How to find relief for your mortgage payments
A new federal law , the Coronavirus Aid, Relief, and Economic Security Act, put in place two protections for homeowners with federally backed mortgages.
First, your lender or loan servicer may not foreclose on you for 60 days after March 18, 2020. Specifically , the CARES Act prohibits lenders from beginning a foreclosure against you, or from finalizing a foreclosure judgment or sale, during this period.
Second, if you experience financial hardship due to the pandemic, you have the right to request a forbearance for up to 180 days. You also have the right to request an extension for up to another 180 days.
A forbearance is when your mortgage servicer, or lender, allows you to pause or reduce your mortgage payments for a limited time frame while you regain your financial footing. Forbearance does not mean your payments are forgiven. There can be many different forbearance programs depending on the type of your loan.
Make sure you understand how the forbearance will be repaid. You must contact your lender to request forbearance. There will be no additional fees, penalties or additional interest added to your account. You do not need to submit additional documentation to qualify, other than your claim to have a pandemic-related financial hardship.
Understand, this act applies to federally backed loans such as Fannie Mae, Freddie Mac, FHA, VA or USDA. Most loans are federally backed, but if yours is not, you may qualify for other programs created by the state in which you live. Contact your lender to determine what programs you qualify for.
To request mortgage relief, call your loan servicer. You may have to wait on the line for a while because a lot of people need help. You should be prepared to ask and answer questions. Most lenders have a website where you can find the information you need and answers to some of your questions.
When calling your lender, have your account number on hand. Ask what options are available to help temporarily reduce or suspend your payments. Ask if there are forbearance, loan modification or other options applicable to your situation. Ask if they can waive fees on your mortgage account.
Once you are able to secure forbearance or another mortgage relief option, ask your lender to provide written documentation that confirms details of your forbearance agreement and that you are clear on the terms.
While you’re in a forbearance period, there are a number of things you can do to protect yourself. Keep all written documentation on hand. Continue monitoring your monthly mortgage statement to make sure you don’t see any errors. Stop your auto payments for your mortgage.
It’s a good idea to continually check your credit. If you stop making payments without a forbearance agreement, the lender will report this information to the credit reporting companies, and it can have a lasting negative impact on your credit history. Once your income is restored, contact your lender and resume your payments.
If you receive any extra money during this period, save it so you can pay these deferred payments. Continue to pay your property taxes and insurances if your mortgage does not have an escrow account.
After your forbearance period ends, you will have to make arrangements with your lender to repay any amount suspended. Generally, repayment of forbearance can be done by the following options: one lump sum at the end of the forbearance period; added onto your existing monthly payments over a set number of months; or added to the end of your loan as additional payments or as a lump sum.
Always contact your lender to confirm how you may repay your forbearance.
Bob Hollick is a State Farm Insurance agent based in Washington.
To submit columns on financial planning, investing or business-related matters, email Rick Shrum at rshrum@observer-reporter.com.