclosure as COVID-19 protections are set to expire. Loss mitigation efforts like the interest rate change seek to bolster home retention and help guide borrowers out of forbearance through reduced monthly payments. FHFA also announced on Tuesday that the GSEs would not be permitted to make a first notice of foreclosure that would be prohibited by the CFPB under the Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X Final Rule in most cases before Dec. 31, 2021.
Sandra Thompson, acting director of FHFA, stated “Allowing more families to qualify for an interest rate reduction will prevent unnecessary foreclosures, help strengthen the Enterprises’ books of business, and make sustainable homeownership a reality for more families currently living with the uncertainty of forbearance.”