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Coronavirus, Finance, Mortgage 101

What You Need to Know About Mortgage Forbearance

From who can get mortgage forbearance, to what it is, this is your go-to resource about the basic of mortgage forbearance policies.

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If you are having trouble making your monthly mortgage payments these days, you are not alone.  Through the end of April, about 3.5 million homeowners have their mortgages in forbearance.

So, what is mortgage forbearance? Forbearance is a period when your mortgage servicer or lender allows you to pay your mortgage at a lower rate– or not pay any of your mortgage– during a predetermined period. However, you will have to pay back the partial or paused payments after the forbearance period ends.

Who Can Get a Mortgage Forbearance

Borrowers whose mortgages come directly from the federal government, are guaranteed by the federal government, or are owned by either Fannie Mae or Freddie Mac, have the right to ask for a six-month forbearance. If you are still unemployed, or face financial difficulties because of the coronavirus pandemic, when the 180-day period ends, you can apply for an additional 180 days of forbearance.

Your right to forbearance is protected by the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), which was enacted in late April. For more information about your rights under the CARES Act, contact the Consumer Financial Protection Bureau.

How to Get a Mortgage Forbearance

You must contact the company that services your mortgage if you want to get a forbearance. The company that bills you every month is your servicer and may be different from the lender that approved your mortgage. If you don’t know your servicer, you can find it by searching your name or address on this site. Find out all of the options are available to you to temporarily reduce or suspend your payments, such as modifying your mortgage or paying a lower monthly amount for six months.

Close up detail of town house rooftops with chimneys against blue shy.

What is a Federally Backed Mortgage?

Three government agencies guarantee mortgages to homeowners through approved private lenders. There three agencies are the Department of Veterans Affairs, the Federal Housing Administration, and the U.S. Department of Agriculture. These guarantees protect lenders from defaults, making it possible for lenders to offer mortgages that carry higher risks such as those with lower credit standards or lower down payments. The VA and USDA also make loans directly to borrowers.

Fannie Mae and Freddie Mac

Even if your mortgage is not from one of these three agencies, it may still be covered by the CARES Act. Many lenders will sell their conventional loans, which are loans from banks and other lenders, to Fannie Mae or Freddie Mac. Mortgages owned by these two government-sponsored enterprises are covered by the CARES Act.

You probably have no idea whether or not Fannie or Freddie owns your mortgage, but you can find out by visiting either one of their websites online at Know Your Options for Fannie Mae or Freddie Mac Loan Lookup.

What if your mortgage is not backed by a federal agency or owned by Fannie Mae or Freddie Mac? Though the CARES Act does not cover these mortgages, many banks and other mortgage lenders have forbearance programs and loan modification options that will lower your monthly payments. Check out your lender’s web site to see what they offer. NerdWallet keeps an updated list of what banks and mortgage lenders offer homeowners and how to contact them.  Call your servicer to discuss your options.

State or Local Housing Assistance

States, and some local governments, have housing agencies that provide their residents with homeownership assistance. Find information about what’s available where you live by using this list of what state housing agencies are doing in the way of coronavirus mortgage relief. Down Payment Resource also lists state and local coronavirus programs.

Key Takeaways

  • The CARES Act gives borrowers who have government-owned mortgages (including mortgages owned by Fannie Mae or Freddie Mac) the right to a mortgage forbearance up to six months.
  • Mortgages owned by Fannie Mae and Freddie Mac are not requiring borrowers to repay missed mortgage payments in a lump sum unless the borrower can afford to do so.
  • If possible, pay a portion of your mortgage during each month of forbearance. You will be glad you did when you create a repayment plan.
  • Make a plan to repay your missed payments that will work for you. Don’t overestimate your ability to pay each current month plus a portion of missed payments each month.
  • Your lender does not want you to default. Work with your servicer to review every option, including a loan modification that will lower your monthly payment or refinancing your mortgage when you are back on your feet financially.

 

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Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.

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