Is mortgage forbearance an option? Here’s what to know

Experts anticipate more homeowners will seek this protection

periods and repayment options. They need to be aware of what’s being offered — specifically when the balance must be repaid and if they can manage the payments. In some cases, interest will continue to accrue on privately held loans while payments are reduced or suspended.

The CFPB and other financial regulators have encouraged financial institutions to work with borrowers facing financial difficulty because of coronavirus.

Talk to your servicer about your options or check with your state housing authority to see if there are any additional protections or aid in place to help.

Any borrower should also be clear on who is responsible for payments that might typically go to an escrow account — such as those for homeowners insurance or taxes. If not covered by the servicer, the homeowner should continue those payments.

WHAT HAPPENS WHEN FORBEARANCE ENDS?

Homeowners with federally backed loans won’t have to pay back those missed payments all at once. They can spread them out over time, tack them on to the end of the loan or make a lump sum payment at the end of their mortgage.

Fannie and Freddie announced last week that borrowers who go into forbearance and return to making normal monthly mortgage payments can opt to repay those missed payments when the home is sold or refinanced.

People with privately held loans must work out the best available option with their servicer. In some cases the loan may be extended or repayments spread over time, but some may face one large payment when the forbearance period is over.

WHAT ELSE DO I NEED TO KNOW?

While forbearance would typically hurt your credit score, the credit of homeowners who sought protection because of the pandemic is not affected.

A forbearance is certainly a better option than defaulting on a loan, which comes with significant added costs and would likely lead to foreclosure, as well as damaging a homeowner’s credit.

If you run into problems along the way, find a certified housing counselor through the Department of Housing and Urban Development. The counselors offer their services free of charge. If you run into problems with your servicer, you can file a complaint with the CFPB or reach out to your state’s attorney general for help. (AP)