Under the CARES Act, homeowners with a federally backed mortgage (insured or guaranteed by Fannie Mae, Freddie Mac, VA, FHA or USDA) have a right to request a forbearance period up to 180 days, or approximately six months. This can be extended another 180 days if needed, for a total of almost 12 months. So, what exactly is a Mortgage forbearance? It is when your lender or mortgage servicer allows you to temporarily pause or reduce your payments for an agreed upon timeframe. People sometimes confuse forbearance with forgiveness. A forbearance doesn't wipe out any mortgage payments; it merely postpones them.
The decision to request mortgage forbearance should not be taken lightly, and if you can still afford your housing payment, you should continue to do so as these postponed payments are still owed and accumulating.
If you do request a forbearance here are some options, you may qualify for after your plan ends:
- A one-time lump-sum payment of all the postponed payments.
- A repayment plan which increases your monthly payment to pay off what you postponed. Terms of repayment plans can vary but are usually between 3-12 months.
- Extending your mortgage term or adding the missed payments at the end of the loan. This is a loan modification and your lender or servicer may require you to submit an application to qualify for this workout option.
With all workout options, it is up to the loan servicer to determine what repayment options are available. If you do request a forbearance plan, make sure to ask your mortgage servicer about repayment options afterward and ask for a written agreement if possible. While the forbearance can certainly help during a time of it is important to think ahead to make sure this option is the best fit for you.