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Deferring Payment after Mortgage Forberance

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.

Considering Forbearance? Get the Facts First - ForbearanceReport.com

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
    • 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.

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.

Considering Forbearance? Get the Facts First - ForbearanceReport.com

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.

FindMyWayHome has been a resource for both homeowners and homebuyers that have experienced financial hardship since the great real estate crash of 2008.

This website was built by independent mortgage brokers.  My partner and I have been in the mortgage business for over 20 years each.  We maintain this website to give consumers an opportunity to avoid high-pressure salespeople and get expert advice anonymously.

We published “When Can I Qualify for a Mortgage After Bankruptcy, Short Sale, Foreclosure or DIL” in February 2011, and have been helping folks get back on the path to homeownership after a significant financial hardship ever since. We have answered over 2,300 questions from homeowners and homebuyers on that one article alone!

For over 12 years now, we have been helping families make more informed and educated decisions about homeownership, and if you find yourself in a challenging place, we’re here to help you recover as quickly as possible and get back on the path to homeownership.

About the Author

Scott Schang

A 20+ year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues and making sense of complicated real estate and mortgage topics on this website since 2007

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  • Leon says:

    Scott, my wife and I have been hit hard with this pandemic. We are currently in our 7th month of a forbearance and I see no change to our financial situation. We have a VA mortgage on one home and a 80/20 loan on a rental property in Florida. I have two adult children who have needed our assistance with living in California and relocating during the fires and two others also needing our help. What is the best way to handle repayment of our 8 or 9 months of forbearance? Please advise!

    • Scott Schang says:

      Hi Leon, I’m so sorry to hear about your hardship. Your reinstatement options will be determined by the type of loan and your servicer.

      Your VA loan will be much easier than the 80/20 on the rental. The VA is very flexible and will work with you to find a solution that works for you. Under the CARES Act, your VA loan can be in forbearance for up to 12 months.

      Do you know if the 80/20 is federally backed? Have you spoken to the servicer regarding reinstatement options?

      Expect that your servicer is going first ask if you have the money in savings to catch your mortgages up. It’s unlikely that you’ll be able to pay it all at once.

      What happens next is called the “workout waterfall” and is really just a series of options that will ultimately result in you being able to retain your home and catch up on these skipped payments.

      Your best-case scenario is a deferment of the skipped payments, which becomes a 2nd lien, non-interest bearing loan that is paid in full if you sell or refinance in the future.

      VA has other loan modification options that you will not get on a non-va loan.

      Stay in communication with your servicer, and have this conversation with them now. Banks do not want your home. They are going to work with you.

      The last thing I think I can share that might help is to be prepared to take steps to protect your credit. If you have equity in your rental, selling it might relieve a lot of pressure in other areas if things do not improve fast enough.

      Communicate with your servicers. The number should be on your monthly mortgage statement.

      I hope this helps?

  • Teresa Tims says:

    Awesome post… thanks for putting this together…