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FHA VA USDA Forbearance Fact Sheet

Forbearance Fact Sheet for FHA, VA, USDA Mortgages

BREAKING NEWS:  May 6th, 2020 – The Department of Housing and Urban Development (HUD) released a resource for servicers with loans insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Rural Housing Service (RSA-USDA).

The CARES Act Forbearance Fact Sheet for Mortgagees and Servicers of FHA, VA, or USDA Loans resource provides guidance to servicers about how to communicate with homeowners about going into and getting out of forbearance.

This guidance is going to the servicer of your loan. That does not mean that every employee working for that servicer will be properly trained and up to date with this information.

As recently as April, 27th, the HUD OIG released a memorandum titled: Some Mortgage Loan Servicers’ Websites Offer Information about CARES Act Loan Forbearance That Is Incomplete, Inconsistent, Dated, and Unclear.

Considering Forbearance? Get the Facts First - ForbearanceReport.com

The memorandum covers an analysis of 30 servicers that service 90.5% of all FHA loans in the market.  Nearly all of the servicers had enough incomplete, inconsistent, dated, or unclear information on their website that it raised concern from HUD, which resulted in this memorandum.

If you think it’s hard to update a website, think about training a bunch of new loss mitigation employees recently hired to handle the sudden volume of forbearance requests, soon to be reinstatement and mortgage workout requests.

Protect Yourself

If you are a homeowner with an FHA, VA, or USDA loan.  Use the link above and keep that document handy in case your servicer tells you something that contradicts what your options are.  These orders are coming from the top.  Any contradiction may just be a misunderstanding or a lack of training.

Guidance for Assisting Homeowners

I want to use an excerpt here from the document here because this wording is very precise.  HUD’s guidance is as follows:

Considering Forbearance? Get the Facts First - ForbearanceReport.com

If a borrower can still make their mortgage payment, request that they continue to do so. However, if the borrower requests a forbearance, a servicer must give them the forbearance requested.

    • No documentation is required to prove the hardship beyond the borrower asserting that they are suffering from hardship.
    • This relief is available to anyone who has a federally-backed mortgage, regardless of delinquency status.

Under the CARES Act, you are entitled to request an initial forbearance of your monthly mortgage payment for up to 180 days and may request up to an additional 180 days.  Your servicer must approve the forbearance for the amount and time that you request.

Considering Forbearance? Get the Facts First - ForbearanceReport.com

Under the CARES Act, this is done at your request and for as long as you request, up to 360 days in total (initial up to 180 days and then up to another 180 days, if requested) Your servicer should educate educated you on the impact of longer forbearances.

Your servicer may discuss shorter initial forbearances with you, such as 3 months for example, and work up or down depending on your situation.  Your servicer should also ensure that you understand that the missed payments must be repaid, although it may be paid back over time.

Your servicer should educate you about what options will be available to you to make repayments. Your servicer should inform you that you can contact them when your hardship is over or resume making their regular monthly mortgage payment to end the forbearance and discuss what repayment options are available.

Considering Forbearance? Get the Facts First - ForbearanceReport.com

Government Insured or Guaranteed Loan Forbearance Guidance

Federal Housing Administration (FHA)

FHA does not require lump sum repayment at the end of the forbearance. FHA has created a COVID-19 Standalone Partial Claim to help with repayment. If borrowers were current or less than 30 days delinquent as of March 1, 2020, they may be entitled to this option.

A partial claim is a zero-interest, no fee, second mortgage lien against your property that will become payable when you sell your home, pay off your mortgage, or your mortgage otherwise terminates. If you do not qualify for the COVID-19 Standalone Partial Claim, FHA offers other tools to help you repay their missed payments over time.

Veterans Affairs Mortgages (VA)

The servicers of VA loans cannot require you to make a lump sum payment immediately after you exit a CARES Act forbearance. The VA has a suite of loss mitigation options designed to assist Veteran borrowers in bringing their home loan current.

Considering Forbearance? Get the Facts First - ForbearanceReport.com

In addition to the regular loss mitigation options, VA is making available all disaster loss mitigation options to further assist if you have been affected by the novel coronavirus (COVID-19) pandemic.

Rural Housing Service Guaranteed Loan Mortgages (USDA)

RHS does not require a lump sum payment at the end of the forbearance. Servicers should work with you to determine if you can resume making regular payments and if so, either offer an affordable repayment plan or term extension to defer any missed payments to the end of the loan.

If you are unable to resume making regular payments, the lender should evaluate the borrower for all available loss mitigation options.

What if my loan is not FHA, VA, or USDA?

If your loan is not insured or guaranteed by FHA, VA, or USDA, you might be covered under Fannie Mae or Freddie Mac guidance which offers deferment at the end of forbearance, which is a best-case scenario.  You can use these lookup tools to see if your loan qualifies for the deferment option.

Considering Forbearance? Get the Facts First - ForbearanceReport.com

If your loan is not FHA, VA, USDA, or Fannie or Freddie, your servicer will determine their own methods for granting forbearance and what repayment options are available.  All servicers have been encouraged to follow the Fannie and Freddie example of deferment first, but it’s ultimately up to the servicer to decide what their policy will be.

Experienced & Expert Advice

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.

For over 10 years now, we have been helping people 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.

If you have any questions about mortgage forbearance, mortgage forbearance refinance, or other real estate or mortgage questions, leave your question or comment below and we’ll assist in any way that we can.

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

Leave a Question or Comment About this Topic

  • Hector says:

    Hello Scott, I have a USDA loan and my forbearance will end by the end of September but my servicer is not offering a deferral option which is the most convenient for my situation. They have only offer me Cap and Extend modification, a repayment plan for three months and a lump sum payment. Is it not mandatory to offer me a deferral of payments?

    • Scott Schang says:

      Hi Hector, USDA loans are covered under the CARES Act. It is not mandatory that your servicer offer you the deferral option. The CARES Act, and CFPB guidance does state that your servicer is not allowed to require a lump sum payment, and this sounds like it may be a creative way around that. I would inquire up the chain if possible, talk to a manager and ask them why they are not offering you the deferral option. Some servicers seem to be very quick to offer deferment, which is by far the least disruptive for the consumer, and other servicers are treating forbearance like financial mismanagement, which it is not.

      Good luck, and if you are still getting push back, feel free to shoot me an email directly at scott@findmywayhome.com and let me know who your servicer is. If there is anything else I can do to help, I will certainly try!

      I hope this helps?

  • yo says:

    what do you have to provide to get a partial claim after forbearance? is it automatically given after forbearance if you can make monthly payments?

    • Scott Schang says:

      There is not a set of guidelines around being granted a partial claim. My experience is that if you have an FHA loan, the servicers are offering the partial claim pretty quickly. You need to contact your servicer to see what options are available to you. If they do not mention partial claim as an option, don’t be afraid to bring it up and ask for it.

      Hope this helps?

  • David says:

    Is there a breakdown of mortgage loans in forbearance by State?

    • Scott Schang says:

      Hi David, are you looking for the volume of forbearances broken down by State? If so, I do not have that information, but most of the forbearance numbers are coming from Black Knight. Does this help?