If you have been impacted by the national COVID-19 health crisis and are having trouble paying your mortgage payment, forbearance may be an option for you.
Forbearance is offered by some lenders to borrowers who have experienced a financial hardship such as a loss of income or increased medical expenses. Eligible borrowers approved for forbearance may see reduced monthly mortgage payments or deferred payments for a short period.
However, forbearance does not mean that your unpaid mortgage payments are forgiven. You’ll have to repay missed payments sometime in the future when the forbearance plan ends, or perhaps at the end of your mortgage term.
Although many lenders have offered forbearance plans in the past, the CARES Act offers borrowers a few extra protections. The types of forbearance plans available to you will vary according to your mortgage type. For example, if you have a government-backed mortgage, you have the right to request a forbearance plan from your mortgage servicer.
Mortgages backed by the Federal government include:
- USDA/Rural Development
- Fannie Mae
- Freddie Mac
If you’re not sure what type of mortgage you have, you can contact your mortgage servicer to find out. Under the CARES Act, you have the right to request forbearance for up to 180 days if you have an eligible mortgage. If you continue to experience financial difficulties and are still unable to pay your full mortgage payment at the end of the initial forbearance plan, you have the right to request an extension for up to an additional 180 days.
You must contact your mortgage servicer to request a forbearance plan. Keep in mind that although your payments may be suspended during the forbearance period, interest will still accrue, and thus the amount you owe on your mortgage will grow.
Regardless of what type of mortgage you have, many lenders are willing to help you during these difficult times. When you reach out to your lender, be sure to ask a few critical questions about any relief options that may be offered.
Understand your forbearance plan:
- Do you need to make any payment now?
- When is your next payment due?
- What will your unpaid balance be at the end of the forbearance plan?
- When will you owe the entire outstanding amount?
- Will future monthly payments increase?
- Can your mortgage term be extended?
When you request a forbearance plan from your mortgage servicer, be prepared to answer a few questions your mortgage servicer is likely to ask:
- Why are you unable to make your mortgage payment?
- Is this a temporary hardship, or is it permanent?
- What is the current state of your financial situation: what are your household income and expense amounts, how much do you have in checking and savings accounts, etc.
- If you are an active duty service member with a recent change of orders.
Lastly, be on the lookout for scams. COVID-19 scams are increasing at a rapid pace. Every day, fraudsters and scam artists prey on unsuspecting homeowners who are experiencing financial difficulties. Don’t become a victim to their promise to help.
Be on the lookout for scams:
- Fraudulent calls, emails, text messages.
- Work only with your lender.
- Don’t pay a fee to a third party to help you with your mortgage.
Eligible borrowers will not be automatically signed up for a forbearance plan under the CARES Act. Contact your lender as soon as you think you may be unable to may your full mortgage payment. With the current state of this national pandemic, lenders may have a high volume of calls, so expect longer hold times.