Coronavirus Mortgage Relief Options
If you are having trouble making on-time mortgage payments due to the national coronavirus emergency, forbearance may be an option for you. Forbearance can help consumers get back on their feet during short-term financial difficulty due to this pandemic, but there are a few things you need to know and some very important decisions you’ll need to make. And remember…Forbearance DOES NOT mean forgiveness.
Let’s first look at what Forbearance so we can better understand what you may be agreeing to.
Forbearance is when your mortgage servicer or lender allows you to pause or reduce your payments for a limited period of time. FORBEARANCE DOES NOT ERASE WHAT YOU OWE. You’ll have to repay any missed or reduced payments in the future. The best thing to do is to keep making your mortgage payments if you have the ability to do so.
The types of forbearance available vary by loan type…government backed loans and non-government backed loans. Loan servicing companies may have forbearance or deferment options for non-government backed or private loans, but the exact options available to you may differ. For now, let’s discuss Government backed loans and how they pertain to the CARES Act.
If your mortgage is backed by the federal government—this includes FHA, VA, USDA, Fannie Mae and Freddie Mac, provisions of the recently enacted CARES Act allow you to TEMPORARILY suspend payments if you are experiencing financial difficulty DUE TO THE IMPACT OF THE CORONAVIRUS on your finances. But you must call your servicer, this is not automatic
That is a key bit of information, so let me repeat it. The CARES Act allows you to TEMPORARILY suspend payments if you are experiencing financial difficulty DUE TO THE IMPACT OF THE CORONAVIRUS on your finances. But you must call your servicer, this is not automatic
Here’s how this works for federally backed mortgages under the CARES Act. If you are experiencing financial hardship due to the coronavirus pandemic, you have a right to request forbearance for up to 180 days. You also have the right to request an extension for up to an additional 180 days. But again, you MUST contact your loan servicer to request this forbearance. There won’t be any additional fees, penalties or interest added to your account. But your regular interest WILL still accrue.
It is important to find out what options are available to you and the best place to find that information is from your loan servicer. Look for their contact info on your monthly mortgage statement.
If you cannot make your mortgage payments, and you are looking to suspend or reduce your payments, you will need to work with your servicer. If you decide to move forward with a forbearance plan, ask your servicer how you will be required to pay back the amount owed after the forbearance period.
Here are some questions that you will NEED answers to.
Will you owe the entire unpaid amount in a lump sum once the pause period has ended or at the end of the loan term?
Can the loan term be extended so that missed payments are added to the end of your mortgage?
Will your subsequent monthly payments be higher for a period of time to make up the deferred amount?
Know what you’re getting yourself into before you sign. Speak with the correct people, ask the right questions, READ THE FINE PRINT.
Remember…FORBEARANCE IS NOT FORGIVENESS, THERE IS NO FREE LUNCH! You still have to pay it back. Whether it is at the end of a few months, or if it’s at the end of the lifetime of the loan, it will have to be paid back. You need to make sure that you are getting accurate information regarding Forbearance if that’s what you choose to do.
Please make sure you understand what you’re getting into. It’s very similar to 2008 when people were short selling and didn’t realize that before the Mortgage Forgiveness Debt Relief Act was passed, they would be taxed the difference of what they owed on the home and what they Short Sold the home for.
But, unlike the Mortgage Crisis in 2008, most people today have a substantial amount of equity in their homes. Don’t allow media headlines, or bad information to cloud your judgement and take you down the wrong path as well as disqualify you from having the ability to refinance…or worse…cause you to lose your home.
Finally, be on the lookout for scams and scammers looking to take advantage of consumers affected by coronavirus. You might receive fraudulent calls, emails, text messages or other “offers” to help you reduce or stop your mortgage payments. Make sure you are working directly with your mortgage servicer…contact them directly, never respond to an inbound call, email or text. For more in depth information, including information on how to find a HUD-approved housing counselor, go to ConsumerFinance.gov/CoronaVirus.
Bottom line know what you are agreeing to and work with VERY experienced Realtor and Lender partners who know how to protect you and give you accurate and sound advice.
Please feel free to reach out to me directly at 850.554.9543, for any advice at all. I can help you navigate these tough times and refer you to the appropriate people.