As more Americans experience financial hardships, due to COVID-19, more are requesting mortgage forbearance. This means that the borrowers have requested a temporary break on upcoming payments. In just the first week of April, nearly two million loans were in forbearance.
Each mortgage servicer will have unique guidelines and forbearance policies to navigate. Whether they offer a lower monthly payment or simply allow you to skip payments, the most important thing to remember is that forbearance is not free! The payments will need to be made up at some point during the lifetime of the loan.
What Is Mortgage Forbearance?
- It is a temporary pause on your monthly home loan payments.
- Forbearance is granted by the lender in an effort to not require foreclosure.
- Lenders and borrowers work together on the terms of the forbearance.
- Borrowers will need to provide some kind of proof of financial hardship in order to justify the postponement.
CARES Act & Your Mortgage
Very recently, the CARES Act was enacted to help home owners impacted by the COVID-19 crisis. The act directs all lenders to suspend borrower payments for up to one year for any federally backed mortgages. It also put an end to any foreclosures and evictions during this time.
If you are struggling financially because of COVID-19 you may be granted forbearance on your federally backed mortgage loan for up to 180 days. You also do have the option to request an extension for an additional 180 days.
If you are a landlord and have a mortgage on multifamily housing, meaning 5 or more units, you will be allowed a 30-day mortgage forbearance with up to two additional 30-day extensions on payments. Here are the loans impacted by the CARES Act:
- Insured under section 255 of the National Housing Act
- Insured by the Federal Housing Administration (FHA)
- Guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992
- Guaranteed or insured by the Department of Veterans Affairs
- Purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association
- Guaranteed, insured, or made by the Department of Agriculture
How to Request Mortgage Forbearance
To receive forbearance on your federally backed loan, you must submit a request to your servicer or lender. In many scenarios you will need to provide documentation related to any financial hardships as a result of COVID-19. From there the mortgage servicer will let you know if you have been granted mortgage forbearance.