Several important forbearance and foreclosure protections for homeowners were recently extended.
Now, millions of homeowners with federally guaranteed mortgages have the option to extend their forbearance an additional six months, and the federal foreclosure moratorium deadline has been pushed back to June 30, 2021.
These COVID-19 protections apply to 70% of existing single-family mortgages, including the 2.7 million homeowners who are currently in forbearance, according to a statement released by the White House.
Forbearance gives homeowners who are struggling financially the option to pause their monthly mortgage payments without hurting their credit score or paying penalties. If you’re eligible for forbearance, your options vary a bit depending on what type of loan you have. “The dates [for forbearance] vary based on who owns your loan, and based on when you got your original forbearance,” says Urban Institute senior research associate, Karan Kaul.
If you’re struggling to make your mortgage payment, contact your loan servicer. Even if you don’t have a federally-backed mortgage, your loan servicer may have forbearance options available for you.
Also, with these new rules, you won’t automatically be placed in forbearance or have your forbearance automatically extended. So it’s important to talk with your loan servicer. “If you’re experiencing any kind of hardship, call your servicer, right off the bat,” says Federal Housing Finance Agency press secretary Raffi Williams. Talking with your loan servicer will help you to understand all of the available options.
Here’s what you need to know about your options for entering and exiting forbearance.
Mortgage Forbearance Options
The new forbearance and foreclosure deadlines apply only to loans backed by a federal agency, Fannie Mae, or Freddie Mac. If you have a private mortgage, then these moratoriums won’t apply to you. But many private lenders are offering forbearance, so call your loan servicer and ask even if you don’t have a government-backed loan.
Keep in mind that you may still have a loan that qualifies for forbearance — even if you have a private lender. If you’re unsure what type of mortgage you have, call your loan servicer. You can also use the Fannie Mae or Freddie Mac tools to look up your mortgage, but those tools won’t include USDA loans, FHA loans or VA loans.
If you’re unsure what options are available to you, here are the updated deadlines to request a COVID-19-related forbearance for each type of mortgage.
|Loan Type||Deadline to Request Covid Forbearance||Maximum Length of Covid Forbearance||Foreclosure Moratorium|
|FHA Loan||June 30, 2021||Up to 18 months||Through June 30, 2021|
|VA Loan||June 30, 2021||Up to 18 months||Through June 30, 2021|
|USDA Loan||June 30, 2021||Up to 18 months||Through June 30, 2021|
|Freddie Mac||Feb. 28, 2021||Up to 18 months||Through June 30, 2021|
|Fannie Mae||Feb. 28, 2021||Up to 18 months||Through June 30, 2021|
While the deadline for the maximum, 18-month COVID-19 forbearance has already passed, loans backed by Fannie Mae and Freddie Mac are still eligible for a reduced forbearance. For initial forbearance claims made after Feb. 28, 2021, you may remain in forbearance for only up to 12 months.
If you have a VA loan, USDA loan, or FHA loan, you have until June 30, 2021, to request your initial forbearance. With those loans, if you’re currently in forbearance you may now qualify for an additional six months of forbearance, in 180-day increments. This additional six months increases the maximum amount of time homeowners that are currently in forbearance to up to 18 months. The foreclosure moratorium on these loans has been extended through June 30, 2021.
If you want to take advantage of these options, you’ll need to contact your lender directly
Options for Exiting Forbearance
When you’re ready to exit forbearance and begin making payments on your mortgage again, you’ll need to reach out to your loan servicer. There are a variety of ways to move forward from forbearance. You probably won’t be forced to make one lump-sum payment for all of the payments you missed, although that is one option.
Other options for exiting forbearance include:
- Loan modification
- Deferred payments
- Repayment plan
“Most people will end up in what’s called a payment deferral, which puts the missed payments onto the end of the loan,” Williams says. These payments are due if your home is sold, refinanced, or you reach the end of your current loan term. This is likely to be the easiest for many homeowners, especially if your income was only temporarily lost during the shutdown.
If you can afford to make extra payments, then you can set up a repayment plan with your lender. In this situation, you’ll pay more each month than your standard payment until you’ve made up for the payments you missed during the forbearance period.
For those who are still experiencing financial hardship or have had a permanent or long-term reduction in income, a loan modification may be the best option. “A loan modification is a permanent change to the terms of the loan,“ Kaul says. To modify your loan, you’ll work with your lender to adjust your repayment term or interest rate in order to reduce your monthly payment.