Homeowners who have been financially impacted by the pandemic have been able to take advantage of federal mortgage forbearance since March 1, 2020. To continue helping homeowners, officials have made recent announcements extending mortgage forbearance. This protects struggling homeowners from foreclosures and evictions for federally backed mortgages for up to 180 days. These include FHA, VA, and USDA loans.
A few updates to know about both the federal eviction moratorium and mortgage forbearance:
A forbearance agreement, sometimes referred to as a deferred payment agreement, provides some relief for homeowners by allowing a pause or reduction — without penalty — on your monthly mortgage payment.
Under forbearance protection, once you tell your lender that you are experiencing a pandemic-related financial hardship and need forbearance, your mortgage servicer is not allowed to charge you interest or fees while your monthly payments are on hold. You can repay the missed payments if you decide to refinance or sell. Also, lenders can’t force you to catch up on these missed payments in a single lump sum, per the CARES Act.
Homeowners may be eligible for COVID hardship forbearance if they have been directly or indirectly impacted financially due to the coronavirus pandemic and have a federally backed mortgage, such as HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac loans. Non-federally backed loans may also be eligible.
September 30, 2021, is the current deadline for requesting an initial forbearance.
There is no specific, blanket time frame for how long forbearance lasts nor is there a particular federal guideline for terms. It really depends on your lender or creditor as well as your particular situation. However, under the CARES Act, the following extensions apply for forbearance periods:
| Forbearance Dates | First forbearance time frame | Second forbearance time frame | Third forbearance time frame | Maximum forbearance |
|---|---|---|---|---|
| Oct. 1, 2020 to June 30, 2021 | Up to 6 months | Up to 6 months | None | Up to 12 months |
| July 1, 2021 to Sept. 30, 2021 | Up to 6 months | None | None | Up to 6 months |
If you haven’t requested forbearance, you have until Sept. 30, 2021.
If you’ve already been in forbearance, this extension will not automatically apply. This means you must call your bank and request it again. Speak to a housing counselor at HUD if you have questions about whether you qualify.
When your forbearance term is over, you need to start repaying the amount that was paused. There are several pathways, but here is what will likely happen at this time:
It is best to speak with your lender to discuss what makes the most sense for your situation. Because this is such an uncertain time, lenders may be more open to adjusting your repayment to help set you up for success.
For example, if you still can’t make the full payments, your lender may provide you with an option to make partial payments instead.
The following are examples of possible situations and available options.
| Your situation | Option | Details |
|---|---|---|
| You can afford to pay more than the normal monthly mortgage payment | Repayment plan | A portion of the amount that was owed from forbearance may be added to your monthly mortgage payment. |
| You’re only able to pay the regular monthly mortgage amount | Deferral | The amount that was in forbearance may be added to the end of your loan and repaid when you refinance, sell, or when the mortgage term is over. |
| You’re only able to pay the regular monthly mortgage amount | Partial claim | Another option may be to move your forbearance amount into an interest-free second mortgage (COVID-19 Standalone Partial Claim). This amount needs to be repaid when you refinance, sell, or when the mortgage term is over. |
| You can’t afford to pay your mortgage | Modification | The mortgage amount and the paused payments may be calculated together. The amount may then reduced to an affordable monthly payment. |
| You’re able to pay all of your forbearance payments in one lump sum payment | Lump-sum reinstatement | This may be an option if you have the funds available. However, loan servicers aren’t allowed to make you pay a lump sum. |
The point of forbearance is to not penalize homeowners for their inability to make payments. Accepting forbearance should not hurt your credit score.
However, keep in mind that missed or reduced mortgage payments, even if they have a forbearance arrangement, are technically considered delinquent. Lenders can report them to the credit bureaus but are not required to, which is why it’s important to speak to your lender so you know what to expect. A foreclosure stays on your credit report for seven years and negatively impacts your credit score.
The most important thing to understand is that under forbearance, lenders are not allowed to foreclose your property.
Under federal law, a servicer cannot foreclose on your home unless your mortgage is more than 120 days past due. There can be exceptions depending on your forbearance terms and the rules vary by state.
Remember, if you can’t resume making payments on your loan, call your lender immediately so you understand what options you have to modify your loan.
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