A. First, find out when your indulgence time has expired. Forbearance is the legal term for lender-approved suspension of your mortgage payments. According to the Consumer Financial Protection Bureau, there are currently around 3 million homeowners in arrears on their mortgages, but around 2 million of them are indulgent. Forbearance provides them with temporary protection from foreclosure, ruined credit, and late fees while they skip payments.
But forbearance does not go on indefinitely.
Question: What are the rules governing the indulgence process?
A. The federal government set the rules when it cracked down on homeowners in the weeks following the first outbreak of the coronavirus pandemic. The $ 2.2 trillion CARES bill was incorporated into the bill in late March 2020. Among many other provisions, it gave homeowners with government-guaranteed loans the right to be indulgent for up to 180 days.
It also gave homeowners the right to request an extension of up to 180 additional days for a total of about a year of suspended payments. Many homeowners were approved last summer, which means their indulgence may run out in the next few months.
Q. What if I am still in a financial crisis?
A. The government later changed the program to allow homeowners up to two additional three-month extensions for a maximum of 18 months forbearance. If you feel you need an extension, now is the time to act.
Q. Who can I contact about an extension?
A. Your mortgage company, which may be your lender or someone who has been hired by your lender to manage your mortgage. The most important piece of advice is communicating with your mortgage service provider. Before you call, go to the service provider’s website and search for “Forbearance” and “COVID-19”. My lender’s website says, “Let us know asap [if you can’t make your payment]. There are often options that can be extended depending on your situation and the loan you have. “
These are extraordinary times. Your servicer will get this. Open a dialog.
Follow up by email or phone. There may be delays in the response. So it’s best to get in touch well in advance of your forbearance expires.
Q. Am I guaranteed an extension?
A. It depends on what type of mortgage you have. About 70 percent of mortgages are federally secured, which means that a federal company or agency owns or guarantees them. There are two categories of federal mortgages, each with different rules.
Question: What are the rules for each category?
A. In general, the rules for mortgages backed by HUD / FHA, USDA, and VA are more restrictive than for mortgages backed by Fannie Mae or Freddie Mac. For example, Fannie Mae and Freddie Mac routinely grant enhancements, while HUD / FHA, USDA, and VA require a qualification process. Ask your service technician for details.
Q. Are there other rules for applying for an extension?
A. Yes, Fannie Mae or Freddie Mac mortgages require you to be on an Active Forbearance Plan on February 28, 2021. For HUD / FHA, USDA, and VA mortgages, you must have an Initial Forbearance Plan applied for on or before June 30, 2020.
Question: What if I’ve never begged forbearance? Can I request it now?
A. If your loan is secured by Fannie Mae or Freddie Mac, there is no time to apply for an initial forbearance. However, if your loan is backed by the HUD / FHA, USDA, or the VA, the deadline to apply for an Initial Forbearance is June 30th.
Question: How do I find out whether my mortgage is covered nationwide?
A. Search online for “Fannie Mae” and “Lookup” and “Freddie Mac” and “Lookup” to find websites where you can enter certain information to see if your mortgage is covered by either agency. Or ask your lender or mortgage service provider.
Q. What if my federal mortgage isn’t covered?
A. Many banks have their own mortgage suspension programs, most of which are similar to the provisions of the CARES Act. Go to their websites. Talk to your service technician.
Q. What if my grace period expires?
A. Forbearance does not mean that your missed payments will be canceled, given, or canceled. It is up to you to propose a plan to make up for missed payments. The CARES Act does not provide guidance on this. It’s up to you to negotiate an agreement.
Question: What are some amortization alternatives?
A. The least burdensome option is to extend the term of your mortgage. If you miss 12 payments, your mortgage term will be extended by a year so that you can make up for those payments.
You might also agree to double payments for the next six months to make up for a year of missed payments, though it can be too much of a burden for most.
Q. Other alternatives?
A. You could agree with your lender to rewrite the mortgage including the interest rate and term of the loan, adding the skipped payments to the new amount borrowed – basically a refinance.
The alternative that you probably want to avoid is a balloon payment, where you combine all the skipped payments into one flat rate.
Q. What about my escrow account?
A. Many borrowers add extra cash to their monthly mortgage payments to cover real estate taxes. Check with your city to make sure you are up to date.