The US Federal Government passed a new law, the Coronavirus Aid, Relief, and Economic Security (CARES) Act and it included protections for homeowners with federally backed mortgages.
If you have been affected by the declaration of the COVID-19 National Emergency, and frankly who hasn’t, you may have the opportunity to get some relief on your mortgage payments based on the CARES Act.
There are 2 protections:
- A moratorium on foreclosures
- Right to forbearance
However, please know that Forbearance is not forgiveness, nor is this a free pass to stop making your mortgage payments, this is temporary and a still evolving situation as to the implementation. Act with care and get the knowledge about your options to make the best educated decision for your family.
So, What is a Forbearance?
With this option, you and your mortgage company agree to temporarily suspend or reduce your monthly mortgage payments for a specific period of time. This option lets you deal with your short-term financial problems by giving you time to get back on your feet and bring your mortgage current.
I want to emphasize, Forbearance is temporary.
How does it work?
Forbearance reduces your monthly mortgage payment—or suspends it completely—during the forbearance period. If you qualify for forbearance, you and your mortgage company will discuss the forbearance terms:
- length of forbearance period,
- reduced payment amount (if the payment is not suspended), and
- the terms of repayment.
After the forbearance period has ended, you will need to repay the amount that was reduced or suspended.
There are usually 3 options you will qualify for:
- Reinstate or Cure
- Make a one-time payment for the amount due
i.(example: if your mortgage payment is $2000 per month and you do a 4 month forbearance, in the 5th month you will owe a lump sum of $10,000. $2000 for the 4 months plus the amount due for the 5th month.)
- Add a specific amount to your payments each month until the entire amount is paid
- With this option, you spread out your past due amount—added on to your current mortgage payments—over several months in order to bring your mortgage current.
- (example: if your payment is $2000 a month and you asked for forbearance relief of 4 months, in month 5, you would begin to repay the forbearance amount of $8000 over the next 12 months in addition to your regular $2000 payment. In this case it would be $2666 for the next 12 months to make the repayment of the forbearance amount & be “caught up”) This could also apply if you continue to make a reduced payment during the forbearance time – the amount of the difference owed would added to the amounts due to get caught up.
- Under this option, you reach an agreement between you and your mortgage company to change the original terms of your mortgage—such as payment amount, length of loan, interest rate, etc. In most cases, when your mortgage is modified, you can reduce your monthly payment to a more affordable amount.
- (example: if you request 4 months of forbearance relief and are unable to meet the above options a lender may add $8000 to the balance of the loan and rewrite your note for a longer term. They may also choose to offer you a different rate and term length in order make the payment more manageable. ** this will most likely be a case by case situation
Know The Rules:
Borrowers who are directly or indirectly impacted by COVID 19 can request relief assistance, which includes:
- Mortgage forbearance for up to 6 months, with the possibility of the additional 6 months extension
- Waiving all assessment of penalties and late fees
- Suspend or stop the foreclosure process for up to for up to a determined time
- Suspend all negative reporting to credit bureaus for delinquency or late payments
- Mortgage forbearance plans may also include a loan modification option or reduced payment amounts during the forbearance period – as mentioned above!
Things to remember:
- You must call your mortgage servicer – the company where you make your payments – to discuss your options.
- ALL servicers will have their own implementations. You are entitled to ask for relief, but not as to the options that will be provided.
- Remember this is temporary help – make good educated decisions that will be beneficial to you both in the short term and the long term
- Beware of Scams – always verify information & get it in writing
- Ask for help and clarification if you don’t understand your options
During these difficult times, I’m here to help you with any of your mortgage related questions.
My goal is to always provide comprehensive mortgage solutions to my customers with a high degree of Knowledge, Respect, Trust and Convenience.”
Remember bad news sells – don’t listen to everything you hear, get facts, make good choices and should you need some advice, reach out to me directly for a confidential conversation .
🙋♀I am up for the challenge & available to you if you need me.