Attention Lenders:
This communication addresses NJHMFA’s policy regarding the purchase of forborne loans as well as how loans that enter forbearance soon after purchase will be handled.
Post-Purchase Forbearance
Loans entering forbearance after the Agency’s purchase of a loan will not automatically result in a repurchase demand. A Quality Control review of purchased loan files will be completed to ensure all standard guidelines plus all GSE and Agency COVID19 implemented overlays were followed appropriately. Participating lenders may be required to repurchase non-performing loans if Agency guidelines or first mortgage investor/insurer rules were not followed properly.
Purchase of Files in Forbearance Homeward Bound (MBS):
Current Ginnie Mae securitization rules permit initial securitization of forborne loans if at the time of pooling, no more than one payment is due and payable. Given this guidance,
the Agency
WILL
purchase loans that have already entered forbearance prior to purchase, provided that the loans are purchased by the third business day of the month of this one scheduled monthly payment. For example, loans that close in April typically have the first payment due in June. In this example, if the loan is fully purchased by the third business day in June, NJHMFA will buy this loan in forbearance. Similarly, for the rare occurrence that a loan may be nearing a subsequent monthly payment prior to purchase and enters forbearance at that time, the loan may be sold to NJHMFA if the purchase is fully completed by third business day of the month that first payment is due. Loans that are not able to be purchased by the third business day of the month of the payment due as described above will not be able to be purchased while the loan is in forbearance, as our monthly Ginnie Mae pooling timeline will not allow NJHMFA to securitize the loans prior to the second monthly payment being due and payable. For loans that are not purchased in time for the eligible pooling with Ginnie Mae, the Agency expects to purchase these loans from participating lenders after the forbearance period has ended, and repayment, partial claim or modification has been put in place, provided all agency and investor/insurer guidelines were followed appropriately. Forbearance in and of itself will not constitute a default for purposes of early payment default.
Special Notice Regarding Early Payment Default Period on Loans Purchased in Forbearance:
For loans that are purchased by NJHMFA from a participating lender while the loan is already in forbearance, the Early Payment Default (EPD) period will begin at conclusion of the forbearance period. For example, a loan purchased in June that has a three month forbearance from June through August will have the six month EPD period begin in September and go through February of the following year. The Participating Lender agrees to this revised term of the EPD period by the act of sale of a loan in forbearance to the New Jersey Housing and Mortgage Finance Agency.
First-Time Homebuyer (Mortgage Revenue Bond)
: Guidance is being finalized by NJHMFA for loans in forbearance. In the meantime, please hold any of these loans actively in forbearance. NJHMFA aims to provide updated direction with one week’s time.
Police & Fire (PFRS)
: Guidance is being finalized by NJHMFA for loans in forbearance. In the meantime, please hold any of these loans actively in forbearance. NJHMFA aims to provide updated direction with one week’s time.
Post-Closing Best Practices
In order to reduce the possibility of loans being denied for purchase due to forbearance, all lenders should work to reduce the amount of time from loan closing to loan purchase by NJHMFA.
- First, it is imperative that loans are submitted as soon after closing as possible. The current average receipt time is eleven (11) days after closing, but there are lenders accomplishing this task in five (5) days.
- Additionally, please be responsive to condition requests and be sure to email the assigned purchaser when you have forwarded the required conditions for review. We will be working closely with your teams to purchase loans quickly and efficiently.
- Finally, lenders that can accomplish these milestones quickly should be able to get loans in purchasable condition prior to the first payment due date, which eliminates the need to reconcile payment history prior to NJHMFA completing the loan purchase.
The Agency performs regular Quality Control review of purchased loan files to ensure all GSE and Agency COVID19 implemented overlays were followed appropriately. Participating lenders may be required to repurchase non-performing loans if Agency guidelines or first mortgage investor/insurer rules were not followed properly.
