Editorial | One of the hottest trending topics in the housing industry during the pandemic has been Forbearance. Millions of borrowers across the United States have been directly or indirectly impacted financially by the volatility of the current market and could potentially benefit from seeking a Forbearance. Many borrowers, however, are unfamiliar with how this type of mortgage relief program works. Borrowers must keep in mind that forbearance doesn’t erase what they owe. Instead, it provides options on how they can affordably repay missed payments later on. In essence, a forbearance is a written agreement that allows a borrower to reduce or suspend monthly payments for a specified time.
While forbearance is not new in the housing industry, the recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES Act) made significant amendments to this type of relief in helping mitigate foreclosures across the nation.
If the pandemic has significantly affected your capability to repay your mortgage on a timely basis, Loan forbearance could be an option. First, confirm that Freddie Mac owns your loan by using this loan look-up tool, since there are important things you need to know when considering forbearance.
1. Forbearance plans could go up to 12 months – When you contact your servicer or mortgage lender, which is the right thing to do when experiencing financial hardship, you may be initially offered up to six (6) months of forbearance plan. Before your initial forbearance period comes to an end, you may request to extend your forbearance for another 6 months if your servicer determines that your finances haven’t improved. Don’t be afraid of suspending your payments as you’re not required to repay all missed payments in a lumpsum, although it’s an option. Your servicer will help you determine what repayment option suits your situation.
2. It could allow you to suspend payments and accruing interests – Once you enter a forbearance program, your monthly payments including interests are suspended until the agreement expires. Suspending your monthly mortgage payments is worth considering if your income has been affected and you want to use your remaining funds for other important matters. Some homeowners may choose to continue repaying even in small amounts while in forbearance, so they’re not overwhelmed later on.
3. No documentation is required from you – Once you request forbearance as you believe that your finances have been affected by the pandemic, your servicer will not require you to provide documents to prove that your income has been affected. Moreover, your servicer will not collect additional fees or charge you interest when you request forbearance. However, you may find it ideal to prepare your mortgage and income statements before calling your servicer.
4. Previous delinquency doesn’t affect your eligibility – Under the CARES Act you can be eligible to avail forbearance regardless if you’re delinquent with your payments, as long as Freddie Mac owns your loan. Be sure to know who owns your mortgage before calling your servicer as rules and regulations can vary.
5. Your servicer must discuss with you the most appropriate Delinquency resolution option – Because every homeowner’s situation is unique, your servicer will help you determine what the best option for you is in order to tackle missed payments. Known as the Quality Right Party Contact or QRPC, your servicer must establish contact with you and help you deal with your coronavirus-related financial hardship.
Because of the ongoing challenges related to the pandemic, and knowing the above, you may find that forbearance is a positive option to help you get through these difficult times.
However, if you’re still able to make your monthly payments but would like to lower your monthly payments, an RPM Mortgage loan advisor can provide guidance in this way as well. Give us a call today to find out how we can help you achieve your financial goals in 2020 and beyond.