What to do when your CARES Act mortgage forbearance ends.

Dated: January 13 2021

Views: 736

Mortgage forbearance provided a lifeline for millions of homeowners during the difficult months of the pandemic.

But with the six-month end date for many forbearance plans rapidly approaching, homeowners will have to decide how to move forward.

Do you need to extend your COVID forbearance plan for another six months?

Or, are you ready to exit? If so, what are your options?

Here’s what you need to know if your mortgage forbearance plan is ending soon.

Most forbearance plans can be extended for 6 more months

The good news? You can get a six-month extension on your loan forbearance.

That means a total mortgage forbearance period of 12 months on your government-backed loan if you need it.

How do you request an extension?

Your your loan servicer should provide you an option to extend forbearance another 180 days if you need it. Loan servicers are supposed to reach out to borrowers 30 days before the forbearance plan is scheduled to end to help them understand what options they have for repayment.

Strategies for exiting mortgage forbearance

Forbearance is not loan forgiveness. Borrowers will still owe the principal and interest that they didn’t pay during the forbearance period. Borrowers will need to make both the regular mortgage payments and also all the payments they missed while the loan was in forbearance.

  1. Full repayment, which is a one-time lump sum payment. It’s possible to pay back all the missed payments at once. But lenders are NOT allowed to require this. 
  2. Intermittent payments, where you arrange repayment with your servicer over three, six, nine, or 12 months –—whichever makes the most sense — on top of your regular payments
  3. Lengthen your loan term and pay off the missed amount at the end of the extended loan term, with additional mortgage payments
  4. Defer your repayment. This option lets you pay off the missed amount at the time the home is sold, refinanced, or the mortgage term ends
  5. Pursue a loan modification. This helps borrowers who are at risk of default change their mortgage terms – usually including a lower interest rate, reduced length of the loan, or reduced monthly payment,

Expect delays when contacting your mortgage servicer

Loan servicing organizations are not all properly staffed for the expected volume of forbearances, and they can’t train support agents fast enough to meet their needs.

Be prepared for process changes, as regulators react to the crisis in real-time and create new rules or modify existing rules

What if you still can’t afford your mortgage payments after forbearance?

You’ll probably need to consider disposition options. This may include selling your home if you can no longer afford it. Foreclosure, short sale, and deed-in-lieu are other ways of disposing of a home you can’t afford. These options may be damaging to your credit and should be reserved until you’ve exhausted all other solutions.”

Low rates can make mortgage payments more affordable

For those exiting mortgage forbearance in the next few months, there may be an opportunity to lower your mortgage payments below pre-pandemic levels.

Rates have hit record lows nine times in 2020, and are set to remain low for months — if not years — to come.

Some options for exiting mortgage forbearance would allow homeowners to secure a new, lower rate and make their monthly payments more manageable.

To help navigate through this process or discuss options for possibly putting your home on the market. Please reach out at anitra.iglehart@exprealty.com

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Anitra Iglehart

Real Estate sales have always been something that intrigued Anitra. Being a Maui Resident for over 20, she loved the idea of helping people and facilitating homeownership. Her attention to detail, amb....

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