Since the coronavirus pandemic shut down much of the United States economy, homeowners have flooded their mortgage companies with requests for help.
According to the Mortgage Bankers Assn., There are now 3.5 million mortgages in so-called forbearance programs, which allow borrowers to delay payments or make partial payments for a period of time. while their financial situation improves.
The programs have provided temporary relief, but the process was confusing. Here’s what you need to know.
What can I do if I can’t pay my mortgage?
Under the federal CARES law, a borrower with a federally guaranteed mortgage loan has the right to stop paying their mortgage for six months under forbearance programs, as long as the homeowner has met. to financial difficulties on the part of the current pandemic.
Relief, however, is not automatic.
If you want to take advantage of it, you must apply to your mortgage agent, the company to which you make your payment each month.
While you may be having financial hardship from the current pandemic, there is no threshold as to the level of hardship you face. And you don’t have to submit documents proving your difficulties.
After six months, if you wish, you can request an additional six-month break in payment, bringing your total forbearance period to one year.
According to the Federal Office for Consumer Financial Protection, you should not be charged any additional fees, penalties or interest as a result of your abstention.
The guaranteed right to abstain does not apply to people with private mortgages, but mortgage agents also provide assistance to these people. If you have a private mortgage, you should check with your mortgage company to see what help is available.
How do I know if I have a government guaranteed mortgage?
Most mortgages in the United States are guaranteed by the federal government, either by Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veteran Affairs, or the US Department of Agriculture.
But it can be difficult to know if you actually have one of these loans. Typically, you don’t issue a check to a government agency every month; you pay a private mortgage services company, which collects your payments and forwards them to the investors who own your mortgage.
According to the CFPB, your mortgage manager should, to the best of their knowledge, tell you who is guaranteeing your loan. The consumer office said the information could also appear on your mortgage documents, particularly if you have an FHA or VA loan.
Do I have to reimburse the payments that I missed during the forbearance?
Yes, payments are postponed, not forgiven. However, you will not be required to repay the missed payments in a lump sum if you have a government guaranteed loan.
Even private lenders offer different options, knowing that if you’ve lost your job or seen your income drop, it would be very difficult to pay it off all at once.
There has been a lot of confusion about lump sum payments, with some consumer advocates claiming that mortgage companies have incorrectly told consumers they are required to make them, or made vague statements that have led consumers to believe it was.
You can pay it off all at once if you want. But government agencies say they are trying to clear up the confusion and have released advice to mortgage agents on the type of repayment plans they should offer if a borrower can’t pay a lump sum.
You are still allowed to make partial payments during your forbearance period if you wish. Making partial payments reduces the amount you will need to repay in the future.
So how do I get back the payments I’m missing?
The options will vary somewhat depending on the type of government guaranteed loan you have, hence some of the confusion. But government agencies insist that you don’t need to pay a lump sum, and agents must work from a list of options to find an affordable repayment plan and approve it if the borrower is eligible.
Options include paying a higher mortgage payment each month until all of your missed payments are tallied.
There are also options that keep your monthly payments the same as before withholding. If you have an FHA loan, for example, repairers must assess you for a “National COVID-19 Emergency Partial Claim,” which keeps your monthly payment at the same level and puts the missed payments into a new, separate interest-free loan that must be paid off when your first mortgage is paid off – say, when the loan ends, when you refinance, or when you sell your home.
For borrowers Fannie Mae and Freddie Mac, one option is the “cap and extend modification,” which keeps your mortgage payments the same as before the forbearance and extends your loan terms.
There are also options to reduce the monthly payments if the upfront payments are unaffordable. However, there is a limit on the drop in payments, so you could still face foreclosure if you can’t find a job.
Additional information on reimbursement options is available on the site The CFPB website under the heading “How can I reimburse my tolerance? Some of the options are not available if you were an offender before the pandemic.
OK, I want to start the forbearance process. What should I do?
You can call your repairman to ask for forbearance, but the wait times can be long. You can also apply online, so check your service agent’s website.
The CFPB recommends that you ask your repairer for written documentation to confirm the terms of the forbearance agreement.
If I am having difficulty submitting an application or having problems during forbearance, where can I seek help?
If you think your repairman is breaking the rules or is particularly picky, you can file a complaintt with the Federal Consumer Finance Agency.
You can also receive free or low cost help from HUD-approved housing counselors.
The CFPB also has more information on What to watch out for.