Many borrowers hit the pause button on their loan principal and interest payments and are now looking to understand their options.
A mortgage COVID forbearance, also known as a mortgage forbearance program, is a temporary relief option offered to homeowners who are experiencing financial hardships, particularly related to the COVID-19 pandemic. It is a measure implemented by many mortgage lenders and backed by government agencies, such as the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac.
The best course of action for borrowers with forbearance ending is to contact their mortgage servicer and navigate exiting the forbearance program together.
Many borrowers are confused on the terms of the mortgage forbearance program as it operates differently than the student loan forbearance program. The mortgage forbearance program does not pause the loan or forgive payments. Borrowers are still responsible for repaying missed payments.
There are immediate payment options for borrowers who have reached the end of their mortgage forbearance and are no longer facing a financial hardship. In addition to payment options, may be loan adjustments that could better suit a borrower depending on their loan type and financial situation.
Forbearance Payment Options
Reinstatement: borrowers have the option to pay the total amount missed during the forbearance period
Repayment Plan: borrowers can choose to include the past due forbearance amount alongside upcoming mortgage payments, resulting in a temporarily increased payment
Borrowers who are unable to reinstate their loans and do not meet the criteria for a repayment plan may be eligible for a loan modification. A loan modification involves permanent alterations to the loan terms, such as lowering the interest rate, extending the loan period, and including any outstanding amounts in the new principal balance. Under specific conditions, borrowers may also qualify for the temporary suspension or forgiveness of the principal.
Borrowers who do not meet the requirements for a payment plan or loan modification may qualify for a partial claim. A partial claim involves shifting the outstanding payments to the loan's conclusion or establishing a secondary lien that must be paid off upon mortgage refinancing, property sale, or termination.
The above options may not be available for all loan types. Each loan is unique and financial hardships vary by borrower. The best course of action for borrowers with forbearance ending is to contact their mortgage servicer and navigate exiting the forbearance program together. There are also several HUD approved counseling agencies to assist borrowers as well.
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