This year has been rough for millions of Americans. The coronavirus pandemic has resulted in millions of losing their jobs. Now that the coronavirus is entering its worst period, unemployment numbers are also starting to get worse. Thankfully, the federal government just agreed on a new round of stimulus to help Americans; however, many think it won’t be enough. Many Americans are already behind on their rent and mortgages. In fact, about 3 million Americans already have their mortgage in forbearance. With the pandemic getting worse and not enough stimulus on the way, there’s a good chance that many more will fall behind. If you or someone you know are facing hardship and risk falling behind on your payment, help is available. You have the ability to apply for forbearance for your mortgage, but time is of the essence. Here is what you need to know…

What is Mortgage Forbearance?

Mortgage forbearance is a simple concept. If you experience hardship that makes it difficult to make your mortgage payments you can make an agreement with your lender to delay these payments. A mortgage forbearance is not forgiveness. You still have to pay the money you owe your lender, eventually. How you pay your lender back and when you pay your lender back can vary. The team at Peoples Choice Mortgage wrote a deep dive into mortgage forbearances earlier this year and you can read it here. 

There are three standard forms of forbearance: lump sum payments, repayment plans, and mortgage modifications. Lump sum payments are when your lender agrees to defer your current payments in exchange for a lump sum of all payments deferred at the end of your agreement. Repayment plans allow you to pay your lender missed payments back in a series of installments. The length of these installments can vary, but rarely exceed 12 months. Mortgage modification is when the lender changes your mortgage agreement to add the length of your forbearance to the backend of your loan. Different lenders have different structures and it is up to you to work with your lender to find one that works. 

Why is Now the Key Time to get a Mortgage Forbearance?

The important thing to remember with getting a forbearance is that it is an automatic process. You can’t just miss your payment and expect to be given one. You have to apply for one from your lender. Now is the key time to apply for a mortgage forbearance because you need to apply for one before you start missing payments. Also, you want to take advantage of the CARES Act. In the early days of the pandemic, the federal government passed the CARES Act. Included in the CARES Act are mortgage deferral options due to hardship stemming from the pandemic. You want to apply for a forbearance now, so that you fall under the auspices of the CARES Act.

How Do You Apply for a Mortgage Forbearance? 

Navigating the process of getting a forbearance can be difficult. To help you through this process the Consumer Protection Financial Bureau provided five simple steps to help guide you.

Step 1: Find the contact information for your servicer. You need to get a hold of your servicer to make an arrangement. Your servicer is the person you make your mortgage payment to every month. To find their contact information, take a look at your monthly statement and look for their number. Only use the number you find on your statement to avoid getting taken advantage of by scams on the internet.

Step 2: Call your servicer. Call your servicer to get help with your mortgage. Explain your situation and why you are currently experiencing hardship and will be behind on your mortgage payments. If you have any questions about your lender’s process, now is the time to ask. 

Step 3: Ask if you’re available for protection under the CARES Act. Remember, the CARES Act provides special protections for homeowners that have been hurt financially by the pandemic. The CARES Act applies to all federally backed loans, such as FHA loans, USDA loans, and VA loans. Many private lenders also have special forbearance programs in place because of the pandemic. 

Step 4: Ask what happens when your forbearance period ends. Remember, there are several different structures of agreements. Figure out which type of structure your lender uses. Ask if you have an option of structures and whether or not there are any special fees. Make sure you understand the exact specifics of your agreement because not abiding by your forbearance agreement can lead to foreclosure. 

Step 5: Ask your servicer to provide the agreement in writing. It is important to have your agreement in writing so that you know exactly what you are promising. This also allows you to look at it at any point in the future you have questions about your agreement. It is also important to make sure your agreement is exactly as it was explained to you over the phone by your servicer.

Final Thoughts

These are difficult times for many homeowners. Few things are more frightening than falling behind on your mortgage payments. Fortunately, there is help out there. However, it is up to you to make it happen. Remember, forbearance plans are not automatic. You have to reach out to your lender and apply for them. If you are at risk of falling behind on your payments, do not wait to speak to your lender. Do it now! If you have questions or concerns about your mortgage payments and your options, you can also contact your mortgage broker. We have great relationships with our vendors and can help you get in touch with the people you need to get the relief you need. We love our clients dearly and are here to help you with anything we can to make sure your dream of owning a home doesn't turn into a nightmare.