Three consecutive on-time monthly payments after exit.
That’s the floor for a non-cash-out rate-and-term refinance after forbearance across Fannie Mae, Freddie Mac, FHA, and VA non-IRRRL loans in 2026. Borrowers who reinstated in full at exit (paid every missed payment back in a single sum) are generally eligible without waiting. But cash-out is a separate track with a longer window: FHA cash-out requires 12 months of post-exit payments, and Fannie Mae’s note-date seasoning rule adds its own layer.
The Short Answer
For a no-cash-out rate-and-term after a CARES Act successor workout:
- Conventional (Fannie Mae / Freddie Mac): three consecutive timely monthly payments as of the new note date, per Fannie Mae’s Lender Letter LL-2021-03 lineage. Lump-sum catch-up payments don’t count toward the three.
- FHA non-streamline rate-and-term: three consecutive on-time payments after exit. Any outstanding FHA partial-claim junior lien is paid off or subordinated at closing.
- VA non-IRRRL rate-and-term: three post-exit payments is the working pattern. A VA partial claim, where present, follows the 2026 VA procedure.
- USDA Streamlined-Assist: 12 months of on-time payments prior to application. Full-doc USDA rate-and-term follows the current HB-1-3555 Chapter 6 rule.
Forbearance Is Not a Modification
Forbearance is a pause on payments. A modification is a permanent change to the note terms. The post-exit seasoning math looks similar for GSE rate-and-term, but the paperwork trail, the junior-lien exposure, and the credit-report treatment all differ in ways that matter at closing. Readers arriving from a loan-modification search should instead read the MRB guide on rate-and-term refinance after loan modification seasoning.
CARES Act Successor Plans in 2026
The CARES Act Section 4022 right to request forbearance on federally backed loans lapsed with the national emergency. Loans entering hardship in 2026 are routed into post-CARES workouts that inherited the CARES reporting framework.
Fannie Mae and Freddie Mac COVID-19 Payment Deferral moves missed payments into a non-interest-bearing balance due at payoff, sale, or maturity. It’s the GSE default when a borrower can resume contractual payments but can’t immediately repay the arrears. Freddie Mac Flex Modification and Fannie Mae Flex Mod are the broader GSE workouts for borrowers who can’t resume the original contractual payment.
FHA COVID-19 Recovery Modification and Standalone Partial Claim are HUD’s parallel options. The Standalone Partial Claim places the arrears into a zero-interest subordinate lien on the home, due at refinance, sale, or final payoff. HUD Mortgagee Letter 2025-06 addressed the extension of these options, and a later Mortgagee Letter adjusted the sunset calendar. Worth knowing: confirm current program status with HUD’s Mortgagee Letters index or an FHA-approved lender before relying on a program end date.
VA Partial Claim was reinstated in 2026 under the VA Servicing Purchase (VASP) framework. Servicers were given until November 28, 2026 to complete implementation. The partial-claim amount covers up to 25% of the loan balance, or up to 30% when a prior COVID-era partial claim was used. And a borrower who previously used a COVID-era VA partial claim may be barred from a second one.
USDA Rural Development routes hardship borrowers through the Special Relief Alternative and directs qualifying refinances to Streamlined-Assist or full-doc rate-and-term per HB-1-3555.
The Three Consecutive On-Time Payments Rule
Each payment must be the full scheduled monthly payment on the loan in its post-workout state, landing on the contractual due date or inside the grace period. Three payments run over three calendar months, not three payments stacked into one.
So what happens when a borrower wires every missed payment in one lump sum at exit? That lump-sum reinstatement doesn’t count toward the three post-exit payments. Why not? Because a reinstated borrower is already treated as current and generally eligible to refinance without the wait. The three-payment rule applies only to borrowers who routed arrears into a deferral, partial claim, or modification.
Because timing is everything here, the clock starts on the first scheduled contractual payment after the workout is in place – not the date the forbearance technically ended.
The Partial-Claim Junior Lien at Refinance
The FHA Standalone Partial Claim lien carries no interest, no monthly payment, and comes due when the first mortgage is paid off or the home sells.
At a non-streamline rate-and-term, the partial-claim lien has to clear. Two paths:
- Payoff at closing. The servicer issues a partial-claim payoff statement. The new loan pays off the first mortgage and the partial-claim lien, within the new loan’s LTV limit. The lien is released and the title is clean.
- Subordination. The new lender asks the partial-claim lien to stay behind the new first mortgage. HUD allows partial-claim subordination in certain refinances; the approval sits with the servicer and the new lender.
Here’s where it gets tricky. When a rate-and-term refinance pays off a subordinate lien that wasn’t purchase-money, Fannie Mae Selling Guide B2-1.3-02 and Freddie Mac Guide 4301.4 set specific conditions for treating the transaction as a limited cash-out (rate-and-term) rather than a true cash-out. The partial claim cured arrears rather than financing the home, so the classification turns on how the closed-end-subordinate rules apply (and the interpretation isn’t always consistent across lenders). Ask the lender to pull the Selling Guide citation on the specific transaction before locking a rate.
The FHA cash-back cap on a rate-and-term refinance is $500 at closing. Anything above that converts the transaction to an FHA cash-out refinance with a 12-month post-exit seasoning requirement.
VA partial-claim payoff at refinance follows the 2026 VA procedure, with servicer collection timelines aligned to the November 28, 2026 implementation deadline. See also the sibling guide on the FHA Streamline refinance after a HUD partial claim.
Credit Report Impact
Federally backed loans in a CARES-based forbearance were required to be reported as current while the agreement was in effect. And that protection flowed into most post-CARES successor plans as long as the borrower stayed in compliance with the written workout.
FICO’s own simulations put the typical score impact of a six-month forbearance at about 3.7 points, and a twelve-month forbearance at roughly 7.5 points – a working range of 3 to 8 points. But claims circulating online that a forbearance drops a FICO score by 200 or more points contradict FICO’s own published data.
A forbearance granted outside the CARES framework (a private hardship agreement granted in 2024 or 2026, say) is reported under Metro 2 standards. These can show a “deferred payment” status or an “AW” comment code. Some lenders treat the post-CARES private status more cautiously than a clean CARES-era record.
Program Walkthroughs
Conventional. Three consecutive on-time post-exit payments on the final workout terms. Immediate eligibility if reinstated in full. Classification of a partial-claim payoff in a rate-and-term transaction has to be confirmed by the lender against Selling Guide B2-1.3-02 and Freddie Guide 4301.4. See the conventional rate-and-term refinance parent page.
FHA non-streamline after a partial claim. Three on-time post-exit payments on the loan with the partial claim in place. The partial-claim lien gets paid off or subordinated at closing. Cash back is capped at $500; above that it’s a cash-out refinance with a 12-month seasoning requirement.
VA non-IRRRL. Three post-exit payments is the working pattern. The November 28, 2026 servicer-implementation deadline may affect how quickly a partial-claim payoff can be processed at closing. IRRRL after a partial claim follows a different seasoning rule (210-day loan seasoning plus recoupment) and is covered on the MRB IRRRL cluster pages.
USDA full-doc. Post-forbearance eligibility is set in HB-1-3555 Chapter 6. Streamlined-Assist requires 12 months of on-time payments prior to application. Full-doc rate-and-term may follow different documentation rules; confirm with the USDA-approved lender.
Lender Overlays
The agency floor is three on-time payments. But the lender ceiling can be six or twelve. Overlays show up more often on partial-claim files than on straight reinstatements (which makes sense when you think about the extra classification risk a lender carries on a file with a HUD junior lien). So a denial from one lender at month four doesn’t close the market. Price three or more lenders when the agency rule is met but the first answer came back on an overlay – a seasoned loan officer will often know which lenders in a given week are running a strict six-payment overlay and which aren’t, before the application package is even submitted for underwriting review.
Documents to Gather
A refinance officer will typically ask for the forbearance agreement and the servicer’s exit letter, along with the full payment history from exit through the application date, as well as the partial-claim payoff statement (FHA) or the deferral balance statement (GSE), plus a current mortgage statement showing no delinquency flag, and a hardship explanation letter if the lender requests one.
When a Rate-and-Term Refinance Is Not the Move
If the existing loan is FHA and the goal is a lower rate with minimal documentation, an FHA Streamline after a HUD partial claim may fit better. The Streamline follows HUD’s 210-day plus six-payment seasoning rule, measured from the closing date of the existing FHA loan, and sidesteps the Selling Guide classification question. If the goal is permanent payment relief on a loan the borrower can’t resume at contractual terms, a loan modification is a separate path with its own refinance seasoning rule. And if the three-payment count isn’t yet complete, waiting out the seasoning is cheaper than stretching for an overlay-friendly lender at a worse rate. Run the cost math against the refinance break-even point before deciding.
FAQ
How soon can I refinance after exiting forbearance? Three consecutive on-time payments after exit for Conventional, FHA non-streamline, and VA non-IRRRL rate-and-term. Immediate if the arrears were paid back in full at exit. Twelve months for most cash-out paths.
Does forbearance show up on my credit report? CARES-era forbearances were reported as current while the agreement held. Post-CARES private forbearances follow Metro 2 reporting, which may show a deferred or AW status.
How many FICO points does forbearance drop my score? Per FICO’s own simulations, roughly 3 to 8 points depending on duration. The “200-point drop” claim circulating online isn’t consistent with FICO’s published data.
Can I refinance with an FHA partial-claim second lien? Yes. The lien is paid off or subordinated at closing. Classification of the payoff as rate-and-term versus cash-out under Fannie Mae and Freddie Mac rules depends on the Selling Guide sections for closed-end subordinate liens.
Do lenders have overlays on the agency three-payment rule? Yes. Six-payment and twelve-payment overlays are common, particularly on partial-claim files.
Does a lump-sum reinstatement count as one of the three payments? No. A full reinstatement puts the loan back to current status and generally allows an immediate refinance. The three-payment rule applies to borrowers who routed arrears into a deferral, partial claim, or modification.
Requirements vary by lender and servicer. This piece is general information and doesn’t constitute individualized advice. Confirm current post-forbearance eligibility with an agency-approved lender and your loan servicer before filing a refinance application.
