What to know about mortgage forbearance
Families across the country are experiencing financial hardship during these uncertain times. Loss of wages, reduced hours, or unexpected unemployment has left many unable to afford their mortgage payments. Mortgage forbearance, however, may be able to help.
What is mortgage forbearance?
Mortgage forbearance is when the mortgage lender or servicer allows borrowers to reduce or pause mortgage payments for a short period of time. Forbearance does not eliminate payments; the amount of the reduced or skipped payments are due at a later date and are often added on to the end of the loan period.
Do I qualify?
Not every loan qualifies for mortgage forbearance. The following guide can help homeowners determine whether or not their loan qualifies for forbearance.
If the loan is federally backed: To be eligible for forbearance under the CARES Act, the mortgage must be federally owned or backed by a federal agency including:
- US Department of Housing and Urban Development (HUD)
- USDepartment of Agriculture
- USDA Direct
- USDA Guaranteed
- Federal Housing Administration (FHA), including reverse mortgages
- US Department of Veterans Affairs (VA)
- Fannie Mae
- Freddie Mac
If the loan is backed by Fannie Mae or Freddie Mac: Those whose loans are backed by Fannie Mae or Freddie Mac are eligible for additional protections under forbearance, including:
- Not incurring late fees
- No delinquencies reported to credit bureaus
- Suspension of foreclosure and other legal proceedings
If the loan is not federally backed: If the loan is not backed by a federal agency, homeowners should contact their servicer directly. Financial regulators have encouraged lenders to work with borrowers who are currently unable to meet their obligations due to the effects of COVID-19.
How to request forbearance
While forbearance may seem like an easy way to take a break from mortgage payments, homeowners that can afford their monthly payments should continue to pay. Many lenders are overwhelmed by borrowers requesting forbearance; avoid calling financial institutions to allow those who truly need help to receive services first.
When calling the loan servicer, be prepared to provide the loan officer with information including:
- Why you are unable to make the payment
- An estimate of how long the problem will last
- Details about income, assets, and expenses
Likewise, make sure to ask the lender questions such as:
After speaking with the loan servicer, ask for written documentation outlining the details of the agreement. Review the information; some forbearance programs require all the missed payments by a specific time, while others add missed payments to the end of the mortgage term. When income is partially or fully restored, resume making partial or full payments as soon as possible. The fewer missed payments, the less that is owed back to the loan servicer in the future.
by Author, May. 08, 2020