COVID-19 FORBEARANCE RELIEF HAS BEEN EXTENDED: What to Know and How to Catch Up When It Ends
Homeowners struggling with the aftermath and turmoil of the COVID-19 pandemic have received welcome news. The Biden Government has asked Federal agencies to extend the foreclosure moratorium and mortgage forbearance relief programs. This will allow more than 2.7 million homeowners who are currently still in forbearance to keep their payments paused for as long as 18 months. Plus, if you have still not taken advantage of forbearance you have more time to sign up.
How Forbearance Works
Mortgage forbearance does not do away with your monthly payments, it just enables you to either postpone or reduce them for a predetermined amount of time. It will also not dinge your credit score as credit bureau reporting of overdue payments is suspended.
This relief is specifically limited to homeowners who have federally backed mortgages or about 11 million US borrowers. They include:
- Federal Housing Administration (FHA Loans)
- Department of Housing and Urban Development (HUD)
- Department of Agriculture (USDA Loans)
- Department of Veterans Affairs (VA loans)
- Mortgages sold the two government entities, Freddie Mac and Fannie Mae
Some people may be in forbearance as initially borrowers’ facing hardships due to COVID-19 qualified for two 180 days relief periods in March 2020.
Some Key Takeaways
- Providing two additional three-month mortgage forbearance (total 6 months) for those who entered forbearance before June 30,2020.So, homeowners who are already in forbearance and it expires in March have till June 30 to get at least one more extension of three months (total of 15 months).
- Extending the mortgage payment forbearance enrollment timeframe for borrowers who are not at present in forbearance till June 30, 2021.
- The ban on foreclosures for homeowners has been extended to June 30, 2021.
However, if you wish to get an extension or find out if you are eligible for this relief, you should reach out to your loan server.
How To Catch Up When Forbearance Ends
Once your forbearance ends your paused payments and interest will not be forgiven. Rather you will have to catch up on them eventually.
Here are some options for catching up on your missed payments once your forbearance program is finally brought to a close.
- Repayment Plan: In this scenario, you will arrange repayment with your servicer by adding part of your balance to your regular payments. You could also pay intermittent payments over three, six, nine, or 12 months on top of your regular payments till your balance is paid off. You could work with your lender to come up with a repayment plan that is within your means.
- Extend Your Loan Term: You can tack the missed payments to the end of the loan’s existing repayment plan. For example, if you have missed six mortgage payments your loan can be extended to six months beyond the existing end date.
- Postpone Your Repayment: You might be eligible for a junior lien. This means you agree to make a lump-sum payment of the missed amount when the home is sold, refinanced, or when the mortgage term ends. According to a survey conducted by Mortgage Bankers Association, this was the most popular option.
- Apply For A Loan Modification: This helps borrowers who want to keep their homes but cannot afford mortgage payments even after their forbearance comes to an end. A Loan modification is usually a free service that reduces the interest rate, extends the length of time for repayment, or lowers monthly payments.
Homeowners who receive coronavirus hardship forbearance are not required to pay back all the missed payments in a single lump-sum once the forbearance period ends. You should discuss all the options with your lender in detail when you request forbearance in the first place. This will help you know what exactly to expect and select a repayment plan that works for your situation.
Read our blog “Struggling to Pay Your Mortgage? Know Your Options” to learn more about the options available if you cannot stay current on your mortgage.
If you have any mortgage-related questions including forbearance you can reach out to our experts at (877) 877 7575
