If the economic impact of the coronavirus has left you unable to pay your mortgage, you may be eligible for forbearance that could temporarily halt or reduce your payments. When you contact your lender or loan servicer, talk about options available to you and make sure you understand when and how you would be expected to make up missed payments.
Who is Eligible for Mortgage Forbearance?
The Coronavirus Aid, Relief, and Economic Security Act lets borrowers with federally backed mortgages request forbearance if they are experiencing a financial hardship due to COVID-19. Homeowners with federally backed mortgages may be eligible for 180 days of forbearance and possibly a 180-day extension after that. If a borrower requests hardship forbearance, the lender is required to offer it.
If you aren’t sure if you have a federally backed mortgage, look at your most recent loan statement to find out. You can also check on Fannie Mae’s and Freddie Mac’s websites.
Contact your loan servicer to explain your circumstances and request forbearance. Gather information you will need to answer questions about your income, your assets and other expenses besides your mortgage.
How Could Forbearance Affect Your Mortgage Payments?
The CARES Act requires lenders to offer borrowers with federally backed mortgages forbearance, but the law isn’t clear on what will happen when the forbearance period is over. Lenders and loan servicers have been adopting their own policies, which vary widely.
Some lenders will require borrowers who request forbearance to repay the amount that was deferred in a lump sum once the forbearance period ends. For many borrowers, that could be difficult or impossible.
In other cases, lenders will allow borrowers to skip or reduce their mortgage payments, then make up the missed amount gradually by making larger payments over a period of time. Some mortgage lenders will tack on the missed payments to the end of the repayment period, thus extending the term of the loan.
Other Options to Consider if the CARES Act Doesn’t Apply to Your Mortgage
If you don’t have a federally backed mortgage, you may still be able to get assistance. Some state governments have implemented their own policies to help homeowners struggling to keep up with their mortgage payments. Research any programs available where you live.
Lenders are also offering their own programs. Depending on your lender, you might be able to make no payments, or to make smaller payments, and repay the missed amount later, either by making larger payments or by extending the length of the repayment period.
Make Sure You Understand the Terms of an Agreement
Governments and lenders are offering options to assist homeowners struggling due to COVID-19, but the variety of programs with different terms have created confusion among borrowers. If you need to reduce or delay your mortgage payments, make sure you understand when and how you would be expected to make up skipped payments and get the details in writing.