What you need to know about mortgage forbearance
The COVID-19 pandemic has caused economic turmoil in every facet of American life, not the least of which is the ability to make monthly mortgage payments.
With unemployment rates in the millions and rising, the government recognized a huge sector of the population will struggle to pay their mortgages immediately.
That’s why Congress approved the Coronavirus Aid, Relief and Economic Security Act, sweeping legislation that, among other protections, places a moratorium on foreclosures and gives homeowners the right to forbearance if they experience hardship due to COVID-19.
Let me be clear up front: If you can pay your mortgage, you should. Choose forbearance out of necessity rather than a convenient way to pause your payments.
Before we dive into the nuances of forbearance, let’s define the term. In short, forbearance means you pause or reduce your mortgage payment for a limited period of time. You will have to repay the missed payments. Forbearance does not equal forgiveness.
You are eligible for forbearance if your mortgage is federally owned or backed by one of the federal agencies, which includes Housing and Urban Development (FHA mortgages), United States Department of Agriculture (USDA), Veteran Affairs (VA), Fannie Mae and Freddie Mac (conventional loans). If your mortgage is not owned or backed by one of those entities, your servicer may still be able to help. You will need to contact your loan servicer (e.g: your bank) directly with any questions.
Every loan servicer has its own rules and guidelines. For example, homeowners may have to pay a lump sum at the end of the forbearance period. It’s critical you read the fine print and obtain everything in writing so there are no misunderstandings.
The Consumer Financial Protection Bureau has written a terrific guide I encourage you to review. You will find the information at consumerfinance.gov.
The CFPB does warn it may take a while to speak with a loan servicer on the phone. Loan servicers are experiencing a high call volume and may also be impacted by the pandemic. This will come as no surprise to any of us who have tried to call other tech support lines in the past month (think airlines).
When you reach a person from your loan servicer, the CFPB recommends you ask the following questions:
What options are available to help me temporarily reduce or suspend my payments?
Is there forbearance, loan modification or another option?
Can you waive late fees? While this is an unprecedented time with recordhigh jobless claims and bills coming due, it’s essential to take your time, evaluate your options and read the terms on any forbearance option.
In these uncertain times, let’s all navigate the rocky waters of the pandemic and emerge once again as proud homeowners.
Shikma Rubin is a loan officer at Tidewater Home Funding in Chesapeake. She enjoys the chance to lead workshops and webinars on how to buy a home in 2020. Have mortgage questions? You can reach her at srubin@tidewaterhomefunding.com or 757-490-4726.