Real Estate Transactions

The persistent pandemic has taken a toll on Americans in countless untold ways. For many, lost wages and medical expenses related to COVID-19 are particularly consequential, making it tough to pay the bills, including the monthly mortgage.

Fortunately, many financially struggling homeowners have been able to take advantage of mortgage forbearance protection allowed under the CARES Act passed by Congress in March. This will enable borrowers of federally backed mortgages, including Freddie Mac, Fannie Mae, VA, FHA and USDA loans, to request mortgage forbearance — the temporary suspension of required mortgage payments — for up to 180 days.

The problem is, those six months have expired or will soon for many borrowers who earlier pursued forbearance. They’re worried about what will happen next or if they have any options to pursue.

Thankfully, they have choices, including the option to extend forbearance protection for an additional 180 days.

“Most forbearance plans are expiring now, or have recently expired because borrowers have reached the six-month deadline where they either have to file for an extension or let their forbearance expire,” says Nishank Khanna, CFO of Clarify Capital in New York City. “In fact, about 1 million plans were set to end in October 2020.”

Rachel Khirallah, a foreclosure attorney in Dallas, says forbearance plans under the CARES Act were intended to be a temporary resolution to those whose income was impacted by COVID-19.

“The CARES Act, which provides forbearance plans to any qualified borrower who requests it, only makes this plan available for 180 days for those who demonstrate a coronavirus-related hardship,” she says. “But eligible borrowers can request a 180-day extension.”

If your forbearance plan is nearing expiration, and you’re not ready to start making payments again, contact your loan servicer and communicate this, recommends Thomas O’Connell, senior vice president, default management, for Planet Home Lending in Meriden, Connecticut.

“First, check your servicer’s website; there’s probably a COVID-19 message right on the homepage with directions for asking for an extension on your forbearance or for other loss mitigation assistance,” O’Connell explains.

Khirallah adds that forbearance allowed under the CARES Act shouldn’t involve completing and submitting any special documents.

“You simply need to request the forbearance by phone or in writing and state that it’s due to a COVID-associated hardship,” she says. But Khirallah states that it is always best to have it in writing.

Most importantly, don’t wait until the last minute or your expiration date to get a hold of your loan servicer.

“You want to make sure you allow enough time to discuss your financial situation with your lender and review your options,” Khanna suggests.

Keep in mind that not all mortgage lenders/servicers will provide or allow a forbearance plan — only governmentbacked mortgages are required to do so.

“The good news is that many privately backed mortgages are voluntarily granting forbearance, too, so don’t be afraid to ask,” says O’Connell, whose company is providing forbearances in 90-day increments and granting forbearance extensions to eligible customers.

Note that if your mortgage is not federally backed, you may be required to complete a forbearance application and provide documentation to show your hardship.

Remember, too, that forbearance doesn’t forgive your debt obligation.

“It simply sets it aside until a later date. Each month, your loan statement will indicate how much your outstanding debt is,” O’Connell notes. “Keep an eye on that balance so that you’re not surprised later by how much you owe.”

Once you’re back on a firmer financial footing, you can pursue several routes for repaying your skipped payments. O’Connell says the most common four options are:

1. Immediately repay what you owe all at once in a lump sum.

2. Modify your loan to make up for the missed payments; this might include changing your interest rate and/or extending how long your mortgage lasts.

3. Defer your payments. “You may be able to tack the missed payments onto the end of your loan. Or, you can agree to have a balloon payment due at the end of your current home loan,” O’Connell says.

4. Enter into an extended repayment plan in which you pay more each month, typically over a year or so, to make up your missed payments. The bottom line?

“If you need help, ask for it. That’s what forbearance is all about,” O’Connell insists. “Contact your loan servicer, who can walk you through your options.”