When Mortgage Forbearance Ends
Mortgage forbearance is a topic many Americans are learning about for the first time, as they seek relief from lenders in the face of coronavirus-related income losses.
For many homeowners, mortgage forbearance is an option provided under the Coronavirus Aid, Relief and Economic Security (CARES) Act. Among its many economic relief provisions, the CARES Act requires lenders and servicers responsible for federally backed mortgages to offer homeowners payment forbearance; these include FHA loans, VA loans, USDA loans and all mortgages owned or securitized by Fannie Mae or Freddie Mac.
Homeowners with mortgages not backed by the federal government may still qualify for COVID-19 mortgage forbearance under voluntary relief programs put in place by lenders.
Mortgage forbearance terms vary, but all require you to eventually make up for the payments that were excused during the forbearance period.
When Mortgage Forbearance Under the CARES Act Ends
Under provisions of the CARES Act, if you get mortgage forbearance on a federally backed loan as part of COVID-19 relief, your loan servicer cannot charge extra interest on your forbearance repayments or require you to repay excused payments in a single lump sum at the end of the forbearance period.
The U.S. Consumer Financial Protection Bureau (CFPB) provides the following details for forbearance repayments under different types of federally backed loans. The CFPB notes that these are options available to lenders, but may not apply to all borrowers. It urges homeowners to consult with their loan servicers for additional details.
Lenders and servicers of mortgages owned or securitized by Fannie Mae or Freddie Mac have the following options for repayment after a forbearance period:
· Give borrowers up to 12 months after forbearance ends to repay past-due payments.
· Extend the mortgage term by the exact number of months in forbearance.
· Add past-due amounts to the loan balance and extend the term of the loan by the number of months necessary to keep monthly payments the same as they were before forbearance.
· Add past-due amounts into the loan balance and extend the loan term to 40 years.
Lenders and servicers of FHA loans have the following repayment options:
· Borrowers may enter into a repayment plan to repay past-due amounts within six months of forbearance ending.
· Mortgage term may be extended to 30 years by adding the past-due amounts to the outstanding balance on the loan.
· Past-due amounts may be paid off at the end of the loan in a lump sum.
Servicers of VA loans can extend any of the following forbearance repayment options to their borrowers:
· Borrowers may enter into a plan to repay the past-due amount within six months of forbearance ending.
· Past-due amounts (including payments abridged during forbearance and any payments missed prior to forbearance) can be added to the loan balance, and the loan term may be extended to 30 years.
· Servicers are to aim to keep monthly payments at no more than 31% of a borrower’s gross income, extending the loan term to as much as 30 years as needed to do so, with an option of forbearing principal.
Lenders and servicers administering USDA loans can offer borrowers one of the following options for forbearance repayment:
· Borrowers may enter into a repayment plan to repay past-due amounts within six months.
· Servicers may add past-due amounts into loan balances and extend the term to 30 years to keep payments equal to or lower than the amount they were prior to forbearance.
· Forbearance repayment can be provided in a lump sum after the final loan payment is made.
Lenders and servicers issuing non-federally backed mortgages are not compelled to take action under the CARES Act, but the CFPB and a handful of other agencies have urged them to be flexible in dealing with borrowers beset by the COVID-19 pandemic. The CFPB recommends borrowers check with their loan servicers and housing counseling agencies about available forbearance plans and repayment options.
No matter what type of mortgage loan you have, if you’re concerned that you will be unable to manage your mortgage forbearance repayments, or will be unable to resume regular mortgage payments at the end of the forbearance period, contact Parkview Services before the end of your forbearance period to discuss your options.