Mortgage Updates Surrounding COVID-19

Turbulence continues in the housing market as rates fluctuate and the economy reacts due to shelter-in-place orders. The last several days have produced some very significant changes in the mortgage industry. Here’s the rundown:

Minimum credit score requirements

Under normal circumstances, borrowers with a 580 credit score are in the clear for FHA and VA requirements, while a 620 will make the cut for a USDA loan. But under today’s economic conditions, especially with the job losses we’ve seen lately, many lenders and investors are choosing to raise those minimum credit score requirements in an effort to minify the risk of borrowers not being able to make their payments.

For now, the credit score requirement bump is simply a protection against default during a rough time in our economy. It’s uncertain as to how long the increased credit score requirements will last. But many of the big benefits of each loan program remain, while interest rates are still sitting at some of the lowest levels we’ve seen in a long time.

Jumbo loans and DPA programs may be suspended

Many lenders are choosing to hold off on jumbo loans and down payment assistance programs. Jumbo loans are ones that exceed 2020’s conforming limit of $510,400. Note that this does not mean you can’t buy a home with a purchase price of over $510,400 - as long as your down payment reduces the loan amount below that threshold.

Down payment assistance programs may not be available either. This includes TSAHC and TDHCA programs. There is currently no set date as to when these programs will return.

Assistance during COVID-19

For some homeowners, this may be a difficult time to keep up with mortgage payments. Fannie Mae and Freddie Mac have initiated measures to mitigate some of the financial hardship that may be experienced during the coronavirus pandemic.

Payment forbearance

There may be options in place that allow homeowners to temporarily suspend or reduce monthly mortgage payments. A forbearance is not a deferment, meaning payments cannot be skipped or added to the end of the loan. After forbearance, mortgage servicers are committed to working with customers on permanent workout options to help maintain or reduce monthly payment amounts as necessary, including loan modifications.

Payment forbearance does not mean you can:

• Move payments to the back end of your loan
• Defer payments
• Skip payments
• Waive interest

If you are in serious need of temporary mortgage payment relief, get in touch with your mortgage servicer directly to explore your options.

Credit Reporting

If you’re a homeowner using a conventional loan, Fannie Mae and Freddie Mac are requiring mortgage servicers to suspend credit bureau reporting of past-due home loan payments. If you’re at risk for missing a mortgage payment, your credit score won’t take a big hit during this exceptional time. This applies to homeowners in forbearance, using repayment plans, or using trial period plans as a result of this national emergency.

The FHA and VA programs have encouraged mortgage servicers to follow suit. As this is not required, there may be servicers who have not yet put this practice into place. Check directly with your servicer if you’re concerned about a drop in your credit score due to a late payment.

Foreclosures

Fannie Mae and Freddie Mac have set a temporary prohibition on foreclosure sales and evictions. Guidance has yet to be issued for options regarding initiation of new foreclosures. This suspension does not apply to properties that are vacant or have been abandoned.

FHA and VA also have a prohibition on the initiation of new foreclosures, completion of foreclosures in process, and evictions. The suspension of foreclosures do not apply to properties that are vacant or have been abandoned.

Need some help? Got questions?

The Fairway Servicing Team is constantly monitoring changes and is committed to keeping you updated.

• You can find your servicer’s contact information on FairwayNEXT.com
• If your loan for a new purchase or refinance has not yet been transferred to a servicer, you may contact Fairway toll-free at 1.800.201.7544 from 8:30am to 5:00pm CST, Monday - Friday. We’ll connect you with a specialist to help with assessing available payment assistance options.
• If Fairway or ServiceMac currently services your loan, may contact a Customer Experience Specialist by calling toll-free 1.877.297.5350 from 8:30am to 5:00pm CST Monday - Friday, to get connected with a specialist who will assist with the assessment of available payment assistance options.