Multifamily Investor Communication Regarding COVID-19
As the situation around COVID-19 continues to evolve, we recognize that these are unprecedented times. First and foremost, our thoughts are with the families that are impacted by the virus. At Fannie Mae, we remain focused on our mission to provide liquidity to the market. In maintaining our commitment to transparency, this announcement shares responses to frequently asked questions related to impacts from COVID-19 and applications to our Multifamily MBS and CRT programs.
While we are unable to speak to specific actions that states and municipalities may take in response to this situation, Fannie Mae offers temporary payment forbearance, if requested by a lender, for loans backed by properties impacted by the economic effects of the virus. Any such requests from lenders would be evaluated on a case-by-case basis.
Delegated Underwriting and Servicing (DUS®) and Guaranteed Multifamily Structure (GeMS™)
For MBS, Fannie Mae pays principal and interest due on the MBS under its guarantee. For loans that are granted payment forbearance, Fannie Mae will continue to advance principal and interest payments on the MBS for at least 120 days and may choose to advance for up to two years before being required to buy the mortgage loan out of the MBS trust (causing a prepayment in full of the MBS without prepayment premium). In the event the forbearance period ends while the loan still backs an MBS and the borrower is able to repay amounts of principal and/or interest that were deferred during the forbearance period, the MBS will remain outstanding and no early prepayment of the MBS will occur as a result of the forbearance.
As we continue to monitor the situation, we may provide additional forbearance details in DUS Disclose®.
Credit Risk Transfer (CRT) Investors
Multifamily Credit Insurance Risk Transfer (MCIRT™) and Multifamily Connecticut Avenue Securities (MCAS™)
CRT investors can see both unpaid principal balances (UPBs) – actual UPB with the unpaid principal from the forbearance and scheduled UPB (showing any scheduled amortization payments) – in the periodic reporting in Multifamily Loan Performance Data. If the loan defaulted and the actual UPB was higher than it otherwise would have been due to the forbearance, there may be an increased risk of loss on the loan.
Interest payments to MCAS investors and premium payments to MCIRT investors are not dependent upon interest collections on the Reference Obligations. As a result, reduced interest collections due to temporary payment forbearance will not affect these payments. If the borrower repays the deferred interest prior to maturity or the forbearance balance is added to the final balloon payment and the UPB is paid in full at maturity, there would be no losses on the loan.
For any loan that indicates an increased risk of default, whether as a result of temporary forbearance or otherwise, we would take proactive loss mitigation measures to reduce the likelihood and severity of any losses. Additional resources on our credit risk management practices are available on our website.
For further questions, please contact the Fannie Mae Investor Help Line at 1-800-232-6643 or send us an e-mail.