Your Forbearance Plan is Coming to an End. What’s Next?
If you are at the end of your forbearance plan on your home mortgage loan, you’re not alone. About 1.9 million homeowners nationwide are currently enrolled in forbearance plans, according to Black Knight, and many of those plans can’t be extended past September.
If you’re still struggling to make regular mortgage payments, help is available. Depending on your loan type, who your service provider is, and how your loan is regulated, you may have a number of options available to you. Below, we walk you through some possible options so you know what steps to take.
Contact Your Servicer
Your servicer is not necessarily the bank you took your loan out with — it’s the financial institution who sends you your monthly mortgage bill. Call the number on your most recent statement, and tell them you want to review all available options around pandemic forbearance. Your servicer may tell you that the suspended forbearance payments will result in higher monthly mortgage payments. Here are some options your servicer may offer:
Reinstatement: You’d have to repay the full amount of deferred payments in one lump sum in the near future and resume your regular mortgage payments.
Repayment: Your servicer would add the amount of the suspended payments onto your current monthly payment. That means your monthly mortgage payment will increase to include the amount of suspended payments until the balance is paid.
Tell your servicer you’d like to know what other options they can offer, especially in light of COVID-19. They should tell you about the options below, and if they don’t, you should ask!
Loan modification: Ask if your loan is eligible for reduced monthly payments, where your mortgage term would get longer but you’d pay less every month. Not all loans may qualify for this, but you should ask anyway.
Payment deferral: If you’re unable to resume your regular payments, you may be able to defer missed payments so you don’t pay them until the end of your loan term or when your home is sold or refinanced.
Extending your loan term: Your servicer may agree to extend your loan term by spreading out payments.
Options for Private Label Mortgages
If you are in forbearance and you have a mortgage through a private bank (as opposed to a government agency), you are in luck! A new rule says that New York regulated banking organizations and any New York regulated mortgage servicers must comply with an amended banking law Section 9-x. This means that at the end of the forbearance period, you have the right to select one of three repayment options below that works best for you to exit your COVID-19 related forbearance:
Extend the term of the loan for the number of months the loan was in forbearance and keep the payments the same;
Repay the arrears accumulated during the forbearance period on a monthly basis (this option may be best if you saved up money or now have a higher income than before);
Negotiate a loan modification or any other options that addresses your changed circumstances -- this may be best if your income decreased or you had a life event that changed what you are able to pay each month.
Options for Government-Backed Loans
Whether you have a loan backed by Fannie Mae and Freddie Mac, or an FHA/HUD loan, your servicer has options for you, even if you aren’t ready to resume regular payments. These are a couple of the options being offered.
Partial claims / deferrals: This option is generally offered to homeowners who can afford their pre-COVID payment amount. It works by deferring what wasn’t paid during the forbearance in a 0% subordinate mortgage (which would be due when the property is sold or refinanced after your primary mortgage is satisfied). This option is generally offered to homeowners who are able to afford their pre-COVID payment amount.
Combining a partial claim with a loan modification: This combines the partial claim explained above with a loan modification that permanently changes one or more of the terms of the loan (like the length of months or the rate you pay).
Fannie Mae & Freddie Mac Loans:Your servicer can contact you 30 days before your forbearance period ends to discuss affordable repayment options with you. Fannie Mae and Freddie Mac do not require a large lump sum payment at the end of the forbearance.
FHA/HUD Loans: Loans guaranteed by FHA/HUD do not require a large lump sum payment at the end of the forbearance period. Options include COVID-19-related loan modifications, and other repayment options.
All other loans: Contact your servicer; there may be other repayment options available to you.
Conclusion
If your servicer is not offering you any of these options, you are strongly encouraged to seek assistance from a housing or legal advocate -- you can reach our network for free by calling us toll-free at 1-855-HOME-456 or visit homeownerhelpny.org/get-help