Thanks to the ongoing COVID-19 pandemic mortgage forbearance has become a popular method for many Americans who have lost their jobs, millions of families and individuals alike are finding themselves dealing with all sorts of financial hardships. In fact, according to recent studies, approximately half of Americans consider the current crisis to be a huge threat to their personal finances as of late March. Furthermore, between the dates of March 15, 2020 and May 30, 2020, over 40 million people ended up filing for unemployment benefits.

The federal government, in response, has announced plans to help with offering relief to homeowners who may not be able to keep up with their monthly mortgage payments at this time. These plans come in the form of the CARES Act, which was signed by President Trump back on March 27, 2020 and enables homeowners to take advantage of up to 12 months of mortgage forbearance if the mortgage itself is either federally owned or backed. The act also provided the stimulus checks that are currently being sent to citizens, as well as assistance for small business owners and other various types of relief measures.

While this may sound like a great idea, it’s important to keep in mind that putting off these kinds of payments may not actually be as helpful as you may think. In fact, signing up for a mortgage forbearance has the potential to create serious issues for you in the future.

One of the biggest issues regarding the CARES Act in terms of mortgage forbearance is that while it asks both lenders and servicing companies to allow payment delays for up to 360 days on federally-backed mortgages, the act itself isn’t necessarily specific in regards to what happens when the forbearance period itself ends. This means that individual services and lenders are essentially establishing different rules in regards to how borrowers will be required to make up the payments that they have missed.

One credit expert had the following to say about the possible downside of signing up for this type of program:

“If the lender or servicer demands that you payback the deferred amount all at once or in an otherwise expedited manner, that could be impossible for the borrower.”

The best option to consider is to contact your lender or mortgage servicing company in order to determine what the best solutions are for you to take advantage of; however, you may end up having to wait on hold for quite a while due to potential high call volumes during this specific time. You can also go online to their official website in order to see if you can begin the process there.

Basic Options

Here are some examples of the most basic options that you will likely end up encountering when the time comes for you to contact your lender for a forbearance regarding your mortgage:

Payments will be due immediately once the forbearance period ends.

  • Payment reduction will be due over a period of one year.
  • Any and all paused payments will be due at the end of the loan.

How to request mortgage forbearance

As opposed to the student loan relief program offered by the CARES Act, mortgage forbearance isn’t automatic, nor is it available from every mortgage company. In the event that you require payment relief from your lender, here are the steps that you will need to follow in order to request it.

  • Determine which specific company is the one that services your mortgage.
  • Take the time to conduct your own research to find out if your mortgage is actually backed by the federal government.
  • Speak to your mortgage lender and explain your current hardship to them.
  • Ask them what will happen once the forbearance period officially ends.
  • No matter what, take the time to document anything and everything.

For  further in-depth information on mortgage forbearance please take a look at this article from consumer finance.

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