During these challenging times, many people are facing financial difficulties. If you’re a homeowner and having trouble paying your mortgage, read on. If you’re looking for a way of delaying your mortgage payment, forbearance may be the right option for you.
Forbearance is an agreement with your mortgage servicer or lender that allows you to pause or reduce your payments for a limited period of time. Forbearance does not forgive what you owe. You’ll have to repay any missed or reduced payments in the future.
Forbearance is always an option but is garnering a lot more attention these days due to the COVID-19 pandemic. Forbearance for federally-backed mortgages was included in the recently passed Coronavirus Aid, Relief, and Economic Security (or CARES) Act. Here’s how it works: If you are experiencing financial difficulties due to the COVID-19 pandemic, you have a right to request forbearance for up to 180 days. You also have the right to request an extension for up to an additional 180 days.
To take advantage of this option, you must contact your loan servicer to request forbearance. While your regular interest will accrue, no additional fees, penalties, or interest can be added to your account. It’s important to know how you will be expected to make up these payments. Some key questions to ask your lender include:
- Will I owe the entire unpaid amount in a lump sum once the pause period has ended or at the end of the loan term?
- Can the loan term be extended so that missed payments are added to the end of the loan?
- Will my subsequent monthly payments increase for a period of time to make up the deferred amount?
Here are some specifics from the various federal programs regarding delaying your mortgage payment.
FHA. In addition to the forbearance created under the CARES Act, the FHA always has several other mortgage relief programs in place, including standard mortgage forbearance for up to six months and special forbearance for unemployment, which can last a year or more.
VA. VA lenders are helping its borrowers impacted by COVID-19 with existing mortgage relief programs such as special forbearance. The duration of this special forbearance varies based on the homeowner’s situation. See mortgage assistance information on the VA website.
Fannie Mae. Mortgage giant Fannie Mae is offering a forbearance option with a reduction or suspension of your mortgage payments for up to 12 months, offered in increments of up to six months, suspension of late fee relief during the forbearance period, and options for repayment after forbearance, such as catching up gradually or a permanent loan modification that aims to maintain or reduce your monthly payment.
Freddie Mac. Freddie Mac is currently providing mortgage forbearance for up to one year, waiving penalties and late fees, and halting foreclosures and evictions of its borrowers until at least May 17, 2020. It is also offering loan modifications that lower payments or keep payments the same after the forbearance period.
Update as of April 27, 2020: Borrowers with loans backed by Fannie Mae or Freddie Mac won’t be required to repay missed payments in a lump sump if they choose forbearance.
The Bottom Line
Our advice? While forbearance is a great option, if you’re able to keep up with your payments, keep making them. Mortgage forbearance is not the same as mortgage forgiveness; you’re just delaying your mortgage payment. Also, be advised that many scammers are making fraudulent “offers” to help you reduce or stop your mortgage payments. Ignore them and only work with your lender.
Want to talk it through? Please reach out at any time. We’re here to help.