CARES Act For Mortgage Forbearance
What You Need to Know
If you are experiencing difficulty making on time mortgage payments due to the COVID pandemic, forbearance may be an option for you.
What Is A Mortgage Forbearance
A mortgage forbearance is when your mortgage servicer or lender allows you to pause or reduce your payments for a limited period of time.
Forbearance doesn’t erase what you owe. You will have to repay any missed or reduced payments in the future. The types of forbearance available vary by the type of loan you have. If your mortgage is backed by the federal government, this includes FHA, VA, USDA, Fannie Mae, and Freddie Mac loans, provisions of the CARES Act allow you to temporarily suspend payments if you are experiencing financial difficulty due to the impact of coronavirus on your finances.
Loan servicers may also have forbearance or deferment options for non-government backed or private loans, but specific options available to you may vary.
Under the CARES Act, here’s how it works for federally backed mortgages. If you are experiencing a financial hardship due to the coronavirus pandemic, you have the right to request a forbearance for up to 180 days. You also have the right to request an extension for up to an additional 180 days. But, you must contact your loan servicer to request this forbearance. There will not be any additional fees, penalties or interest added to your account. But your regular interest will still accrue.
Other than telling your servicer that you have a pandemic related financial hardship, you won’t have to submit additional documentation to qualify for a forbearance.
The best place to find what options are available to you is from your loan servicer.
Regardless of the type of mortgage you have, here are a few things to consider. If you cannot make your mortgage payments and you are looking to suspend or reduce your payments, you will need to work with your loan servicer. If you decide to move forward with a forbearance plan, ask your servicer how you will be required to pay back the amount owed after the forbearance period.
Does the entire unpaid amount need to be paid in a lump sum, can it be paid at the end of the loan? Can the loan term be extended so that the missed payments are added to the end of the mortgage? Will your monthly payments be higher for a period of time to make up for the deferred amount when you start making payments again?
This information and additional information about a mortgage forbearance and the CARES Act can be found on the Consumer Financial Protection Bureau web site.
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