By Charlestien Harris
Many homeowners were able to take advantage of the forbearance option available through the CARES ACT provisions enacted by congress. Forbearance is a type of temporary mortgage relief that was very instrumental in helping borrowers keep their homes while being directly affected by the pandemic. While in forbearance, your monthly mortgage payment is reduced or suspended for a given time period.
So, what happens when your forbearance has come to an end? One of the most important points I try to stress to a client is that communication during this process is key to a successful outcome. Ideally, about 30 days before the initial forbearance plan is scheduled to end, you and your servicer should assess your situation and determine next steps. This could include additional forbearance or a workout option to make up your missed payments.
Under the CARES Act, you were eligible for forbearance for up to 12 months. The Biden/Harris Administration has extended the initial forbearance period up to an additional 180 days or until March 31, 2021. This can be done at the borrower’s request.
While the forbearance offers a temporary solution for homeowners, it is important to understand that mortgage forbearance is not the same as mortgage forgiveness. At the end of your forbearance period you must repay the delinquent payments and try to work with your loan servicer to determine the best solution for making them up.
The loan servicer should make the homeowner aware that they will not be required to pay the arrearage in a lump sum payment. There are multiple options for catching up with your missed payments, so it’s important you talk with your loan servicer to determine the work out option that works best for you, including reinstatement, repayment plan, payment deferral, partial claim or a loan modification just to name a few.
During forbearance, you will not accrue additional fees or penalties. However, you won’t be paying down your principal and the interest based on the terms of your mortgage will continue to accrue on your unpaid balance. To help you get a better understanding, let’s say you entered into a forbearance agreement of three months. If your monthly mortgage payment is $1,000, you should only owe $3,000 in missed payments plus interest at the end of a three-month forbearance period.
To stay on track with paying down your loan balance and less interest over the life of the loan, it’s important that you resume your payments as soon as you are financially able. If you need any additional information you can visit the following websites:
http://www.freddiemac.com/about/covid-19.html
www.hud.gov/sites/dfiles/SFH/documents/IACOVID19FBFactSheetConsumer.pdf
You can also contact your nearest HUD approved counseling agency by visiting the HUD website at www.hud.gov to find one. Southern Bancorp Community Partners has five HUD certified housing counselors on staff and we would be glad to assist you during this process and to help you understand the facts about the options that may be available to you as a homeowner.
Visit www.southernpartners.org to contact one of our counselors. Email me at Charlestien.harris@southernpartners.org or call me at 662-624-5776 (work) or 662-444-0371 (cell). Until next week, stay financially fit!