Landlords who enter into a new leniency agreement with Freddie Mac, expanded or amended, are now required to notify tenants of all tenant protections related to the leniency contract within 14 days of the contract`s approval. In addition, Freddie Mac Multifamily will soon be launching upgrades to its online credit search tool so that tenants can search for a zip code to determine if their property has a mortgage purchased or securitized by Freddie Mac and therefore they are eligible for certain protections. Both measures are in line with an announcement by the Federal Housing Finance Agency regarding both Freddie Mac and Fannie Mae. If you suffer from COVID-19 Innotation, Freddie Mac can offer you up to 12 months of indulgence. Other key features that have similar relationships to default risk and leniency risk are borrowers` FICO scores and DTI ratios. Chart 4 shows how leniency rates decrease when borrower FICO values increase over the three periods, but less sharply during the COVID-19 period. During the COVID-19 period, the interest rate is multiplied by 5.6, the interest rate of borrowers in the highest category (800) (2.0%) lowest category (<620) with 11.1%. A mortgage leniency agreement is not a long-term solution for delinquent borrowers. Rather, it is aimed at borrowers who have temporary financial problems caused by unforeseen problems such as temporary unemployment or health problems. Borrowers with more fundamental financial problems – such as choosing a variable rate mortgage, where the interest rate has been reduced to a level that makes monthly payments prohibitive – are usually led to seek other remedies. While a mortgage leniency agreement offers short-term facilities for borrowers, a credit modification contract is a permanent solution for prohibitive monthly payments. With a credit change, the lender can work with the borrower to do certain things – for example, lower the interest rate.
B, switch from a variable interest rate to a fixed rate or extend the term of the loan – to reduce the borrower`s monthly payments. 10 McManus and Yannopoulos (2020) show that leniency rates increase with monthly payment, even after checking the LTV ratio, FICO score, DTI ratio, geography and other variables often used in mortgage angelism. We see three fundamental facts about leniency rates during these periods. First, the leniency rates in the covid-19 crisis are similar to those of the storm period of 2017, but much higher than during the reference period8.