One of the goals of the recently passed CARES Act (Coronavirus Aid, Relief, and Economic Security Act) is to provide relief for struggling homeowners, including the requirement that loan servicers provide mortgage forbearance. It’s important to understand what this forbearance means and who is able to take advantage of the relief.
What is Mortgage Forbearance:
Forbearance is when your mortgage servicer or lender allows you to pause (suspend), or reduce your mortgage payments for a limited period of time while you regain your financial footing. It is NOT mortgage forgiveness nor does it forgive what you owe. It is basically a temporary period where mortgage payments will not be due monthly, to provide some immediate relief for those who need it. According to the CARES Act, loans will accrue interest during forbearance, but many will not be subject to additional interest or fees. At the end of forbearance, some loan servicers may request multiple months’ worth of payments due at one time, so it’s highly recommended that you contact your loan servicer to learn and understand their repayment terms. *the servicer contact information is located on your monthly mortgage statement*
Who is eligible for mortgage forbearance:
Qualification requirements for mortgage forbearance vary by lender, but generally you’ll start by submitting an application. Various lenders may allow you to start the application online, while others will ask that you call them first. Upon starting the application process, you’ll want to have a few items on hand:
- Your most recent mortgage statement.
- An estimate of your current monthly income.
- An estimate of your current monthly expenses.
- An explanation of your hardship (and, if possible, documents that substantiate your claim).
It’s best to start the process early rather than waiting until you’re about to miss a payment. Also, it is recommend that if you can make your mortgage payments, to keep paying them. Do not contact your servicer if you’re aren’t facing immediate financial hardship.
To learn more, check out this short, highly informational VIDEO from the Consumer Financial Protection Bureau, which explains forbearance and how to navigate the best options for you.
Any questions, feel free to reach out to one of our Home Loan Consultants, and we suggest that it is always a good idea to consult with your financial advisor or tax consultant before making financial decisions.