Fannie Mae: Lender Letter LL-2021-07: COVID-19 Payment Deferral
Updated 6/30/21: Fannie Mae adjusted the terms for a Flex Modification with reduced eligibility criteria for COVID-19 impacted borrowers to provide an opportunity to reduce their interest rate, regardless of the mortgage loan’s mark-to-market loan-to-value ratio.
Updated 2/25/21: Fannie Mae updated COVID-19 payment deferral eligibility criteria to:
▪ Permit the mortgage loan to be less than or equal to 18 months delinquent as of the date of evaluation, and
▪ Eliminate the limit of one COVID-19 payment deferral and instead limit the COVID-19 payment deferral to a cumulative deferral of 18 months of past-due principal and interest (P&I) payments.
Updated 2/10/21: Fannie Mae updated COVID-19 payment deferral eligibility criteria to permit a mortgage loan to be less than or equal to 15 months delinquent as of the date of evaluation. Additionally, the new criteria eliminates the limit of one payment deferral and instead limits the COVID-19 payment deferral to a cumulative deferral of 15 months of past-due principal and interest payments.
NOTE: The document will now be known as LL-2021-07.
Updated 11/18/20: Fannie Mae revised Lender Letter LL-2020-07 to eliminate the requirement for reporting a delinquency status code for a COVID-19 payment deferral if the mortgage loan is brought current.
Investor Update
October 14, 2020
Source: Fannie Mae
With Lender Letter LL-2020-05, Payment Deferral, we announced payment deferral, a new retention workout option jointly
developed with Freddie Mac at the direction of the Federal Housing Finance Agency (FHFA). That workout option was created to assist borrowers who became delinquent due to a short-term hardship that has since been resolved.
In response to the COVID-19 pandemic and servicer feedback, we are introducing COVID-19 payment deferral, a new workout
option specifically designed to help borrowers impacted by a hardship related to COVID-19 return their mortgage to a current
status after up to 12 months of missed payments. Designed to be simple and efficient for both servicers and borrowers, this
solution is for borrowers who have completed a COVID-19 related forbearance plan, or who have a confirmed but resolved COVID19 financial hardship. COVID-19 payment deferral was jointly developed with Freddie Mac at the direction of FHFA. COVID-19 payment deferral offers servicers:
▪ A solution that is simple to explain to borrowers, as the amount of their delinquency moves into a non-interest bearing
balance, due and payable at maturity of the mortgage loan or earlier payoff; and all other terms of the mortgage remain
unchanged.
▪ No trial period, resulting in fewer borrower touchpoints than required for modifications.
▪ An efficient automated process through Servicing Management Default Underwriter™ for evaluation and decisioning case
submissions.
While COVID-19 payment deferral is similar to the recently announced payment deferral, we have made several
enhancements to assist borrowers who have a COVID-19 related hardship. Key differences include:
▪ The borrower has experienced a financial hardship resulting from COVID-19 that impacted their ability to make their
monthly mortgage loan payment, which has been resolved.
▪ The mortgage loan must have been current or less than two months delinquent as of Mar. 1, 2020, the effective date of the
National Emergency declaration related to COVID-19.
▪ The mortgage loan must be equal to or greater than one month delinquent but less than or equal to 12 months delinquent
as of the date of evaluation.
▪ Certain eligibility criteria are not applicable, such as time from mortgage loan origination and rolling delinquency
parameters.
▪ The servicer must defer the delinquent principal and interest payments (P&I) together with any allowable servicing
advances paid to third parties as a result of the delinquency into the non-interest bearing balance.
Updates to Lender Letter on Oct. 14, 2020
▪ Clarifying when a borrower who accepts a COVID-19 payment deferral remains eligible for any future HAMP “pay for
performance” incentives.
▪ Clarifying that a mortgage loan with an origination date after Mar. 1, 2020, the effective date of the National Emergency
Declaration, does not exclude it from COVID-19 payment deferral eligibility.
