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What You Need to Know About Mortgage Forbearance
May 11, 2020 — 4 min read
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In light of recent world events, President Donald Trump signed a $2.2 trillion economic rescue package into law on March 27th. The Coronavirus Aid, Relief, and Economic Security (CARES) Act put two protections in place for homeowners with federally backed mortgages:
- Foreclosure moratorium
- A right to forbearance for homeowners experiencing financial hardship due to COVID-19
What is Mortgage Forbearance?
You've probably heard this term more in the past two weeks than you have in your entire time as a homeowner. So, what does it mean? Is it a good idea? Do all homeowners qualify? Let's break down the details. MORTGAGE TERM: Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited period of time. It's important to note than forbearance does not erase what you owe. You must pay the payment reduction or unpaid payments later, once your income has been restored. Depending on the type of loan you have, the owner or investor requirements in your loan, and your servicer, the forbearance options will vary.If your mortgage is federally backed...
For a homeowner to be eligible for protections under the CARES Act, your mortgage must be federally owned or back by one of the following agencies:- U.S. Department of Housing and Urban Development (HUD)
- U.S. Department of Agriculture
- Federal Housing Administration (FHA)
- U.S. Department of Veterans Affairs (VA)
- Fannie Mae
- Freddie Mac
If your mortgage is not federally backed...
We recommend contacting your servicer. Many financial regulators have encouraged financial institutions to work with borrowers over the next few months. You may not be granted forbearance, but your servicer should be able to help identify other alternatives for your financial circumstances.Requesting Forbearance
Under the CARES Act, homeowners experiencing financial hardship due to the COVID-19 pandemic have the right to request forbearance for up to 180 days. If you're still facing financial difficulties after the initial 180 days, you may request an additional 180 days extension. Homeowners must contact their lender or loan servicer to request a forbearance. Depending on your financial situation, you may be asked to explain:- Why you're unable to make your payment
- Details about your income, expenses, and other assets
- Whether your financial standing is temporary or permanent
Wondering what your next steps are? Contact us today for more information.
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