Forbearance Q & A:
Included as part of the CARES Act recently passed by Congress homeowners with mortgages owned by Fannie Mae or Freddie Mac, or insured by the FHA or VA, are entitled to a mortgage forbearance. Let’s answer a few of the common questions about what this means for you.
What is a mortgage forbearance?
A mortgage forbearance is the ability to pause your mortgage payments for a period of 3 to 12 months.
Who would qualify?
Any homeowner is eligible for forbearance under the new act if they have had a financial impact from Covid-19. Proof of hardship is not necessary under the new law.
What happens to my payments if I enter a forbearance?
For 3-12 months your payments will accrue but not be collect by your loan servicer. Upon the end of the forbearance you will be required to pay, in a lump sum, the total of the payments that were put on hold. If at this time you are unable to make up the payments that were put into forbearance you can review options for loan modification or payment plan to get caught up.
Will my payments be reported late?
No – under a forbearance as a result of the CARES act you will not be reported late to the credit agencies.
Are there items I still pay if I enter forbearance?
Yes – homeowners are encouraged to still make their escrow payments for taxes and insurance to ensure that these amounts do not become delinquent and prevent large escrow shortages upon emerging from forbearance.
Are there any downsides to a forbearance?
Yes. Homeowners are only encouraged to claim a forbearance if absolutely necessary. While in forbearance a homeowner will be unable to refinance their mortgage. If at the end of a forbearance you are unable to catch up your payments you may be forced to enter a loan modification that could negatively impact your credit or prohibit you from residential financing in the future. Forbearance is only available once, therefore if you claim one now and then later need one you may find yourself ineligible.
Who should I contact if I want to get a forbearance?
You should contact your mortgage servicer and they will discuss options available to you and the application process.
