Freddie Mac issued Bulletin 2020-28: Eligible Disasters and Other Servicing Guidance Related to COVID-19 (Bulletin). Per the Bulletin, the definition of “Eligible Disaster” is expanded to include any mortgaged premises that has incurred an insured loss. Previously, an “Eligible Disaster” was limited to counties or municipalities declared major disaster areas by the President of the United States. The Bulletin also removed the requirement to suspend credit reporting for borrowers impacted by an “Eligible Disaster”. In addition, the Bulletin introduced Disaster Payment Deferral, a new loss mitigation solution to assist borrowers impacted by an “Eligible Disaster”. Disaster Payment Deferral allows borrowers to be brought current by deferring delinquent amounts to create a non-interest bearing balance that will become due at maturity, payoff or upon transfer or sale. All other terms of the mortgage will remain unchanged.
Furthermore, the Bulletin provided servicing updates and clarifications related to:
- Servicer incentives for Extend Modification, and Capitalization and Extension Modification;
- Insurance loss proceeds disbursements to borrowers impacted by a COVID-19 related hardship; and
- Escrow shortages identified as part of a COVID-19 Payment Deferral or a Disaster Payment Deferral.
The updates related to Disaster Payment Deferral are effective October 1, 2020, however, servicers are encouraged to implement the changes as soon as possible. All other updates are effective immediately.
