Our job is to help you navigate through one of the most important financial decisions you’ll ever make—purchasing or refinancing a home. Your trust in us is something we take very seriously as a mortgage professionals and because of this, we wanted to reach out and address a topic that we’ve seen a lot of misinformation on this week, in hopes that you are equipped with as much information as possible and in turn positioned to make the decision that is best for you.
COVID-19 Stimulus Plan & Mortgages
As part of the recent COVID-19 stimulus plan, the government is rolling out an assistance program for mortgage payments called mortgage forbearance. This is intended to be available for those experiencing a financial hardship that is directly or indirectly due to the COVID-19 emergency. Forbearance, in the context of a mortgage process, is a special agreement between the lender and the borrower to delay payments and without considering the loan to be in default. The literal meaning of forbearance is “holding back.” When borrowers are unable to meet their repayment terms, lenders may opt to delay payments. For example, if you have a loan that is backed by Fannie Mae, Freddie Mac, FHA, VA or USDA, you would be able to attest to experiencing a COVID-related financial hardship and request from your mortgage servicer a temporary reprieve in making your mortgage payments for up to 180 days. The good news is, if you are in a position where you are unable to make your mortgage payment, you have options to consider.
Mortgage Loan Forbearance FAQs
There has been a lot of misleading information floating around, so we wanted to take a minute to clarify the most common questions our team has received.
- Loan forbearance is only a temporary forgiveness of your obligation to make loan payment. You will still owe the lender the back payments.
- We do not yet know how each lender will decide to collect those back payments from you. For example, some lenders may say that if you miss three months’ worth of payments (ex. June, July, August) you will need to pay all four months of payments in full in September. Other lenders may allow you to spread out the missed payments over a certain time period or add it on to the end of the loan term. If you are unable to meet their specific repayment terms, lenders may consider the loan to be in default. You will need to work directly with your lender and servicer to understand their terms of repayment.
- While you are in forbearance or on an active repayment plan, you cannot refinance until you are paid in full and current.
In Conclusion
We know that during this time you are being bombarded with information that is cloudy at best, so we hope that this helps to clarify some things for you should you need to explore mortgage forbearance. If you can keep making your payments as you have been, we would strongly suggest you do so. For specific information regarding your loan payment options, please reach out to your mortgage servicer directly.
If you have any questions, as always, please reach out to us directly. We are here for you and are thinking of you during this time of uncertainty.