What You Need to Know About Mortgage Forbearance

What You Need to Know About Mortgage Forbearance Facebook image

What You Need to Know About Mortgage Forbearance featured imageThe coronavirus disease 2019 (COVID-19) has affected our world on unprecedented levels. And homeowners are no exception. So, in 2020, Congress passed the Coronavirus, Aid, Relief, and Economic Security Act, or CARES Act. As part of the CARES Act, if you cannot make payments on your home, you can find relief with mortgage forbearance.

What Is Mortgage Forbearance?

Mortgage forbearance is an agreement between a mortgage servicer (the company that manages your loan) and a delinquent borrower. The borrower is typically struggling to make payments. The lender agrees to allow you to pause or reduce mortgage payments for a limited time, providing temporary respite.

Who Is Eligible for Forbearance?

You qualify to request forbearance if:

  • You have experienced financial hardship on account of the coronavirus pandemic, and
  • You have a mortgage that is federally backed, which includes HUD, FHA, VA, USDA, Fannie Mae, and Freddie Mac loans

Note- If your mortgage isn’t federally backed, servicers may have comparable options. You should discuss payment relief options with the company that manages your loan.

What Documentation Is Required?

There is no documentation required proving hardship beyond a statement that you’re suffering from such a hardship. If you can, however, continue to make mortgage payments, you should do so.

How Long Does Forbearance Last?

If you’re a homeowner who has a federally backed loan, you have the right to request and receive a forbearance period for up to 180 days. In addition, you can request an extension of forbearance for up to another 180 days, totaling 360 days. However, be advised that other limitations can apply. Also:

  • If you have a Fannie Mae or Freddie Mac mortgage, you may ask for up to two more three-month extensions, up to a total of 18 months of forbearance
    Note – Your initial forbearance documentation must be received by February 28, 2021, to qualify.
  • If you have a HUD, FHA, USDA, or VA-backed mortgage, you may ask for up to two more three-month extensions, up to a total of 18 months of forbearance
    Note – Your initial forbearance documentation must be received by June 30, 2020, to qualify.

When Is the Deadline for Applying?

  • If you have a federally-backed loan, or if you’re the owner of a multi-family rental with a loan backed by the government, you can apply through September 30, 2021
  • There is no current deadline to request initial forbearance for a home subsidized by Fannie Mae or Freddie Mac

Requesting Forbearance

Simply contact your mortgage servicer, requesting a forbearance.

Future Payments, Loan Interest, Foreclosure, and Terms

  • It doesn’t reduce or erase the amount that you owe on your home
  • After the established period, the borrower must resume total payments, plus additional amounts to be current (e.g., principal and interest, insurance, and taxes)
  • Under this legislation, you won’t be reported to credit bureaus or charged late fees
  • If you’re in forbearance, you may be able to avoid foreclosure
  • Agreement terms vary depending on lender and situationNote – both the Consolidated Appropriations Act (CAA) of 2021 and the American Rescue Plan of 2021 include additional funding for housing relief.

While in Mortgage Forbearance, Can I File for Bankruptcy?

The CARES Act supplemented new language to the bankruptcy code and has given individuals struggling with their mortgages more options. Bankruptcy courts are now permitted to discharge the debt if the filer has entered into forbearance or has an adjusted mortgage loan. If your debt burden is still too high, you can consider filing for Chapter 13 bankruptcy.

Note – if Congress doesn’t renew these provisions, these changes may no longer be in place.

The CARES Act has helped provide relief for individuals struggling to make their mortgage payments. So from job loss and illness to other COVID-19-related circumstances, if you’re unable to make payments on your home, make your appointment with Mummert Law today! We are available for a consultation, at which time we’ll sit down together, evaluate your position, and determine the best way to proceed. So don’t go it alone when it comes to finding relief during this unprecedented time.