Can you help me understand my mortgage forbearance options?


Q: P.L. in Hamilton County: Can you help me understand my mortgage forbearance options? My lender hasn’t been very helpful.

A: It really depends on the type of mortgage you have. If it’s federally backed (and about three quarters of all mortgages are, either via Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veterans Affairs, or the Department of Housing and Urban Development), the CARES Act allows you to request forbearance for up to 180 days if you’ve experienced financial hardships due to COVID-19. In fact, according to FOX Business, more than seven percent of all active mortgages in the U.S. are now taking advantage of forbearance plans (as of April 30th). There are no additional fees or penalties if you request this. All you need to do is call your loan servicer to get the process started.

If your mortgage is not federally backed, it is not covered by the CARES Act. In this case, you’ll need to check with your lender for your options.

As a reminder, forbearance does not mean that you don’t have to make your payments or that payments are forgiven. You are actually just ‘pausing’ payments. And here’s the important part: Make sure you understand how you’ll be expected to eventually re-pay the suspended payments. In some cases, we’re hearing about homeowners agreeing to a ‘balloon payment,’ meaning they will have to pay theentireamount owed at one time. If this is financially feasible for you to do, that’s fine – but it’s not for most people.

Thankfully, Fannie Mae and Freddie Mac recently announced that homeowners with federally-backed mortgages will not be forced to make a balloon payment. Instead, you’ll likely be able to add payments to existing payments over a certain number of months or add payments to the end of your loan. But double check with your lender about your options so you don’t agree to a re-payment plan you can’t afford.

Here’s The Simply Money Point: We know you said your lender hasn’t been much help, and as frustrating as that is, you’re still going to have to try and talk with them. Because if you don’t know all your options, you won’t be able to make an informed decision.