Millions of Americans have lost their jobs or have seen their incomes drop during the coronavirus pandemic. Fortunately, many have obtained a large reprieve in the form of mortgage forbearance.
Normally, forbearance – putting loan payments on hold for a period of time – is something mortgage lenders can deny loan customers. But during the pandemic, homeowners who need it have been guaranteed that protection. Specifically, borrowers have the right to request a 180-day forbearance period followed by a 180-day extension, for a total of 360 days without making any payments. During this time, borrowers cannot be reported as past due on their home loans to the credit bureaus.
The Federal Housing Finance Agency (FHFA) has yet to set an end date for its coronavirus-related abstention policy. But President Joe Biden is pushing to extend the forbearance request deadline until September 30 (in conjunction with other relief measures). Given that the greatest economic crisis is by no means over, this would give borrowers who run into financial difficulties over the next few months the opportunity to put their home loans on hold rather than struggle to repay them. And that could, in turn, prevent many mortgages from being foreclosed.
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What you need to know about mortgage forbearance
If you have a mortgage and are struggling to make ends meet during the pandemic, you might consider asking your lender to put your mortgage on hold. You should also know:
- You may need to catch up on your payments. Mortgage payments missed during forbearance are not forgiven, but postponed to a later date.
- Your lender can’t force you to catch up with one lump sum. Rather, you are given a schedule to follow, the details of which depend on your lender.
- You can still pay off your mortgage or make partial payments while your loan is on hold. If, for example, your usual monthly payment is $ 1,200 but you can only swing $ 600 because your working hours have been reduced, that’s fine. The more you invest in your loan during the forbearance period, the less you have to catch up later.
- You may be eligible for forbearance even if you are not unemployed. You may be struggling with other new expenses like increased child care costs during the pandemic, so even if you still collect a paycheck, you can put your loan on hold. In fact, your lender may not even require that you provide proof of hardship during the pandemic.
- You have options if you cannot pay your loan after the forbearance. If your financial situation does not improve after these 360 days of abstention, you can discuss with your lender. You may be eligible to change the terms of your mortgage to reduce your payments.
Many homeowners needed help during the pandemic, so if you’re having trouble with your mortgage payments, temporarily putting them on hold could be a relief. Of course, you can also see if you qualify for mortgage refinancing – if you can lower the interest rate on your loan enough, your monthly payments could go down significantly. But if that’s not an option, abstaining may be your next best bet.