COVID-19 Mortgage Forbearance: What To Know Before You Delay Payment

Millions of individuals and families across the country are facing financial hardships during the coronavirus crisis. The Coronavirus Aid, Relief, and Economic Security Act, commonly referred to as the CARES Act, permits forbearance requests of three to twelve months on government-related loans without penalty. This plan is to prevent foreclosures and the principal and interest will need to be repaid, no late fees should be added. Below is a guide to COVID-19 Mortgage Forbearance to assist your clients.
COVID-19 Mortgage Forbearance: What To Know Before You Delay Payment
If your ability to repay your mortgage is directly impacted by the COVID-19 and your loan is owned by either Fannie Mae or Freddie Mac, you are eligible to delay your monthly mortgage payments for a temporary period. If you don’t have a federally backed mortgage, you still may have relief options but will need to contact your bank directly to ask about available hardship options. Additionally, Veterans who have questions regarding their home loans can contact the VA‘s home loan program toll-free number, 877-827-3702, to speak with a loan technician.
Mortgage Forbearance is Not Automatic. If payment relief is needed, you must contact your servicer BEFORE you stop making payments.
The first step to requesting mortgage forbearance is to go to your online mortgage site. Due to the high volume of requests and the inability for servicers to speak individually with clients, most servicers have online forbearance request applications in place. Follow the prompts asking if you need mortgage assistance due to the financial hardships caused by COVID-19. In most cases, the system will automatically approve you for an initial 90-day period.
After the 90-day forbearance period, when the deferred payments are due, your servicer will request financial documentation from you to decide which repayment program meets your qualifications or if you qualify for an extension.
Each servicer will have different repayment options in place after the 90-day period. Some may include the following:
  1. All deferred payments are due in one lump sum.
  2. Repayment in additional monthly payments.
  3. Repayment through loan modification.
  4. Balance due upon sale or refinance of the home.
Unfortunately, the homeowner will not know what the repayment options will look like until after the initial 90-day forbearance period ends. Therefore, it is extremely important to exhaust any alternatives before you apply for mortgage forbearance. If you don’t absolutely need to defer payments, don’t, because it could affect your ability to borrow money in the future.
Make partial payments. If you are able to make a partial payment and your servicer does not accept those, start a special account and save it monthly so you can use what you save to pay down the balance of the amount needed when the forbearance period ends.
Review your credit reports. It’s a good idea to routinely check your credit report in order to make sure there are no errors or inaccuracies and to verify that your lender is indeed continuing to report your account as current.
Pay attention to your monthly mortgage statement. Continue monitoring your monthly mortgage statements to make sure you don’t see any errors.
Please reach out to us with any questions, we are here to help!

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