What To Do If Your Mortgage Forbearance Period Is Ending
The COVID-19 Pandemic has wrecked the economy and wreaked havoc on millions of American’s finances. It is estimated that 30 million people lost a job and roughly 13% of homeowners took some form of mortgage forbearance to delay their payment.
If you are one of the 3.6 million homeowners in forbearance, it is important for you to know your rights, responsibilities, and whether or not you will need an additional extension.
Understand the Type of Loan You Have
First and foremost, you need to understand what type of loan you have. Even if your mortgage is through Chase or Wells Fargo or another bank, the loan is likely held by someone else. The mortgage relief through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed by Congress is mandatory for government-backed loans, which make up 70 percent of mortgages. These include loans guaranteed by Fannie Mae, Freddie Mac, FHA, Veterans Affairs, and the U.S. Department of Agriculture. But many lenders without government-backed or government-sponsored loans are operating voluntarily under the CARES rules.
If you’re not sure who holds your mortgage, you can ask your lender or you can look it up. You can learn whether your loan is through Fannie Mae here or Freddie Mac here. If you don’t find your loan under Fannie or Freddie, you can get help here. The tips below are divided into those with government-backed loans and those without.
The initial forbearance period for government-backed loans lasts 180 days under the CARES Act. You have the right to request an additional 180 forbearance period if you still need delayed monthly payments.
It is important to note that forbearance doesn’t wipe out your monthly payments. It does give you the right to delay your payments without having to pay late fees or dings to your credit history.
It is also important to know your options for repaying the months you missed when your forbearance is over. Be leary of Lump-sum or “balloon” payments to catch up on missed payments. These won’t be required for consumers with mortgages backed by Fannie Mae, Freddie Mac, FHA, Veterans Affairs, and the U.S. Department of Agriculture. Beyond this, the CARES Act doesn’t spell out your rights on repayment, and different banks are establishing different requirements. Your preference will depend on whether you’re working again, whether your finances are stable, whether you have an emergency fund and whether you fear another layoff.
If you don’t have the money or don’t want to pay the lump sum, expect to pay it back one of two ways. You can choose to pay a small amount extra every month over the next year or add the missed payments on the back end of your loan. This can be done through a loan modification. Check with your lender to find out their requirements for repayment.
Keep an eye out for any letters by mail from your lender. Sure, you’re probably checking your mailbox with one eye closed, out of fear of yet another bill collection notice. But you want to be sure to meet any deadlines for any information or action your bank requests.