What is Mortgage Forbearance?

If you are experiencing difficulty making mortgage payments due to the coronavirus pandemic, there are mortgage relief options available to you.

Many people have fallen on hard times, and for some, the right solution may be to temporarily suspend their housing payment for a limited period of time. While this might be the right solution for some, it can also be a dangerous solution if the terms are not clearly understood. Available mortgage relief options include:

  • Payment relief through a forbearance plan offers a reduction or suspension of your mortgage payments for up to 12 months, offered in increments of up to six months.
  • Late fee relief during your forbearance plan period
  • Repayment options following your forbearance. You are not required to repay missed payments all at once, but you have that option. You can also set up a repayment plan to catch up gradually or a loan modification to help keep payments affordable.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act puts in place two protections for homeowners with federally backed mortgages such as Fannie Mae, Freddie Mac, FHA, USDA, and VA loans. First, your lender or loan servicer may not foreclose on you for 60 days. This includes starting or finalizing a foreclosure judgment against you during that time. Second, you have the right to request a forbearance for up to 180 days and an extension for another 180 days. There will be no additional fees, penalties, or additional interest added to your balance. You must contact your lender and claim to have a pandemic related financial hardship.

A mortgage forbearance does not mean mortgage forgiveness. While the US Government has put forth recommendations for banks and lenders to issue forbearances without reporting negative credit to the bureau’s and temporarily halted foreclosures, they stopped short of issuing guidance to the banks and lenders on how to execute a forbearance and therefore, each may have different options.

Forbearance does not erase what you owe. You’ll have to repay any missed or reduced payments in the future. The types of forbearance available vary by loan type. If you’re able to keep up with your payments, keep making them. If you can’t pay your mortgage, or can only pay a portion, contact your mortgage loan servicer immediately to discuss mortgage relief options. It may take a while to get a loan servicer on the phone. Loan servicers are experiencing a high call volume and may also be impacted by the pandemic. Many lenders are offering a variety of repayment options, which might include tacking what’s owed to the back of the loan, so borrowers are not faced with a large lump-sum amount. Before you go into forbearance, however, make sure you understand what your repayment options are.

Below are a few organizations or professionals to assist with homeowners to stay in their homes:

  • HUD-Approved Housing Counselors. The US Department of Housing and Urban Development (HUD)-approved housing counselors can discuss options with you if you’re having trouble paying your mortgage loan or reverse mortgage loan.
  • Credit Counselors. Reputable credit counseling organizations are generally non-profit organizations that can advise you on your money and debts, and help you with a budget. Some may also help you negotiate with creditors.
  • Consumer Financial Protection Bureau. The CFPB is committed to providing consumers with up-to-date information and resources to protect and manage their finances during this difficult time. 
  • Hawaii Homeownership Center.The Hawaii HomeOwnership Center is committed to providing information and resources during this time of uncertainty due to the Coronavirus. If your income has been impacted, we are available to assist you in creating an emergency budget and review your options regarding your housing situation (if needed). We are available to renters and homeowners.
About the Author

Andrew Leong was born and rasied on the island of Oahu. He is a graduate from the Shidler College of Business at UH Manoa with a degree in Marketing. Prior to real estate, Andrew worked in hospitality management giving him great experience as a dedicated service professional. He strongly believes that being a realtor is more than just helping clients buy or sell a home, as a consultant he is there to guide clients to help make the best choices when it comes to the most important purchase of their lives. It’s not about the dollar but building relationships and doing what’s best for his clients. 

With the abundance of information available to clients today through multiple different media channels, Andrew’s superior market knowledge, negotiating skills and strong community relationships have helped give his clients that competetive edge for over 10 years.