How Do I Defer Payments After Mortgage Forbearance?
What is Payment Deferral?
Payment Deferral, when we’re talking about mortgage forbearance reinstatement options, is about as good a solution as you’re going to find.
If you’re offered payment deferral as an option for reinstating your mortgage after forbearance, you are able to put your skipped payments at the end of your loan to be paid back later.
On 4/27/2020, Federal Housing Finance Agency (FHFA) director Mark Calabria released a statement “to combat ongoing misinformation” about having to pay all skipped payments in one lump sum at the end of the forbearance period.
Here’s an excerpt from the statement:
“During this national health emergency, no one should be worried about losing their home,” said Director Mark Calabria. “No lump sum is required at the end of a borrower’s forbearance plan for Enterprise-backed mortgages. To help homeowners navigate the forbearance process, FHFA partnered with CFPB on the Borrower Protection Program to provide homeowners accurate information about forbearance and address concerns noted in some consumer complaints. While today’s statement only covers Fannie Mae and Freddie Mac mortgages, I encourage all mortgage lenders to adopt a similar approach.”
This announcement covers only Fannie and Freddie loans, so the natural first step is to see if your loan is owned by Fannie Mae or Freddie Mac:
If your loan is owned by Fannie or Freddie, or if your servicer follows FHFA guidance, we have a Letter from Fannie Mae that specifically addresses offering deferment to customers in forbearance.
This letter is over 30 days old, so it’s possible that this new guidance from the FHFA will include looser guidelines, and if we receive clarification we’ll update this article.
Until this guidance is updated (if it will be), I think it’s important to at least have this conversation based on the rules as of today.
What Happens at the End of Forbearance?
While this is specific guidance provided by Fannie Mae, it is my hope that most lenders or servicers follow some uniform procedure for addressing homeowners that were forced to not go to work for 6 straight weeks.
Most homeowners I have had contact with have been offered a 90-day forbearance, some 180-days. According to the CARES Act, 180 days forbearance is to be offered to anyone impacted by COVID-19, and extended to 360 days if a financial hardship still exists.
According to Director Calabria’s statement, servicers are required to reach out to you 30 days before the end of your forbearance.
The missed payments will have to be paid back by the borrower. For those borrowers who opt for forbearance, their mortgage servicer will contact them about 30-days before the end of the forbearance plan to see if the temporary hardship has been resolved and discuss a variety of repayment options. If the hardship has not been resolved, the forbearance plan can be extended. If the hardship has been resolved, the servicer will work with the borrower to:
- Set up a repayment plan;
- Modify the loan so the borrower’s payments are added to the end of the mortgage; or
- Set up a modification that reduces the borrower’s monthly mortgage payment.
What if I have an FHA, VA, or USDA Loan?
The Consumer Finance Protection Bureau (CFPB) released a Guide to Coronavirus Mortgage Relief Options on its website, updated April 24th, 2020.
Between, Fannie, Freddie, FHA, VA, and USDA about 70% of homeowners out there are going to be covered under these guidelines:
Just as forbearance may differ between the federally backed agencies or entities, so does the repayment of the forbearances. Please check back for updated information as well as check with your loan servicer and the website of the agency or entity that owns or guarantees your loan.
The following information provides some of the options to repay your forbearance.
- Fannie Mae & Freddie Mac loans:
- Borrowers allowed to repay past due amount within 12 months after forbearance ends;
- Extend the term of the mortgage by the exact number of months in forbearance;
- Add past due amounts into loan balance and extend the term of the loan by the number of months necessary to make the monthly payment the same as the previous payment;
- Add past due amounts into loan balance and extend the term of the loan for 40 years (480 months).
- FHA loans:
- Borrowers may enter into a repayment plan to repay past due amounts within 6 months after forbearance ends;
- Extend the term of the mortgage to 30 years (360 months) by adding the past due amounts into the previous monthly payment;
- Past due amounts paid off at the end of the loan in a lump sum.
- NOTE: Updated FHA guidance: No lump sum due – deferment possible
- Fannie Mae & Freddie Mac loans:
- VA loans:
- Borrowers may enter into a repayment plan to repay past due amount within 6 months after forbearance ends;
- Add past due amount into loan balance and extend the term to 30 years (360 months);
- Targets lower payment of 31% of borrower’s gross income by extending the loan term to 30 years (360 months) with the option to forbear principal.
- USDA loans:
- Borrowers may enter into a repayment plan to repay past due amounts within 6 months;
- Add past due amount into loan balance and extend the term to 30 years (360 months) as long as the payment is less than or equal to payment prior to forbearance;
- Lump-sum repayment at loan payoff.
- VA loans:
For non-federally backed loans
Check with your lender and your loan servicer for the forbearance repayment options that they offer. You may be able to find information about forbearance programs by checking the websites of your lender and servicer for more detailed information.
Experienced & Expert Advice
There is a lot of misinformation in the news and on the internet coming from professional sources that you would normally trust. Much of this “news” and social media about forbearance has been only partially correct to straight-up dangerous.
It is this lack of accurate reporting, and ambiguous guidance that was our motivation for creating ForbearanceReport.com, and why we continue to cover the challenges that homeowners are sure to encounter as we all try to find a soft landing out of this COVID-19 crisis. Whenever possible, we are using excerpts from official, and high trust sources.
Mortgage forbearance, deferment, and mortgage payment relief options are terms that are a part of many homeowner conversations today as we navigate the fallout from the COVID-19 pandemic.
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