- There approximately 4.3M mortgage loans in forbearance
- Homeowners can ask their mortgage servicer for forbearance and suspend monthly mortgage payments for up to 12 months
- Partnership of Freddie Mac and HousingWire answers common questions about mortgage forbearance
With some 4.3M mortgage loans now in forbearance under the CARES Act, it is important that you and your clients understand the in’s and out’s of mortgage forbearance. You are in a position of providing your clients a great service by passing along this latest and best information about forbearance from the combined forces of Freddie Mac and HousingWire.
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Let’s begin with the basic FAQ and answers about mortgage forbearance:
What is mortgage forbearance?
- It is a temporary postponement of mortgage payments.
- Forbearance is negotiated between the borrower (mortgage holder) and lender (mortgage servicer) for repayment relief
- Mortgage payments are deferred, NOT forgiven, until the end of the forbearance period.
How do I request mortgage forbearance?
- The borrower or mortgage holder has two ways to request forbearance:
- Directly call your lender or loan servicer or company to which you send your monthly mortgage payments (all of these terms are one and the same entity) and tell her/him that you need relief from the financial hardship you have experienced due to the COVID-19 pandemic.
- Directly write and send a hardship letter to your lender that both requests mortgage payment deferral or forbearance and explains your circumstances of financial hardship due to COVID-19.
- (Being able to directly call and/or write your lender or loan servicer is one very good reason to have a personal relationship with your lender or loan servicer!)
Will I need to repay my missed mortgage payments in one lump sum?
- NO…but you can if and when you have the financial capability to do so. Or, you have these two options:
- Negotiate a payment plan with your lender to make upcoming payments larger
- Modify your existing loan to either include an interest rate reduction and/or a longer loan term.
How does your mortgage transition INTO forbearance?
- Once your lender/loan servicer approves your forbearance request, your lender will provide you with a forbearance agreement that outlines the terms. During the forbearance period (the term can go up to one year), the lender/servicer MUST NOT initiate or continue with foreclosure proceeding on the home.
How does you mortgage transition OUT of forbearance?
- At the end of you forbearance term, your lender/servicer ought to connect with you to negotiate the end of forbearance terms for repayment and/or a possible term extension. (If your lender doesn’t contact you, contact her/him prior to the end of the forbearance term. Don’t take it personally…just get it done.)
- At this time, you and your lender may also negotiate a relief or workout option after the forbearance term has expired.
Are you eligible to refinance your mortgage after the forbearance period ends?
- Yes with these stipulations:
- Borrowers can refinance a mortgage with GSE backing 3 months AFTER the forbearance term ends as long as you have make 3 consecutive payments under your repayment/deferral or loan modification plan
- Borrowers in forbearance who continued to make their mortgage payments are eligible to refinance as long as you are caught up on your mortgage payments.
Are there eligibility requirements in order to qualify for forbearance?
- Yes …job loss, reduce income, illness or other issues related to COVID-19
If I was on a forbearance plan or was delinquent in my mortgage payments prior to my COVID-related hardship, am I eligible for forbearance now?
- Yes…under the CARES Act, your COVID-19- related financial distress makes you eligible for COVID-19 forbearance regardless of you previous financial hardships or delinquencies.
Can the forbearance term or period be extended and for how long?
- Yes…if you have a federally backed mortgage, you can ask for an extension on your forbearance term for up to 180 additional days.
Does forbearance impact your credit score?
- No…under the CARES Act, COVID-19- related mortgage forbearance cannot be reported negatively to credit bureaus by your lender/servicer.
Are investment properties eligible for forbearance?
- Yes…borrowers impacted by COVID-19 are eligible for forbearance whether your property is owner-occupied, a second home or an investment property.
Freddie Mac has additional resources to check out for both servicers and homeowners. Go to #HelpStartsHere
- Freddie Mac’s expanded loss mitigation book
- New eBook – COVID-19 Servicing: Guidance for Helping Impacted Homeowners that covers policy, workout options and training for servicers
- A Sustaining Homeownership During a Crisis interactive guide for homeowners to understand mortgage relief. This book is available in English and Spanish.
Additionally, Freddie Mac has a solution called the COVID-19 Payment Deferral that is effective starting July 1.
One more resource for your tool kit as well as your clients:
We recommend you get and keep ALL of these resources so you understand the whole forbearance landscape that involves both lenders and homeowners. Recommend these resources to your clients. Who knows when/if another life changing experience will come along during all of our lifetimes.
Thanks to Freddie Mac and HousingWire.