Loans in indulgence that can now be refinanced – why you need to act fast

New rules shorten the waiting time for refi and get lower prices after indulgence. (iStock)

Borrowers who recently took advantage of indulgence plans will not be penalized when it comes to getting a better interest rate or even buying a new home.

If you took one severity due to the coronavirus crisis and suspended your mortgage payments, you are still entitled to refinance your mortgage this year, according to a recent announcement from the Federal Housing Finance Agency (FHFA).

Here’s everything you need to know about refinancing your mortgage loan (while mortgage rates are at record highs).

New rules allow borrowers in indulgence to refinance

While indulgence is typically a thing on your credit and reduces the chances of refinancing or buying anytime soon, new rules give borrowers some relief and allow them to refinance earlier with a shorter (or no) waiting period, as long as certain conditions are met. Instead of the required 12 months of timely payments once the compliance period expires, just make timely payments for three consecutive months to be entitled to a refinancing. Refinancing rates for mortgages have recently reached record lows, so you need to act fast.

To understand how much you can save on monthly mortgage payments by refinancing now, you need to smash the numbers and Compare prices using Credible’s free online tool. Within minutes you can see what more lenders are offering.


Making payments on time is enough to signal to your lender that your financial situation was a temporary setback and that you are able to keep up with your mortgage payments after indulgence. With as much confusion about indulgence as too late, the new interim policy was introduced to clarify what happens when your indulgence period ends.

Some borrowers enrolled in indulgence due to COVID-19 related challenges, but settles the remaining current on their repayment. Lenders believe it should not have an effect on their ability to qualify for a refinance or new home purchase. Another plus, though not required: If you pay the full amount missed under indulgence right after reintroducing your mortgage, there is no waiting period to refinance.

The new policy applies to mortgages backed by Fannie Mae and Freddie Mac. Loan applications dated June 2, 2020 or later are eligible, but the policy does not apply to refinancing loans with high value loans. The mortgage giants noted that they are not considering payments that have been missed under COVID-related indulgence that have been resolved to be historical violations.

Why refinance after indulgence

A refinancing has been one of the ways that borrowers have used to save money under coronavirus. That means paying off your original home loan and replacing it by creating another with a much better interest rate. The process corresponds to your first mortgage in terms of the necessary documentation and approval process.

Interest rates set another record low with the 30-year fixed rate falling as low as 3.37 percent. These super low rates have to be music to your ears if you want to refinance because it means more money in your pocket. Use Credible to see how much money you can save by refinancing today.


By refinancing your mortgage, you get lower monthly payments and your loan is paid off much faster. If you have one mortgages, a refinancing allows you to switch to a fixed interest rate so you can lock in your lower interest rate for the duration of the loan. This alleviates having to worry about an interest rate increase.

Regulators will continue to monitor the impact of coronavirus and update their tolerance and refinancing policies as needed.

Compare prices

Be sure and compare mortgage refinancing rates from different lenders. Many borrowers make the mistake of not doing enough research and going with the first lender they see. This mistake can potentially cost you thousands of dollars a year.

Look at online tools like Credible for an easy way to compare refinancing rates on mortgages from a number of lenders at the same time and even get pre-qualified. You can do this without affecting your credit score.


If you’re worried about your credit score or are not sure if refinancing is a good idea right now, do not just go for what you may have heard in passing. Take the time to find out what is fact versus fiction when it comes to mortgages and refinancing.

Bottom line

With COVID-19 making it difficult for homeowners to maintain their mortgage payments, many were enrolled in indulgence programs. In fact, a June 1st report from the Mortgage Bankers Association noted that just over 4.2 million homeowners are now on indulgence plans. The total number of loans now in indulgence grew to 8.46 percent.

Meanwhile, data from Black Knight Financial showed that 3.6 million homeowners were overdue on their mortgages at the end of April, representing the largest number since January 2015.


This goal is to ensure that borrowers are not penalized for setbacks and “give homeowners access to record low mortgage rates and keep the mortgage market as efficient as possible,” explained Mark Calabria, director of FHFA.

So if you have seen these interest rates fall and you are in forgivability, be sure and keep an eye on your mortgage payments when you resume making payments.

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