How to negotiate mortgage forbearance

How to negotiate mortgage forbearanceMoney trouble can occur at any time and can make the repayment of a mortgage loan very difficult. Especially during and after an economic recession, the chances of losing your home are much greater. One way in which a borrower can save himself from losing his home is by making an agreement with his lender, in which the lender agrees to not foreclose on the borrower’s mortgage, if the borrower agrees to start making payments that will bring him up to date on his mortgage repayment.

This agreement is called mortgage forbearance and it’s designed to help borrowers who are going through tough financial times. Borrowers can stop making mortgage payments or even postpone them for a period of time, after which they can catch up and resume making regular monthly payments. Mortgage forbearance also allows the borrower to negotiate some of the default amount with their lender.

Is Mortgage Forbearance the Right Option for You?

Mortgage forbearance is a good option for those who experience temporary financial hardships, such as changes in employment, an expensive divorce, a death in the borrower’s family, having to temporarily pay two mortgages due to a job relocation, military service, or being jailed. If you consider that your financial troubles are only temporary and you will be able to recover shortly, then mortgage forbearance is worth taking into account.

If your financial hardship is of a more permanent nature, your lender may still agree to a mortgage forbearance if they consider that you have enough equity in your home and will be able to refinance with another lending institution. Either way, you will need to go through the necessary steps in order to obtain a mortgage forbearance agreement.

Obtaining Mortgage Forbearance

  1. Analyze your financial situation and call your lender. Carefully analyze not only the unexpected decrease in income or increased expenses, but also every source of monthly income and all expenses. Your lender will want to know all these aspects of your financial situation in detail, so researching them thoroughly will help you and your lender both better determine if your financial crisis is temporary or permanent, and how long will it take you to recover. Your income sources may include salaries, child support, financial aid, pension or veteran’s benefits, home rental income and others. Expenses may include loan and rental payments, food, utilities and many others. Having every source of income and expense laid out in front of you can also help you determine where improvements can be made in order to get out of this situation quicker.
  2. Write a hardship letter. After writing down all your sources of income and expenses, and determining that even after making changes, your expenses are still greater than your income, it is time to document your financial situation to your lending institution through a hardship letter. Lenders have great resources for finding out information about your income and expenses, so it’s recommended to be completely honest and provide all of the necessary information in your hardship letter.
  3. Sign the mortgage forbearance agreement. After receiving your hardship letter, if your lender approves your request for mortgage forbearance, the last step is for you to read the agreement and sign it. The lender agrees to not file for foreclosure for the duration of the agreement, and you agree to catch up on your mortgage payments. Mortgage forbearance will not waive the interest that you must pay, or the late fees.

Mortgage forbearance is a great way of getting back on track with your mortgage repayment and avoid losing your home to foreclosure. But before committing yourself to this agreement, make sure that you fully understand what it involves, and that you will be able to recover from your financial hardship in a short time. Also, make sure that the mortgage forbearance is the right choice for your financial needs and not just a tool that will help postpone the inevitable mortgage default.

Many homeowners are struggling to make mortgage payments as a result of the coronavirus pandemic. Here is information you can use, about your options and your rights.

If you are facing money struggles, you are not alone

Help is available. The majority of homeowners are eligible for forbearance for a coronavirus-related financial hardship. Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time while you regain your financial footing.

Forbearance is not automatic. You must request it from your mortgage servicer. This might seem like a big step to take, but taking action now can help you pause your payments and avoid foreclosure.

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Forbearance ends with a payment plan, not a lump-sum payment

Homeowners who receive COVID hardship forbearance are not required to repay their paused payments in a lump sum once the forbearance period ends. You can talk with your mortgage servicer, or start with a HUD-approved housing counseling agency, to discuss a repayment plan that works for your situation.

Most servicers must offer forbearance, and the others can provide options

The COVID hardship forbearance applies to all federally backed and federally sponsored mortgages, which includes HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac mortgage loans. This includes most mortgages. Homeowners with federally backed loans have the right to ask for and receive a forbearance period for up to 180 days—which means you can pause or reduce your mortgage payments for up to six months. Additionally, you can request an extension of forbearance for up to 180 additional days, for a total of 360 days.

UPDATE: Since this video was released, federal agencies have provided more options to extend forbearance.

: You may request up to two additional three-month extensions, up to a maximum of 18 months of total forbearance. But to qualify, you must have received your initial forbearance on or before February 28, 2021. Check with your servicer about the options available.
If your mortgage is backed byHUD/FHA

: You may request up to two additional three-month extensions, for up to a maximum of 18 months of total forbearance. But to qualify, you must have received your initial forbearance on or before June 30, 2020. Check with your servicer about the options available.

Other mortgages may also provide similar forbearance options. If you are struggling with payments, servicers are generally required to discuss relief options with you, whether or not your loan is federally backed.

Getting through to your servicer could be easier than you think

In the early days of the pandemic, homeowners reported trouble getting through to servicers by telephone. Now, many mortgage servicers have increased their capacity to respond to customers. Patience is still encouraged, and you may be able to reach your servicer by telephone or online. Some servicers may have websites for you to understand your options and request forbearance.

Mortgage servicers generally cannot ask for proof of hardship

You can ask for forbearance and tell your servicer that you are going through a financial hardship because of the pandemic. If you have a federally backed loan, the mortgage servicer is not permitted to ask you for proof of hardship.

You do not need to pay for help with forbearance options

HUD-approved housing counseling agencies and the counselors they employ provide their services at no cost to borrowers requesting forbearance. You should steer clear of scams – especially offers to help that come with upfront fees – whether the offer is for your mortgage or for other services, like assistance with unemployment benefits or credit repair.

No need to wait—ask for help now

If you have a home loan backed by HUD/FHA

your mortgage servicer is authorized to approve initial COVID hardship forbearance requests until the COVID-19 National Emergency is officially over. Previously the deadline was set for September 30, 2021.

If your loan is backed by Fannie Mae or Freddie Mac

, there is not currently a deadline for requesting an initial COVID hardship forbearance.

In any case, taking action without delay can help you take control of your finances.

Federal Coronavirus resources

White House Coronavirus Task Force

Information about COVID-19 from the White House Coronavirus Task Force in conjunction with CDC, HHS, and other agency stakeholders.
Visit coronavirus.gov

USAGov

Information on what the U.S. Government is doing in response to COVID-19.
Visit usa.gov (English)

HUD-approved housing counselors

Visit consumerfinance.gov/find-a-housing-counselor or call the CFPB at (855) 411-CFPB (2372) to find a HUD-approved housing counselor, at no cost to you.

Submit a complaint

Have an issue with a financial product or service? We’ll forward your complaint to the company and work to get you a response — generally within 15 days.

By: Dave Roos | Oct 5, 2020

Mortgage forbearance is a temporary pause or reduction in monthly mortgage payments for a homeowner experiencing financial hardship. It’s not loan forgiveness; instead the deferred payments do need to be repaid at some point. But mortgage forbearance can be a lifeline for homeowners who unexpectedly lose their job or suffer losses from a natural disaster, including the COVID-19 pandemic.

The key to avoiding foreclosure during a financial crisis is to ask for help immediately, says Chuck Kracht, director of loan servicing for the Idaho Housing and Finance Association, which offers free loan counseling to struggling borrowers.

“That’s the best advice I can give to anyone,” says Kracht. “The second anyone has any sort of trouble, they need to call their mortgage servicer or lender, or a loan counselor.”

Time is of the essence, because if you’re able to stay current on your mortgage payments not only will your lender be more open to forbearance, but your credit also won’t take a hit. During forbearance, paused payments aren’t reported to the credit agencies as delinquent if you were on time with your previous monthly payments.

“Mortgage forbearance is when a lender or mortgage servicer either pauses or lowers your payment for a limited period of time,” says Kracht. “It’s designed to provide payment relief during a short-term financial difficulty.”

In non-pandemic times, forbearance plans are typically offered as a way to keep borrowers in their homes during a period of unemployment or recovery from a natural disaster like a hurricane or wildfire.

The terms of a forbearance agreement depend on the borrower’s specific financial situation, so lenders typically ask for financial records like monthly income and expenses. Sometimes the mortgage payment is reduced and other times it’s suspended entirely. Kracht says that the typical length of forbearance runs from three months to a year.

How Are Deferred Payments Repaid?

Mortgage forbearance is a temporary solution to financial hardship, not a long-term fix. Once a borrower is back on their financial feet, Kracht says that there are three standard options for repaying a forborne mortgage:

  • Tack it on to the end. Many lenders will allow homeowners to move all deferred payments to the end of the mortgage. Think of it as a no-interest second loan that’s repaid either when the house is sold or when the original mortgage is fully repaid.
  • Add it to your monthly payment. A second option is to slowly repay the deferred amount as a small increase in your remaining monthly mortgage payments.
  • Pay it off in one lump sum. While this option is less common, some borrowers pay off the full amount of deferred mortgage payments immediately after the forbearance period ends.

Benefits and Drawbacks of Mortgage Forbearance

Forbearance is a smart option for both borrowers and lenders. For borrowers, the biggest plus is that it offers a temporary break from monthly mortgage payments without adversely affecting their credit. Forbearance gives them much-needed time to find a new job or recover from a disaster without technically missing a payment.

Kracht says that forbearance is a good deal for banks and mortgage lenders, too, even if it means a reduction or pause in payments, because anything is better than foreclosure.

“The foreclosure process really doesn’t benefit anybody,” says Kracht. “It’s very costly to go through foreclosure. The alternative is retention, keeping somebody in their home, which is the best option.”

The main drawback to forbearance would be that if you have trouble paying the mortgage in general (because you don’t earn enough for instance) at some point, the payments are going to come due. As we said earlier, loan forbearance is not the same as loan forgiveness, so the unpaid debts continue to accrue.

Mortgage Forbearance and the CARES Act

Before the COVID-19 pandemic, a few states had created forbearance programs to provide temporary mortgage relief after a storm like Hurricane Harvey in 2017, but the incredible job losses caused by the pandemic — 22.2 million new unemployment claims in March and April 2020 alone — required a whole new level of emergency mortgage assistance.

Under the CARES Act, homeowners affected by the pandemic are automatically granted mortgage forbearance for 180 days with an option for extending an additional 180 days if needed. Kracht says that the biggest difference between the forbearance options authorized by the CARES Act and regular forbearance plans is how simple and streamlined the process is for obtaining them.

Usually a lender or mortgage servicer will require financial statements and records before extending an offer of forbearance, but not under the CARES Act.

“All that’s required is for the borrower to call the mortgage company and say that they’ve been affected,” says Kracht. “At that point, the mortgage servicer or lender will put them on a forbearance plan, no questions asked and no financial information required.”

The repayment options under the CARES Act are the same as regular forbearance agreements. An estimated 3.6 million households, or 6.8 percent of all active mortgages were in COVID-19-related forbearance, according to one report from October 2020.

What If Forbearance Isn’t Enough?

Forbearance is meant to be a short-term pause in mortgage payments while a borrower gets back on their feet, but what if the forbearance period is set to expire and the financial situation hasn’t improved?

Foreclosure is always a possibility, but as Kracht says, lenders have their own reasons for wanting to keep borrowers in their homes and will only turn to foreclosure as a last resort. He explains that the best advice is to call your lender or a free and confidential loan counselor (find one near you) as soon as you realize that there may be difficulty making payments when the forbearance period ends.

At that point, the best option for you and your lender is to make adjustments to your mortgage that make payments more affordable, either by refinancing the mortgage at a lower interest rate or creating some kind of customized payment plan that better fits your budget.

In response to the pandemic, the Federal Housing Finance Agency (FHFA) has extended its foreclosure moratorium for all homes with federally backed loans (Fannie Mae and Freddie Mac) until at least Dec. 31, 2020.

Forbearance is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later.

Forbearance can help you deal with a hardship, such as, if your home was damaged in a flood, you had an illness or injury that increased your healthcare costs, or you lost your job. Forbearance does not erase the amount you owe on your mortgage. You will have to repay any missed or reduced payments.

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How to request a forbearance

Call your servicer and let them know your situation immediately. Ask them what “forbearance” or “hardship” options may be available.

Some servicers will require that you request forbearance or other assistance within a certain amount of time after a disaster or other qualifying event.

Mortgage forbearance options

Forbearance is complicated. There isn’t a “one size fits all” because the options depend on many factors. Those factors include:

  • The type of loan
  • The owner or investor requirements in your mortgage loan
  • Your servicer

There are key things to consider with each type of forbearance. You’ll want to pay close attention to how your servicer expects you to pay back any missed or reduced mortgage payments.

Here are some forbearance examples to guide you

Paused Payments Option-Paid During Existing Mortgage: Your servicer allows you to stop making payments for six months, but you must pay everything back at once when your payments are due again.

What to consider:

  • You may owe a big bill that comes due all at once. For example, if your servicer allowed you not to pay your mortgage for six months, at the end of the forbearance period, you may owe all six of your missed mortgage payments in one month.
  • Interest on the paused amounts will continue to accrue until you repay them.

Mortgage Payment Reduction Option: Your servicer allows you to reduce your $1,000 monthly mortgage payment by half for three months. After the three months are over you have one year to pay back the amount of that reduction.

What to consider:

  • The amount of the reduction would be spread out over 12 months and added to your mortgage payment once the reduction period is over. This means your monthly mortgage will increase during that one-year period. Using the example above, you would pay $500 for three months and starting on the fourth month you would need to pay $1125.00 ($1,000 + $1500/12) each month for the next 12 months.
  • Interest on any reduced amounts will continue to accrue until you repay them.

Paused Payment Option-Paid back at End of Mortgage: Your servicer allows you to pause payments for one year, and that amount is repaid by either adding it to the end of your mortgage loan or by you taking out a separate loan.

What to consider:

  • You can extend the term of your loan for some amount of time to pay back the paused payments or take out a separate loan.
  • Extending your loan means the missed payments will be added on to the end of your loan. For example if you were given a twelve month period where you didn’t have to pay your mortgage, you’ll have twelve months of payments added on to the date when your loan was supposed to be paid off by.
  • Extending with a separate loan means when your mortgage is due you’ll also have to pay off this separate loan. This is like a balloon payment, which is one large payment due at the end of your loan.
  • Interest on the missed amounts will continue to accrue until you repay them.

for more information on how to avoid foreclosure.

Where to seek help

For help in exploring your options, reach out to a housing counselor. Use the CFPB’s “Find a Counselor” tool to get a list of counseling agencies approved by the Department of Housing and Urban Development (HUD). You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).

If you’re a homeowner in a state included in the federal Hardest Hit Fund

, you may qualify for assistance.

The Hardest Hit Fund programs vary by state and may include:

  • Mortgage payment assistance for unemployed or underemployed homeowners
  • Principal reduction
  • Help for homeowners transitioning out of their homes into more affordable homes

For more information about the program in your state, check with your state’s housing finance agency

If you have a reverse mortgage, you can contact a reverse mortgage housing counseling agency

approved by HUD.

If you’re facing foreclosure or have been served with legal papers, you should consult an attorney. You may be able to find legal assistance from a free legal aid program for your area or territory.

As the coronavirus began sweeping through the country in March 2020, many states issued shut-down orders for businesses, putting as many as 40 million people out of work by May. On March 27, 2020, Congress passed the CARES Act to offer economic relief to those affected by the shut-downs, expanding unemployment benefits and offering mortgage forbearance to homeowners with mortgages backed or insured by the federal government, including Freddie Mac, Fannie Mae, VA and FHA.

In the first 18 months of the pandemic, about 7.7 million homeowners took advantage of COVID-related forbearance plans, according to Black Knight. But by the beginning of November 2021, the number of homeowners still in forbearance dropped to just over 1 million.

Black Knight reports that 84% of borrowers once in forbearance have exited their plans, with 74% either reperforming on their mortgages (51%) or having paid off in full (23%) through the refinance or sale of their home.

After multiple extensions, many forbearance plans expired at the end of September. The Mortgage Bankers Association issued its last weekly report on forbearance on Nov. 8, transitioning to a monthly report.

According to Mike Fratantoni, the MBA’s senior vice-president and chief economist, more borrowers exiting plans in the last week of October went into modification, “a sign that they have not yet regained their pre-pandemic level of income.”

“The strong job market report from October, with another drop in the unemployment rate and a pickup in wage growth, is a positive sign for homeowners still struggling to get back on their feet,” he added.

One year after the onset of the pandemic, the Mortgage Bankers Association estimated that 2.6 million homeowners were still in some form of forbearance. With extensions by the FHFA, borrowers would have up to 18 months of coverage, running through Aug. 31, 2022.

Our goal is to provide a resource that is continuously updated with the latest news and information so that lenders, servicers and homeowners can work together during this period of crisis and recovery.

The U.S. subprime mortgage meltdown that began in late 2007 brought on a severe economic recession. Years later, many households still are trying to work their way back to financial solvency. One of the more important restorative tools is a mortgage loan modification — often one of a group of government-initiated programs under the umbrella of the Home Affordable Modification Program, or HAMP.

Just qualifying for one of these programs is incredibly difficult. If you’ve actually moved your loan modification application forward to a point where you are negotiating terms with your lender, you are in the lucky minority. Here are some tips from the trenches about how to close the deal on the best available terms.

Video of the Day

Negotiating a Reduction in the Principal Amount Owing

A loan modification involves one or more of the following: a reduction in the principal amount owing, a lower interest rate and a partial forgiveness of accrued penalties and fees including the good faith payment most lenders require at the beginning of the negotiation process.

Getting the principal amount reduced is toughest. At least one realtor claims that banks doing loan modifications simply won’t reduce principal amounts. This is countered by government HAMP documents, however, that state if the loan amount exceeds 115 percent of the current appraised value of the home, “the servicer must consider whether a Principal Reduction Alternative (PRA) . should be effected as one part of the HAMP modification.” If your lender claims not to know about this and your loan qualifies, show her the literature that confirms your right to a principal reduction. In this instance and at every other stage of the negotiation, put your requests in writing and confirm their delivery.

Negotiating a lower interest rate

Depending upon your financial situation, you may be able to obtain a new interest rate of as little as 2 percent. Note that whatever rate you get starts climbing again at 1 percent per year after five years, in most cases for three or four consecutive years.

How to negotiate mortgage forbearance

When mortgage forbearance plans were first announced and the pandemic surged through the country in early 2020, many homeowners were allowed to pause their mortgage payments. Some analysts were concerned that once the forbearance program ended, the housing market would experience a wave of foreclosures like what happened after the housing bubble 15 years ago.

Here’s a look at why that isn’t the case.

1. There Are Fewer Homeowners in Trouble This Time

After the last housing crash, over nine million households lost their homes to a foreclosure, short sale, or because they gave it back to the bank. Many believed millions of homeowners would face the same fate again this time.

However, today’s data shows that most homeowners exited their forbearance plan either fully caught up on payments or with a plan from the bank that restructured their loan in a way that allowed them to start making payments again. The latest data from the Mortgage Bankers Association (MBA) studies how people exited the forbearance program from June 2020 to November 2021.

Here are those findings:

38.6% left the program paid in full
  • 19.9% made their monthly payments during the forbearance period
  • 11.8% made up all past-due payments
  • 6.9% paid off the loan in full
44% negotiated work-out repayment plans
  • 29.1% received a loan deferral
  • 14.1% received a loan modification
  • 0.8% arranged a different repayment plan
0.6% sold as a short sale or did a deed-in-lieu
16.8% left the program still in trouble and without a loss mitigation plan in place

2. Those Left in the Program Can Still Negotiate a Repayment Plan

As of last Friday, the total number of mortgages still in forbearance stood at 890,000. Those who remain in forbearance still have the chance to work out a suitable plan with the servicing company that represents their lender. And the servicing companies are under pressure to do just that by both federal and state agencies.

Rick Sharga, Executive Vice President at RealtyTrac, says in a recent tweet:

“The [Consumer Financial Protection Bureau] and state [Attorneys General] look like they’re adopting a ‘zero tolerance’ approach to mortgage servicing enforcement. Likely that this will limit #foreclosure activity for a good part of 2022, while servicers explore all possible loss [mitigation] options.”

For more information, read the warning issued by the Attorney General of New York State.

3. Most Homeowners Have More Than Enough Equity To Sell Their Homes

For those who can’t negotiate a solution and the 16.8% who left the forbearance program without a work-out, many will have enough equity to sell their homes and leave the closing with cash instead of facing foreclosures.

Due to rapidly rising home prices over the last two years, the average homeowner has gained record amounts of equity in their home. As Frank Martell, President & CEO of CoreLogic, explains:

“Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth.”

4. There Have Been Far Fewer Foreclosures Over the Last Two Years

One of the seldom-reported benefits of the forbearance program was that it allowed households experiencing financial difficulties prior to the pandemic to enter the program. It gave those homeowners an extra two years to get their finances in order and work out a plan with their lender. That prevented over 400,000 foreclosures that normally would have come to the market had the new forbearance program not been available. Otherwise, the real estate market would have had to absorb those foreclosures. Here’s a graph depicting this data:

How to negotiate mortgage forbearance

5. The Current Market Can Easily Absorb Over a Million New Listings

When foreclosures hit the market in 2008, they added to the oversupply of houses that were already for sale. That resulted in over a nine-month supply of listings, and anything over a six-month supply can cause prices to depreciate.

It’s exactly the opposite today. The latest Existing Home Sales Report from the National Association of Realtors (NAR) reveals:

“Total housing inventory at the end of November amounted to 1.11 million units, down 9.8% from October and down 13.3% from one year ago (1.28 million). Unsold inventory sits at a 2.1-month supply at the current sales pace, a decline from both the prior month and from one year ago.”

A balanced market would have approximately a six-month supply of inventory. At 2.1 months, the market is severely understocked. Even if one million homes enter the market, there still won’t be enough inventory to meet the current demand.

Bottom Line

The end of the forbearance plan will not cause any upheaval in the housing market. Sharga puts it best:

“The fact that foreclosure starts declined despite hundreds of thousands of borrowers exiting the CARES Act mortgage forbearance program over the last few months is very encouraging. It suggests that the ‘forbearance equals foreclosure’ narrative was incorrect. . . .”

How to negotiate mortgage forbearance

Sharon Cox, REALTOR®

Sharon is a top producing agent working as a team with her husband David at Paragon Realtors. She assists buyers purchasing their first home to those looking for luxury properties locally and globally and provides service after the sale. Through her global connections with other REALTORS®, she can market her listings to buyers moving into the Metroplex or help a client relocate out of state. The Cox Team builds lasting relationships with their clients. Their clients feel confident to refer them to their family and friends.

As a former college professor, she believes in constantly keeping up with the latest in real estate by taking educational courses and receiving certifications that help her provide the best service.

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When you’re facing a financial challenge due to sudden job loss or illness, the stress of unpaid bills certainly doesn’t improve your situation. When your mortgage is one of the bills you can’t pay, that stress level climbs through the very roof that you’re afraid of losing. It won’t take your mortgage company long to start calling you to find out when you intend to start making payments again. All banks and lenders have rules that are slightly different, but nonpayment of your mortgage will eventually lead to foreclosure, no matter how patient the bank chooses to be.

Fortunately, there are several options for avoiding foreclosure proceedings, one of which is mortgage forbearance. Qualifying for a forbearance has some strict rules, but it could possibly save your home when times are tough. Take a look to learn more about this process and whether it’s a good choice for your mortgage.

Options to Avoid Foreclosure

You have several options when it comes to avoiding foreclosure. Although banks may work with you when you first fall behind, most will only wait a short time for you to find a new job or fix the problem that is preventing you from making payments. When you reach the time limit, the bank will initiate the foreclosure process. Once that happens, it’s very hard to stop the process.

How to negotiate mortgage forbearance@llc_map/Twitter

In most cases, once foreclosure begins, you have a limited amount of time before you will be legally forced to vacate the home. The bank then sells the property to a new owner. Foreclosure obviously severely damages your credit. Add the loss of your home to the mix, and the stress level tends to be excessive.

Obviously, most homeowners want to avoid losing their home, but they also want to avoid the negative hit their credit will take. The options to avoid foreclosure if you’re behind on mortgage payments include mortgage forbearance and a loan modification agreement. A loan modification results in a permanent modification of the loan, while mortgage forbearance is only meant to be a temporary fix.

What Is a Mortgage Forbearance?

Like many other things that deal with real estate and finance, mortgage forbearance will look different to every homeowner and every lender. Generally speaking, it is an agreement between you and the bank that allows you to make no mortgage payments at all or reduced mortgage payments for a specific period. During the time that you are not making payments or are making reduced payments, interest will still accrue on the loan.

How to negotiate mortgage forbearanceqimono/Pixabay

Each mortgage forbearance agreement is slightly different. For some agreements, the homeowner will have to pay back the entire amount he or she did not already pay in one lump sum at the end of the forbearance period. Other agreements may distribute the amount of the skipped payments into new monthly payments for a certain time period.

Does Forbearance Damage My Credit?

Forbearance is something that may get reported to credit bureaus, and it could negatively affect your credit score. However, it won’t affect it as harshly as a missed payment, a repossession of a vehicle, a bankruptcy or a foreclosure. It’s much better to request a forbearance before you start missing multiple payments or are in the danger zone.

How to negotiate mortgage forbearance@NRVLand/Twitter

How Do I Request a Forbearance?

You will have to contact your lender directly if you want to request a forbearance. From there, you can negotiate, and the mortgage company will draw up an official forbearance agreement. It’s impossible to say what your lender will offer you because the agreement will completely depend on the type of mortgage you have, how many payments you’ve missed and the standard practices of the company.

How to negotiate mortgage forbearanceMediamodifier/Pixabay

Generally, a forbearance has several attributes, including the amount of payment needed (if any) from the homeowner during the forbearance period, the lender’s policy on reporting the forbearance to major credit reporting agencies, the duration of the forbearance period and the rules for repaying the money after the forbearance period is over. Usually, a mortgage forbearance lasts no longer than a year.

Should I Opt for a Forbearance?

This is a tricky question, especially because you probably won’t get unbiased advice from your lender. Additionally, you may not have other appealing options available if you’re in a situation where you can’t make your mortgage payments.

If you don’t have a financial adviser at your disposal that you can ask for advice, it’s a good rule of thumb to talk to a housing counselor. You can ask for help from a counselor free of charge through the Department of Housing and Urban Development, also known as HUD. Look at the HUD website to find an office in your area. A trained counselor can help you determine if a forbearance is a good option for you.

By now you’ve probably heard that homeowners struggling to pay their mortgage due to COVID-19 can request temporary relief. The program, outlined in the CARES Act, is called a forbearance and lets homeowners temporarily “pause” their mortgage payments for up to 12 months.

After a forbearance, homeowners will need to repay the payments they missed. Depending on a homeowner’s situation and the guidelines defined by the owner of their loan, they may have different solutions available to help with repayment. One solution may be moving some or all of the amount owed to the end of their loan, sometimes called a deferral. Other solutions may include:

Reinstatement: If a homeowner is able, paying back the amount they owe all at once is definitely the simplest option. It’s not for everybody but it’s on the table. This is called a reinstatement. You may have also heard it referred to as “paying a lump sum.”

Repayment plan: With this solution, a servicer simply tacks on an extra amount to the regular monthly payment until the amount owed is paid back. This usually happens over 3 to 6 months but could vary depending on the homeowner’s circumstances.

Loan Modification: At the end of a forbearance, a servicer may adjust the terms of a homeowner’s mortgage to bring the account current. There are several ways to do this. We may be able to lower your interest rate or maybe extend the loan’s term length so that each month’s payment is a little lower.

What to do next

If you’re a Mr. Cooper customer and you’ve entered into a forbearance, check your online account 30 days before the end of your plan. Tell us if you are ready to resume your payments and we’ll be able to provide possible solutions.

Rest assured that we will explore every solution available. The Pandemic Forbearance Plan exists to help homeowners get back on their feet during a tough time. We’ll work with you before, during, and after to help you find the best solutions for your situation.

Are you a Mr. Cooper customer struggling to pay your mortgage due to COVID-19? Click here to see how we can help.

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How to negotiate mortgage forbearance

How to negotiate mortgage forbearance

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Most homeowners can temporarily pause or reduce their mortgage payments if they’re struggling financially.

Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time while you build back your finances.

For most loans, there will be no additional fees, penalties, or additional interest (beyond scheduled amounts) added to your account, and you do not need to submit additional documentation to qualify. You can simply tell your servicer that you have a pandemic-related financial hardship.

Forbearance doesn’t mean your payments are forgiven or erased. You are still obligated to repay any missed payments, which, in most cases, may be repaid over time or when you refinance or sell your home. Before the end of the forbearance, your servicer will contact you about how to repay the missed payments.

COVID-19 mortgage relief: 4 things to know

Since March 2020, millions of homeowners have received forbearance under the CARES Act, allowing them to temporarily pause or reduce their mortgage payments.

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Who is eligible for forbearance?

You may have a right to a COVID hardship forbearance if:

  • you experience financial hardship directly or indirectly due to the coronavirus pandemic, and
  • you have a federally backed mortgage, which includes HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac loans.

For mortgages that are not federally backed, servicers may offer similar forbearance options. If you are struggling to make your mortgage payments, servicers are generally required to discuss payment relief options with you, whether or not your loan is federally backed.

When is the deadline for applying?

If your loan is backed by HUD/FHA

, you may request an initial COVID hardship forbearance as long as the COVID-19 National Emergency is in place.

If your loan is backed by Fannie Mae or Freddie Mac, there is not currently a deadline for requesting an initial forbearance.

How long does forbearance last?

Your initial forbearance plan will typically last 3 to 6 months. If you need more time to recover financially, you can request an extension. For most loans, your forbearance can be extended up to 12 months. Some loans may be eligible for up to 18 months of forbearance, depending on when your initial forbearance started. Other limitations may apply.

: You may request up to two additional three-month extensions, for a maximum of 18 months of total forbearance. But to be eligible, you must have been in an active forbearance plan as February 28, 2021.
If your mortgage is backed byHUD/FHA

: You may request up to two additional three-month extensions, for a maximum of 18 months of total forbearance. But to qualify, you must have requested an initial forbearance plan on or before June 30, 2020. Not all borrowers will qualify for the maximum.

What to do next

Figure out who services your mortgage, and see if your mortgage is backed by Fannie Mae, Freddie Mac, or the federal government.

Mortgage forbearance ending – how do you keep your house?

How to negotiate mortgage forbearance
We are coming up on two years of the COVID-19 pandemic – clearly, no one thought it would last this long. Many Dallas-area residents have had to take significant pay cuts or have even lost their jobs. Our firm has helped hundreds of DFW residents get a fresh start after COVID-related problems caused unmanageable debt, but many other people in the area are still struggling.

Most of the foreclosure and eviction moratoriums have ended recently, so many Dallas residents are wondering how they’re going to keep their homes. Rubin & Associates is here to help! We have put together this blog post to help answer some of the common questions we’re hearing about the end of mortgage forbearance.

How did the foreclosure moratorium work?

The government enacted a foreclosure moratorium when it was clear that the COVID pandemic would cause a massive disruption in the economy. The moratorium was a government directive to stop any current foreclosures – and not to start any new foreclosure proceedings until the end of the moratorium. The moratorium applied to certain types of loans issued by Freddie Mac, Fannie Mae, HUD, and USDA. Other banks and lenders voluntarily joined the moratorium by offering forbearance programs that allowed homeowners to defer their mortgage payments for a certain number of months.

When did the foreclosure moratorium end?

The federal foreclosure moratorium (which applied to all government-backed loans) ended on July 31, 2021, and the forbearance enrollment window was extended through the end of September. Certain borrowers were allowed up to three months of additional forbearance.

There are still federal, state, and local CARES Act funds available, but not everyone is eligible to receive those funds. If you have already missed the deadline to apply for forbearance, there may be additional resources available if you are still struggling with your financed due to the COVID pandemic.

What happens now that the moratorium is over?

Now that the grace period is over, your lender is allowed to proceed with foreclosures. Luckily, the Consumer Financial Protection Bureau has enacted a new rule that requires most lenders to help anyone in mortgage forbearance find options for paying their mortgages. Because of this rule, most lenders won’t be able to start the foreclosure process until January 1, 2022. If you received forbearance from your lender, contact them as soon as possible to find out if you are eligible for an extension.

How can you avoid foreclosure?

The most important step in keeping your home is to speak to your lender as soon as possible. As we’ve mentioned in past blog posts, if you do not maintain regular communication with your lender, foreclosure proceedings will happen much sooner.

If you’ve spoken to your financial institution and have no other options, declaring bankruptcy can help you delay or prevent foreclosure. If you are struggling with other bills as well, such as credit card bills, medical bills, or vehicle loans, a Chapter 7 or Chapter 13 bankruptcy will let you keep your home and force all debt collection actions to stop immediately.

Chapter 7 and Chapter 13 are quite different, so it is important to talk to an experienced bankruptcy attorney to understand the differences and choose the right option for your situation. Call us any time at 214-760-7777 and schedule a free consultation. We will listen to the details of your situation and explain all of your options so you are able to make the best choice for your future. We will not force you to file for bankruptcy – sometimes modifying your mortgage loan, negotiating debt settlement amounts, or even debt consolidation might be a better option.

Call us today for a free debt consultation

If you are struggling with growing debt and worried that you might face foreclosure, call us at 214-760-7777 to set up your free consultation with us today. Unfortunately, bad things happen to good people all of the time – but we are here to help you get a fresh start!

FICS’ Mortgage Servicer software can help servicers handle loan modifications efficiently

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Mortgage forbearance is still a reality for many borrowers and servicers, more than 10 months after the Coronavirus Aid, Relief and Economic Security Act (CARES Act) took effect on March 27, 2020. Under the CARES Act, mortgage servicers must offer up to 12 months of forbearance, in up to 180-day increments, to COVID-19-affected homeowners who have federally backed mortgage loans for one to four-unit family properties.

Although the number of loans in forbearance has declined from the peak of 8.55% in early June, 5.37% of loans (approximately 2.7 million homeowners) remain in forbearance as of January 10.

To accommodate the large volume of loans still in forbearance, mortgage servicers must have functional, flexible and effective forbearance processes in place. Creating clear forbearance and post-forbearance plans should improve borrowers’ understanding of forbearance, speed up the overall process, and preserve revenue while avoiding costly foreclosures. Robust mortgage servicing software, such as FICS’ Mortgage Servicer®, has extensive loss mitigation capabilities and forbearance windows that facilitate tracking forbearance plan details, payment deferment and loan modifications. Servicers can ease the process for borrowers by following these steps.

Communicate with Borrowers

Educate borrowers about the forbearance process. When implementing a forbearance plan, mortgage servicers must clearly explain to borrowers what forbearance means, what repayment options they have, and the implications (e.g., a potential delay in their ability to refinance their loan). Servicers can refer to Fannie Mae’s and Freddie Mac’s “COVID-19 Forbearance Script for Servicer Use with Homeowners” for guidance on how to discuss what forbearance means, how it works and repayment options.

Respond promptly. In a letter sent to 11 large servicers, requesting information about their forbearance program, the U.S. House Committee on Financial Services stated that “borrowers seeking assistance must be able to contact a customer service representative without excessive wait times or other delays.”

Servicers are experiencing another jump in call center volumes. According to the MBA’s Forbearance and Call Volume Survey, for the week ending Jan. 10, 2021, servicer volume increased to 9.2% from 7.2% the week prior, and call wait times increased to 3.6 minutes from 2.7 minutes the week prior. Average call length has also hit a survey high of 8.5 minutes, up from 7.8 minutes the week before.

Servicers should work diligently to answer borrowers’ questions and meet their needs promptly during this stressful time. Servicers should take advantage of borrower-facing web applications to provide mortgage statements and information to borrowers who aren’t in forbearance, to reduce routine phone calls and give servicers more time to talk with the forbearance borrowers.

Help Borrowers Create a Post-Forbearance Roadmap

Some borrowers mistakenly assume that they must repay the skipped payments in one lump sum. In fact, they have several repayment options. For example, Fannie Mae’s COVID-19 payment deferral option allows borrowers to defer the amount they owe to the end of their loan term (i.e., the maturity date).

Thirty days before the end of the forbearance period, mortgage servicers must contact borrowers to discuss repayment options and determine which one(s) work best for them. Borrowers may have several options:

  1. Repay the loan in one lump sum if they can (perhaps by withdrawing funds from their 401k, IRA, or other retirement plan).
  2. Extend the forbearance period. As of January 10, 80.45% of the loans in forbearance are in a forbearance extension.
  3. Take advantage of a loss mitigation plan. This may include a repayment plan to keep borrowers in their homes, or loan modifications such as writing off part of the loan or extending the terms of the original loan.

If a loss mitigation plan is the best option, borrowers will complete a worksheet to allow the servicer to assess income, the size of the loan, and whether a repayment plan or a loan modification will be the better option. If a repayment plan is the way to go, the borrower may be able to start repaying at the end of the forbearance timeline. Loan modifications may include adjusting the principal and interest (P&I) payments, extending the loan term to 30 years or beyond, and/or decreasing the interest rate. Servicers should explore these options with borrowers to determine what best meets their needs.

Track Forbearance and Post-Forbearance Plan Details

With so many loans still in forbearance, servicers need an efficient way to track the specific terms/details of each borrower’s forbearance and post-forbearance plans. Mortgage servicing software must be able to accommodate payment deferment and other loan modifications.

Use leading-edge mortgage software, such as FICS’ Mortgage Servicer®, that has extensive loss mitigation capabilities, including a forbearance/deferment window that allows servicers to track:

  • Forbearance plan details on the loan level
    • Terms: number of months, starting and ending dates
    • Borrower details (e.g., type of hardship, status of the forbearance plan)
  • Post-forbearance plans
    • Repayment plans (e.g., reduced payments)
    • Loan modifications (e.g., new term length, interest rate)
    • Deferment of interest

Servicers can ease the forbearance process by communicating effectively with borrowers and helping them develop the right plans. By using mortgage servicing software such as Mortgage Servicer® to track forbearance and post-forbearance plan details, servicers can more efficiently handle the increased number of modifications. Versatile software allows borrowers and servicers to walk through the forbearance period with relative ease, remain up to date on the timeline and have a more complete picture of the necessary steps to return the borrowers’ mortgage to a current status.

Negotiating a mortgage loan modification allows you to adjust your repayment schedule to meet your current circumstances. When negotiating a mortgage loan modification, you have several options:

  • You can negotiate through a government-sponsored program.
  • You can negotiate through a service.
  • You can negotiate directly with the lender.

If you decide to go it alone, here’s what you need to do to ensure successfully negotiating a mortgage loan modification:

  • Have the name of a reputable lawyer at hand, in case you need advice along the way.
  • Gather all the pertinent information before starting to negotiate. This includes the reason you want to make the modification and a description of the desired modifications [source: Negotiation Requirements].
  • Make sure you’re financially capable of meeting and maintaining the terms of the modifications. You will have to prove your financial status by providing pay stubs, records of expenditures, a recent bank statement, and income tax returns for the past two years [source: Mortgage Loan Modification Regulations].
  • Ask your lawyer or bank about any laws, requirements or guidelines you should be aware of before beginning negotiations.
  • Prepare your terms of negotiations. Be ready to offer the lender a specific interest rate, monthly payment, number of loan payments, collateral, etc.
  • Choose an arbiter. Decide with the lender who to use as an arbiter in case the negotiations hit a snag.

Keep in mind that negotiating a mortgage loan modification is not simple. If you’re not 100 percent sure you can do it on your own, it’s much better to hire a reputable professional to negotiate on your behalf.

Forbearance is Ending: What Does That Mean For You?

With the 18-month mortgage forbearance period coming to an end, many borrowers must find a way to repay missed back payments or risk possible foreclosure. While this policy was enacted to help those in need, the end of this temporary reprieve will potentially push thousands of people into increasingly desperate situations. Many of whom will be forced to make life-changing decisions about their homes.

But before we explore worst-case scenarios, let’s dive a little deeper. What is forbearance, and how might the fact that it is ending affect you?

What is Forbearance?

When the pandemic started, many businesses were forced to close, and millions of people were left without an income. Unfortunately, this made it nearly impossible for many homeowners to pay their mortgages, so the government intervened. The policy enabled homeowners financially impacted by the pandemic to apply for a “mortgage forbearance.”

If approved, homeowners were essentially allowed to “pause” their monthly mortgage payments. Now, of course, that 18-month period is coming to a close, and homeowners must decide how they’re going to catch up on those missed payments and their best course of action moving forward.

How Does This Affect You?

If you were granted a mortgage forbearance, then you’re going to be affected by this in a few ways. First, the forbearance period will end, so your regular monthly mortgage payments will resume. Second, you’ll have to negotiate a way to pay for what you missed. There are a few options you can explore:

Repayment Plan : This is simply a monthly repayment schedule (in addition to your monthly mortgage payment) that allows you to incrementally pay back the amount you owe over time. Terms typically last 3 to 12 months.

Back-end Payment : The missed payments are added to the end of the mortgage in a lump sum, typically without interest incurred.

Payment Extensions : Depending on your lender, you may be able to request an extension, which could result in longer terms and additional interest.

New Mortgage : To avoid foreclosure, your lender might offer you a new mortgage with a 40-year term agreement with an increased interest rate.

Avoiding a Foreclosure

Of course, it all depends on what your lender offers. Sometimes, repayment plans, extensions, and back-end payments just aren’t the right solution for you. If you can’t make any of these back payment solutions work, there is one final option.

You Can Sell Your Home

If you can’t afford to pay your mortgage or back payments when the forbearance period ends, you might consider selling your home. While this may not be ideal, it could save you from foreclosure and might be just the help you need to get back on your feet.

If you’ve found yourself searching for things like “how to sell my home quickly” or “how to get the most for my home,” then you’re in luck. If you choose to work with us, you won’t have to worry about the end of the forbearance period or fret over how you’re going to repay what you owe.

Not sure what your home is worth? Find out here . Our Homebot tool can tell you what your home is worth and how much equity you have in your home. You may even end up making money off your property. We also offer iBuyer programs such as Keller Offers, which has a few different programs to choose from to help you.

If you’re considering selling your home in Jacksonville or anywhere in Northeast Florida, contact the Welch Team today !

How to negotiate mortgage forbearance

While your health and welfare are top priorities during the COVID-19 pandemic, you may also be concerned about how current economic conditions can impact your financial situation.

Last week, we discussed the major points behind mortgage forbearance. Offered through the newly passed federal government CARES Act, forbearance is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. However, this could also mean that you could owe those payments as a lump sum at the end of the agreed-upon period with your lender.

Consumers who are experiencing a financial hardship may be wondering how potentially late or reduced payments might impact their credit scores. In a normal, non-pandemic world, late or missing mortgage payments can damage your credit. But what if you agreed to forbearance terms with your mortgage lender? The short answer is maybe.

For Fannie Mae and Freddie Mac plans, late payments from mortgage forbearance will not be reported to credit bureaus by the loan servicers, and any late fees and other penalties will also be waived as long as you were up-to-date on your payments. If you are unsure if Fannie Mae or Freddie Mac owns your mortgage, you can check online via these websites.

In addition to Freddie Mac and Fannie Mae, there are other federal mortgages that are eligible for relief under the CARES Act:

If you determine that your mortgage is not a federal loan, it is crucial that you contact and negotiate directly with your loan servicer. However, it is also important to note that none of these mortgage relief options are automatic, according to the National Housing Law Project.

In order to take advantage of these available mortgage relief options, you must contact your mortgage servicer directly. Be persistent and diligently follow-up to stay on top of your request. Also, watch for any new additional programs from your mortgage servicer which could require you to re-apply. Finally, make sure that your loan servicer provides you with written documentation that confirms the details of your agreement, and monitor your monthly mortgage statements and your credit to make sure you don’t see any errors.

Do you have questions about your specific circumstance? Contact one of our loan officers today for guidance!

How to negotiate mortgage forbearance

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How to negotiate mortgage forbearance

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How to negotiate mortgage forbearance

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If you anticipate having difficulty making your mortgage payment, contact your lender as soon as possible.

In this guide
  • What is mortgage forbearance?
  • Do all lenders offer forbearance?
  • How does forbearance affect my ability to get a new mortgage?
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What is mortgage forbearance?

Forbearance is when a lender allows you to suspend payments for a set time due to financial hardship resulting from:

  • A sudden loss of employment.
  • A significant reduction in income.
  • A natural disaster event.

If your mortgage is already in forbearance and you’re anticipating difficulty making payments after it ends, contact your lender immediately. If your loan is insured by the government, you may be eligible for an extension, depending on when your mortgage was originally in forbearance.

Do all lenders offer forbearance?

In general, all lenders are required to discuss repayment options with you, including forbearance, if you’re having trouble making your monthly mortgage payments, according to the Consumer Financial Protection Bureau (CFPB).

If you’re already in forbearance and need more time to start making payments again, ask your lender for a forbearance extension. If your financial hardship is due to COVID-19, it should be relatively straightforward to get an extension.

How to request a COVID-19 related forbearance extension

  • If your loan is backed by HUD/FHA, VA, USDA, Fannie Mae or Freddie Mac. Contact your lender and explain that your hardship is due to COVID-19, and your request should be honored. COVID-19-related extensions are not automatic, so it’s critical to request an extension before your forbearance ends.
  • If your loan isn’t backed by a government agency. Don’t panic. Instead, call your lender as soon as possible to discuss repayment options. Besides a forbearance extension, your lender may have other options available to help you avoid an unnecessary foreclosure.

What if your financial hardship isn’t related to COVID-19?

If your situation isn’t COVID-19-related, it’s still important to let your lender know as soon as possible if you anticipate difficulty making your loan payments. You may be able to extend your forbearance period or take advantage of other options to help make your payments more affordable.

Here are three steps you can take:

  1. Contact your mortgage servicer to request repayment help. Your servicer’s contact information is on your monthly mortgage statement.
  2. Use your lender’s phone number and email to communicate, and follow up if you don’t hear back after a reasonable time frame.
  3. If you can’t get a forbearance extension after speaking with your lender, consider other repayment options, including:
    • A loan modification. A loan modification is when your lender changes the terms of your loan, for example, by extending your loan’s term length to reduce your monthly payment.
    • Using a partial claim. A partial claim is an interest-free loan from HUD that can be used towards overdue payments, according to Nolo Law. The loan isn’t due until your mortgage is paid off.
    • Short-selling the property. In this situation, the lender accepts less than what the property is worth, but the loan is considered paid off in full. You lose the home, but you won’t have a foreclosure on your record.
    • Deed in lieu of foreclosure. This is another last resort option that gives the lender the deed to your home instead of foreclosing.

The good news is, help is often available, but lenders will be forced to take action if you don’t communicate with them. So it’s important to be proactive.

How does forbearance affect my ability to get a new mortgage?

Generally speaking, forbearance can drag down your credit score unless your lender has agreed not to report it. But under the CARES Act, lenders are required to report your mortgage as being current, as long as you were in good standing at the time of forbearance.

If you have a Fannie Mae or Freddie Mac loan and want to refinance to take advantage of lower interest rates, you must take the loan out of forbearance first and make at least three consecutive payments. Afterwards, you can look into refinancing the loan, including the payments you missed during the forbearance period.

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How to negotiate mortgage forbearance

Posted on September 8, 2021

One of the first concerns that arose at the beginning of COVID-related shutdowns was that the housing market—responsible for a large portion of economic activity in the United States—would be brought to a virtual standstill. Instead, the ensuing months were among the most active and profitable in recent history. This was due, in part, to early and robust government intervention at the local, state, and federal levels, including the CARES Act and its homeowner and renter protections.

Now, as some of the early provisions of the CARES Act, including mortgage forbearance, come to a close, homeowners, homebuyers, and real estate professionals are wondering what comes next. Learn what the end of mortgage forbearance means for your clients on both sides of the negotiating table—and what it may mean for your business.

How to negotiate mortgage forbearance

COVID-era Mortgage Forbearance: A History

COVID-19 shutdowns began in mid-March 2020, and the passage of the CARES Act followed just days prior. This first foray provided an economic cushion for Americans reeling from the impact of the virus, and the CARES Act subsequently underwent updates and extensions over the following months.

The CARES Act was designed to meet a wide range of economic needs, from providing increased benefits for food stamp recipients to protections for business owners and their employees. As part of its focus on housing, The CARES Act also provided mortgage forbearance for homeowners with government-backed mortgages, including HUD-FHA, VA, and USDA loans and those backed by Fannie Mae and Freddie Mac. These protections led to similar protections from private mortgage providers.

Although it has been extended multiple times, forbearance for FHA, VA, and USDA homeowners is currently set to expire on September 30, 2021, and at this point no further extensions are expected. For homeowners who are eligible for forbearance, this means that applications must be completed and submitted by that date. Fannie Mae and Freddie Mac have not yet announced a deadline for requesting an initial forbearance.

How to negotiate mortgage forbearance

Why the end of forbearance may lead to increased inventory

For many homeowners, the end of forbearance aligns with increased economic activity and a return to pre-COVID employment. This may provide the opportunity for these individuals to resume their mortgage payments while also making arrangements for making up missed payments. Alternatively, some may choose to refinance their loans at today’s low rates in order to make repayment more manageable.

For those who are still struggling, the end of forbearance may mean selling their current home in order to get out from under a burdensome financial obligation. A recent report by Zillow posited that this could result in almost a quarter-million new listings, which presents both an opportunity and an obligation for real estate agents and brokers working with eager buyers and distressed homeowners.

How to negotiate mortgage forbearance

How to prepare your business for a more active market

For those agents with a long list of buyers who have been frustrated by low inventory and rising home prices, the months ahead may offer an unexpected opportunity. Increased inventory is poised to couple with a return to somewhat normal living conditions, with increased rates of vaccination, rising rates of travel, and the return of students to in-person schools.

At the same time, for markets with a seasonal ebb and flow, a fall and winter market that is more like that of the pre-COVID housing market, coupled with increased inventory, may help to ameliorate the tightening and hyper-competitive purchase environment of the past year and a half. For those buyers turned off by multiple offer situations on every listing, this could be a welcome respite that would tempt them back into a home search.

To communicate this good news to your buyers, do the following:

  • Reach out with supporting statistics for your market. These could include increasing average days on the market, an increase in the number of active listings, and more stable home prices.
  • Talk to them about their search, and find out if any of the specifics have changed or if they’re interested in broadening their search parameters.
  • Find out whether they’re planning to go back to the office or if they are working remotely permanently. This could help them broaden their search to neighborhoods that weren’t on their original list.
  • Work with your favorite lender to come up with a solution-based approach, including mortgage products that fund renovations and improvements for buyers who are willing to entertain the idea of a fixer-upper property.

How to negotiate mortgage forbearance

How to help homeowners in financial distress following forbearance

For sellers who approach you in response to the end of mortgage forbearance, do the following:

  • Make sure they have reached out to their lender and exhausted all their options under their current forbearance plan.
  • Make sure they understand their options for refinancing before they decide to sell.
  • Help them price their property appropriately for the latest market conditions so that they can get the most out of their home’s equity.
  • Help them determine whether they may be able to downsize into a smaller home using the proceeds from the sale of their current home so that they can continue to enjoy the benefits of homeownership.
  • Reach out to your professional network and create a comprehensive marketing plan so that your seller clients can maximize the value that currently exists in their home and get back on their feet financially.

As a real estate professional, you are uniquely positioned to make a huge difference in the lives of both buyers and sellers during this challenging time. Make sure that you are communicating regularly and keeping up to date with all the market and economic trends that will impact your clients in the days ahead.

How to negotiate mortgage forbearance

Written by Christy Murdock Edgar

Christy Murdock Edgar is a seasoned real estate writer and frequent columnist for Inman. Her expertise in the realm of real estate has helped agents all over the world improve their content marketing strategies.

Mortgage forbearance is an agreement in which the lender agrees not to foreclose on a home, with the borrower promising to a future payment plan meant to bring him current on the loan. It is important to note that mortgage forbearance is not a long term solution. Instead, it is meant for borrowers who have run into short term financial issues, and simply need a few months in order to get back on track.

Common reasons for needing mortgage forbearance include a job loss, or unexpected health problems.

Benefits for the Borrower

The borrower is sure to benefit from mortgage forbearance. If not, it would never be a consideration. The main benefit is simple to understand: the borrower is granted time to catch up on their missed mortgage payments, without having to worry about foreclosure.

Another benefit is the ability to customize a repayment plan that suits your needs. While the borrower and lender must work together, both parties will be in position to negotiate a mutually beneficial deal.

With a lot of flexibility, lenders often times can suspend payments for several months while the borrower gets his finances organized. Even if payments are not suspended, they can be lowered for the time being with the borrower agreeing to pay the money back at the end of the loan.

Benefits for the Lender

On the surface, it may appear that mortgage forbearance is only beneficial to the borrower. But once you begin to consider all aspects of the situation, it is simple to see that this is not the case.

Lenders would much rather offer mortgage forbearance than go through the foreclosure process. Not only does this save them a lot of money, but it helps to cut back on wasted time as well. Believe it or not, lenders do not enjoy foreclosing on homes. This takes up a lot of resources, and in many cases the process takes a year or longer to reach completion. Not to mention, most foreclosures end up with the bank losing money.

Also, lenders know that they have a better chance of collecting the past debt through mortgage forbearance than they do through the foreclosure process. With the odds on their side, they are almost always willing to give forbearance a try as long as the situation will allow for it.

One thing many lenders do, before agreeing to mortgage forbearance, is increase the interest rate. While they may not be collecting payment in full at the present time, an interest hike can go a long way in helping them recover lost money in the future.

Mortgage forbearance agreements do not release the borrower from financial responsibility. These agreements often times include a date on which the foreclosure process will begin, if the borrower does not live up to their end of the deal.

Both lenders and borrowers can benefit from mortgage forbearance. Those who are in a tight financial spot should contact their borrower to determine if forbearance is an option.

Sarah Skidmore Sell

American homeowners were given more opportunity to hit pause on their mortgage payments because of the financial ravages of the pandemic, but that relief is slowly coming to an end.

About 3 million people are behind on their mortgage, the most at any time since the Great Recession, according to the Consumer Financial Protection Bureau. About 2 million are in forbearance plans, which provide a reprieve of a year or longer from making payments.

Some people are beginning to exit these arrangements, but experts say the pace will soon pick up, with as many as 1.7 million borrowers exiting in September. Regulators have warned mortgage servicers to be prepared for the onslaught.

Those who are unable to resume payments or reach some other agreement with their lender may be forced to leave their homes through sale or foreclosure.

“We must not lose sight of the dangers so many consumers still face,” CFPB Acting Director Dave Uejio said in a statement as the agency works to ease the process and protect homeowners. “Millions of families are at risk of losing their homes to foreclosure in the coming months, even as the country opens back up.”

Experts say homeowners who are in forbearance should start making plans as soon as possible for their next steps — be that resuming payments as usual, tweaking the terms of their loan or leaving their home.

Here’s what borrowers should know:

IF YOU CAN AFFORD PAYMENTS

Homeowners who received a COVID hardship forbearance are not required to repay their skipped payments in a lump sum once the forbearance period ends, the CFPB reminds borrowers.

Contact your mortgage servicer to discuss your options.

If you can resume your pre-pandemic payments, the process should be fairly smooth. Many federally backed loans have programs in place that will allow homeowners to resume payments as usual and tack those missed payments on to the end of the loan period, said Andrea Bopp, an attorney at the National Consumer Law Center who specializes in mortgage servicing issues.

Borrowers may also work with their servicer to find other arrangements, such as increasing the size of their regular payments to help make up their missed payments. In some cases, the servicer may create a separate account for the unpaid payments that would be settled upon the sale, transfer or refinancing of the loan.

The options vary by type of loan, there are several processes in place for borrowers with federally backed loans. However, there are no universal programs to help those with privately held loans ease out of forbearance; these represent about one-third of all mortgages.

All the same, servicers have been encouraged to be flexible to find arrangements that work for all borrowers. The CFPB has a wealth of information on its website to help borrowers sort out their options.

If you do not know who holds your loan, check your mortgage statement, call or write your servicers. The CFPB has information online for consumers on how to do this.

IF YOU CANNOT AFFORD PAYMENTS

If you have a federally backed loan and are nearing the end of your forbearance period you may request up to two additional three-month extensions — although the maximum forbearance period cannot exceed 18 months. This only applies to those who received their initial forbearance on or before February 28, 2021 for loans held by Fannie Mae or Freddie Mac or June 30, 2020 for HUD, FHA, USDA, or VA loans.

If you are struggling with payments, servicers are generally required to discuss relief options with you, whether or not your loan is federally backed.

It’s important to reach out to your mortgage servicer as soon as possible to discuss your options. If you need help, talk with a free HUD-approved housing counselor; they can be found online. Or you can seek out legal help through Legal Aid or by reaching out to your state bar association.

The last resort is for a homeowner to leave their home through foreclosure.

In a foreclosure, the lender takes a property back after a borrower fails to make all the required payments. There is a foreclosure moratorium in place for all federally backed mortgages — those backed by Fannie Mae, Freddie Mac, FHA, USDA, or VA — until June 30, 2021.

However, borrowers may be able to avoid foreclosure if they seek help to make other arrangements, be that through their servicer directly or with the help of a housing counselor or lawyer.

Experts urge homeowners not to wait until the forbearance period is over or the foreclosure moratorium ends. Once the foreclosure process begins it is difficult to stop and foreclosures are expensive for homeowners, with an average cost to borrowers of $12,500.

In some cases, people with equity in their homes may be able to sell their home to avoid foreclosure, which has a not just a devastating financial but emotional and mental impact on families.

Not every deliquency leads to a foreclosure though, notes Odeta Kushi, deputy chief economist at First American. She said that rising equity and home prices may allow more borrowers to sell, causing more of a “foreclosure trickle than a tsunami” ahead.

All experts urge homeowners to reach out to their mortgage servicer as soon as possible to allow for adequate time to make an exit plan from forbearance.

“For people who are overwhelmed right now, it is important to connect with the servicer,” Bopp said. “It can be difficult to sit on the phone . or connect online. But if you wait too long it can be a snowball effect.”

How to negotiate mortgage forbearance

Many mortgage borrowers are still in COVID-19 forbearance. Here’s how to get back on your feet. ( iStock )

Mortgage forbearance proved to be an essential lifeline for many homeowners during the COVID-19 pandemic. Under the CARES Act, many mortgagors were eligible for up to 18 months of forbearance. But as life starts to return to pre-pandemic “normal,” borrowers are struggling to catch up on their mortgage payments.

More than a third (35%) of mortgage borrowers who entered forbearance during the pandemic are still in forbearance, according to a new study by the New York Federal Reserve. Low-income borrowers and first-time homebuyers are most likely to be stuck in forbearance for longer periods of time, struggling to resume their monthly payments.

Learn about the implications of long-term forbearance below, with tips on how you can get out of mortgage forbearance by refinancing, downsizing or saving up. If you’re ready to exit forbearance, Credible’s online marketplace can help you shop for the best mortgage rates for you.

What happens during mortgage forbearance?

Mortgage forbearance allows borrowers to suspend their monthly payments without becoming delinquent but it’s not forgiveness.

You still owe the payments to your mortgage servicer and interest accrues on the balance during this period. This adds to the long-term cost of your mortgage, which is why forbearance is more of a safety net than a financial strategy.

In addition to making your mortgage loan more expensive over time, some home loans that are not backed by Fannie Mae or Freddie Mac may require a lump-sum balloon payment at the end of the forbearance period.

What you can do to get out of COVID-19 forbearance

Consumers have utilized mortgage forbearance as a way to get back on their feet financially, but resuming mortgage payments in full is easier said than done. Here are a few ways you can exit coronavirus mortgage forbearance and get back to paying down your home loan.

  1. Refinance your mortgage
  2. Sell your home and downsize
  3. Find other ways to cut costs and save money

1. Refinance your mortgage

If you’re still in COVID-19 mortgage forbearance but you’re continuing to make your monthly mortgage payments, you’re in luck. The Federal Housing Finance Agency (FHFA) mandated that mortgagors in forbearance who have made at least three consecutive monthly payments are eligible to refinance or buy a new home.

This regulation ensures that mortgage borrowers, even those who are in forbearance, have access to the market’s historically low mortgage refinancing rates.

See what kind of rates you may be eligible for on Credible’s online marketplace. You can compare refinance rates across multiple mortgage lenders so you know you’re getting a good rate.

2. Sell your home and downsize

Many mortgage borrowers have gotten out of mortgage forbearance by selling their homes, taking advantage of the equity they’ve built thanks to the current market’s record-high home values. The average existing home sales price rose 17.2% between March 2020 and March 2021, from $280,700 to $329,100, according to the National Association of Realtors.

With such a rapid gain in value, it’s possible that you’ll be able to sell your home and prepay your mortgage, including any forbearance due.

However, keep in mind that high home values will make it difficult to find another home in the same price range, so it may be smart to downsize or move to an area with a less competitive housing market, if possible.

During the homebuying process, it’s important to find a mortgage that you can afford to keep up with so you don’t just end up back in forbearance in a smaller home. You should also use a tool like Credible’s online marketplace to compare mortgage rates and get the best deal on a home loan.

3. Find other ways to cut costs and save money

Many industries have bounced back as the pandemic begins to fade into memory, but workers in some sectors may still be affected by lower incomes or shorter work hours.

It may not be possible for all borrowers to increase their income to pre-pandemic levels, so a solution could be to cut costs in your monthly budget. Here are a few ways to do just that:

  • Pay down high-interest credit card debt. The Fed’s report found that mortgagors in forbearance used their extra cash to pay down credit card debt by $2,100 on average, which can cut down monthly costs when mortgage payments resume.
  • Consolidate other debts. A balance-transfer credit card or debt consolidation loan can save you money in interest and lower your monthly debt payments. You could also contact a certified credit counselor to enroll in a debt management plan.
  • Refinance other debts while rates are low. For example, you may consider refinancing your private student loans. Borrowers who refinanced their student loans to a shorter term on Credible saved $17,344 on average. To see if refinancing is right for you, visit Credible.

When refinancing, shop around to compare rates

While you might consider refinancing with your current mortgage lender, they may not be able to offer you the lowest rate possible. You should shop around with multiple lenders to try to find the best refinance rate for your situation. You can also use that research to see if your current lender will match or beat the rate. The same goes for all other types of loans, like personal loans and student loans.

Credible’s online loan marketplace lets you prequalify and see potential rates all in one form, without affecting your credit score. You can also get in touch with experienced loan officers who can help you devise a course of action.

How to negotiate mortgage forbearance

The stimulus for homeowners is still continuing. How does one request forbearance on mortgage payments? If you’re affected by the pandemic and it’s hard to keep up with your mortgage payments, mortgage forbearance can be a great way to increase the tight money flow to your household.

Currently, you can request forbearance for up to 12 months if you’ve been affected by the pandemic. Ever since the CARES Act was introduced by the federal government in March 2020, homeowners have been protected.

Requesting mortgage forbearance is going to be very beneficial to your overall household income as you won’t pay your monthly mortgage payments while not incurring any interest or late penalties.

To request a forbearance on your existing mortgage payments, you must get in touch with your loan servicer. Your loan servicer is the company you make your monthly payments. The process of each loan provider may differ from one to another so there isn’t a set answer as to how the process is like. You shouldn’t have any issues whatsoever to request forbearance though.

This stimulus for homeowners is expected to help millions of Americans financially during the COVID-19 crisis. However, you must hurry as the deadline to get forbearance is coming up.

Forbearance Request Deadline

The mortgage loan forbearance was originally due on December 31, 2020 with the CARES Act but it has been extended. If you’re seeking mortgage forbearance, you have one or two more months depending on the type of mortgage you have.

Those who have a USDA, VA, or FHA mortgage must apply for forbearance by February 28 whilst those with a conforming mortgage must apply a month earlier – by January 31, 2021. It’s best to apply for mortgage relief as soon as possible.

The initial duration of the forbearance is 180 days. If this isn’t something that’s enough for you though, you can request an additional 180 days after the first 180 days.

In the aftermath of the economic turmoil and high unemployment levels created by the COVID-19 pandemic, lenders searched for ways to help customers weather the immediate storm. Guidance came from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which created important protections for mortgage borrowers.

If your mortgage is backed by a government entity such as Fannie Mae, Freddie Mac, HUD, USDA, or the Veterans Administration and you are experiencing hardship due to the pandemic, you may request up to 12 months—two 180-day periods—of mortgage forbearance. Choosing forbearance essentially allows you to pause payments for a period of time. If your mortgage is not government-backed, your lender may offer relief options on a case-by-case basis if your income has been affected.

If you have already applied for forbearance or are considering doing so, keep these four important steps in mind.

  1. Do your homework

When considering mortgage relief options, understanding the terminology and process is critical. Forbearance allows you to stop making payments for a period of time without penalty, but it is not forgiveness. You will still owe the principal, interest, escrow, and other components of the mortgage after the forbearance period is over.

Forbearance is also not “deferment,” where the paused payments are added to the end of the loan’s term, although that may be one option for a repayment plan after your forbearance period ends. If you can make partial or full payments during the forbearance period, that will help reduce the amount you owe when the period is over.

  1. Make the request

Forbearance is not automatic. You must request it. Many banks are processing an overwhelming number of requests, so it’s a good idea to use online tools if possible. You will likely not need to provide any other documentation. Under the CARES Act, government-backed loans are entitled to an initial forbearance period of 180 days. To request an additional 180 days, you must make a second request before the first 180-day period expires.

  1. Protect your financial well-being

Forbearance can help you overcome short-term financial setbacks, such as a temporary job loss or a reduction in hours, and keep your home without negatively affecting your credit score. Your mortgage lender won’t charge late fees or other penalties during the forbearance period. Those that were assessed for missed payments prior to you entering into forbearance and not yet paid will continue to remain on the account. In most cases, if your homeowners insurance and real estate taxes are included in your mortgage, they will be advanced by your servicer while you are in forbearance. If they are not included, you should keep paying your homeowners insurance while you’re in forbearance and contact your municipality about deadlines and options for your tax payments.

  1. Plan your next steps

Before your forbearance period expires, your lender will work with you to determine your best next steps. Your options may include a:

  • Loan modification- This may include an extension on the end of your loan or an adjustment to your rate and term to pay the forbearance amount
  • Repayment plan- It allows you to catch up gradually on the amount owed in addition to paying regular monthly payments
  • Reinstatement- When you pay back the full amount of paused payments at the end of the forbearance period

Your lender is likely managing many requests for assistance during this time and will offer more specifics about the options available to you online. Once you make your request, your lender will contact you while you are in forbearance to determine your best option for repayment.

Government guidance is changing nearly every day on this topic. To stay informed of changes, be persistent and check sources like:

Be sure to check your mortgage servicer’s online communications as well, as they are frequently updated.

Most important, your home will not be foreclosed upon while you are in forbearance. Your goal to remain a homeowner is shared by your lender. Know that you have options and your mortgage lender is committed to finding a solution that works.

For more information about M&T Bank’s relief options, visit our COVID-19 relief center.

Disclosures:

This article is for informational purposes only. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.

How to negotiate mortgage forbearance

Home » Foreclosure » 4 Ways to Sell Your House in Forbearance
To delay a foreclose on the mortgage, lenders and borrowers can forge a mortgage forbearance agreement. If you try to sell your house while in forbearance , the lender might extend the forbearance agreement. Foreclosures are expensive and can drag out for months. Lenders want their money back fast, and they have neither the time nor the resources for dealing in home sales.

Keep in mind: the forborne amount of your mortgage must be paid back in full upon sale of the home. This comes out of the purchase price of the house.

1. Traditional Listing

A listing agent lists the home on the Multiple Listing Service (MLS) and a brokerage site (if associated with a brokerage) and produces yard signs. They pinpoint the selling price, stage and market the home, show it to prospective buyers, and negotiate offers. It takes at least 70 days to make a sale, and the agent is compensated for their efforts. Compensation is either a small flat fee at the beginning or commission upon sale.

2. Realtor

A realtor is different from a listing agent in that a realtor is a member of the NAR. Realtors have more resources than agents to sell a house, but their responsibilities are similar. They help decide the asking price, advertise and show the home, and evaluate offers. Upon the sale of the home, they receive a percentage of the sale price as a commission.

Selling with a realtor takes 70 days or more, and this can be attributed to buyer actions. In the purchase process, buyers have more steps than sellers. These steps include the home inspection, appraisal, and mortgage approval. If a step is delayed or fails, it takes more time to sell the house.

3. Sell It Yourself

Selling a house by yourself is a huge undertaking. You are responsible for the following:

  • Determine the market value of your home.
  • List the home online.
  • Market the home.
  • Clean and stage the home.
  • Coordinate walkthroughs.
  • Negotiate terms of sale.
  • Handle the closing.

Without professional help, it can take two to six months to sell the house by yourself. It is also a costly venture, and if you are in forbearance, you may not have the funds to sell a house.

4. Instead, Sell to a Real Estate Investor

If you want to make a quick and easy sale without having to market, show, or stage the home, consider selling to an investor . Most investors will make a cash offer on the house regardless of its condition or while it is in forbearance. You can close fast , pay off your loan, and be free of debt.

How to negotiate mortgage forbearance

You may (or may not) have heard that the CARES Act is allowing a huge chunk of homeowners to request forbearance for six to 12 months of mortgage payments.

If you haven’t heard, you can review the details here, but the takeaway is that anyone with a federally-backed mortgage who has been economically affected by COVID-19 is eligible.

And like other mortgage relief programs that have been rolled out by various private banks and state governors, the forbearance won’t hurt your credit score/history, nor will you pay penalties or fees.

It’s still somewhat unclear what happens after the forbearance period ends, but the CARES Act did stipulate that you can’t be charged interest beyond what would have been due had you remained current on your loan.

For me, that means the missed mortgage payments get added to the end of the loan term, effectively putting the mortgage on hold.

But that’s just my opinion, and the whole thing is still a bit fluid and confusing. Even the experts are trying to make sense of it all.

Another key point is that you don’t need to provide any documentation of hardship to receive the forbearance.

You simply need to attest to your loan servicer that you’re experiencing a financial hardship due to the COVID-19, and request relief.

Hello Lender Generates Free Mortgage Forbearance Request Letters

  • Free tool generates a letter to send your loan servicer for mortgage assistance
  • Simply answer a handful of questions and it does the rest
  • You will receive an email with the letter in Microsoft Word format
  • That letter can then be sent on to your loan servicer to request forbearance

To make that piece a little easier than it already appears to be, the tech arm of law firm Wilson Sonsini Goodrich & Rosati, SixFifty, has launched a new free tool called “Hello Lender.”

It generates a letter (in Microsoft Word format) to your loan servicer by asking you a series of simple questions.

You can then use that letter to send to your loan servicer, who in turn should provide you with the desired relief outlined in the letter, without further proof of hardship.

Just note that your loan must be federally-backed, and you must send it to your loan servicer, which may not be the bank that originally funded your loan.

Assuming you get those details right and qualify based on loan type, you should be good to go.

I generated a test letter and it look about a minute to complete it.

Sample Mortgage Forbearance Letter

How to negotiate mortgage forbearance

It asks a few basic questions, such as your name, your bank/loan servicer’s name, your loan number (if you have it handy), your property address, and the amount of forbearance you’d like to receive.

You can pick anywhere from 30 to 180 days, and it automatically adds a line about the ability to request an additional 180 days of forbearance, or the ability to shorten the forbearance period at your request.

Additionally, it includes language from the CARES Act that you “attest and affirm” that you’ve experienced a financial hardship related to COVID-19, and fees, penalties, and interest won’t be charged beyond what had been if on-time payments were made.

It’s pretty straightforward, but might be helpful to some folks who are totally confused by all this.

I don’t blame anyone, considering the many mortgage relief efforts being touted by individual banks and states, which has probably done more harm than good.

CARES Act Mortgage Relief Might Be Best Path for Most Homeowners

  • CARES Act mortgage relief provides the longest amount of forbearance
    (12 months)
  • With the least amount of documentation necessary (basically a letter)
  • Applies to most loans, including Fannie/Freddie/FHA/USDA/VA
  • Those with jumbo loans or portfolio loans must speak to their bank or loan servicer directly

The CARES Act mortgage relief is probably the main and go-to program at this point for most individuals, since the majority of homeowners with a mortgage have a federally-backed one.

To reiterate, federally-backed includes loans backed by Fannie Mae and Freddie Mac, along with the FHA, USDA, and VA, which should cover roughly two-thirds of the market.

The rest are jumbo loans or portfolio loans, both of which might be on individual bank’s books. In those cases, you’d need to inquire about relief with those entities directly.

Lastly, remember that if you can pay your mortgage, you should pay it. In other words, if you haven’t been affected financially, you shouldn’t just take advantage of the “free mortgage payments” because you can.

That’s the message from FHFA director Mark Calabria and Treasury Secretary Steven Mnuchin.

How to negotiate mortgage forbearance

The Mortgage Bankers Association’s Sara Singhas explained how mortgage forbearance and repayment works and what homeowners should do if they need more time.

More than 15 million Americans have lost their jobs since the start of the coronavirus pandemic, pushing the U.S. unemployment rate to its highest since the Great Depression. As a result, millions of homeowners are relying on mortgage forbearance plans provided by Fannie Mae, Freddie Mac, and several major banks to stay in their homes until the pandemic ends and the economy begins to recover.

How to negotiate mortgage forbearance

Sara Singhas (Photo credit: MBA)

However, the elation about relief has turned into confusion as homeowners navigate the application process, repayment options, and what it means for the future of their families. To help clear up misconceptions, Inman chatted with the Mortgage Bankers Association Director of Loan Administration Sara Singhas and got the answer to your most common questions.

Here’s what she had to say:

Fannie Mae, Freddie Mac, and a number of banks and other loan servicers are offering mortgage forbearance plans that last anywhere from 90 days to one year. What should homeowners consider before applying for one of these programs?

Borrowers that are able to pay their monthly mortgage payment should continue to do so. Many borrowers’ financial situations are in flux during the pandemic and it is very important to work with their servicers to determine the appropriate length of forbearance given their particular situation.

Forbearance only delays payments owed, so borrowers will be required to repay the missed payments. Servicers are also dealing with very high volumes of borrowers in need.

For these reasons, it is important to take forbearance only for the time period in which the borrower is experiencing hardship and only if it is necessary. Typically, the initial period is 90 days. Borrowers that are still experiencing hardship at the end of the initial forbearance period can request additional forbearance periods for a total of 12 months.

What are the common misconceptions homeowners have about these programs, especially when it comes to repayment? Some homeowners think those payments will be added to the back of the loan when that’s not always the case. What specific questions should they be asking about repayment options?

Repayment options will vary depending on who the owner or investor of the loan is. Repayment by adding missed payments to the end of the loan is not available for all loans. Borrowers should talk to their servicer about what options are available to them.

Another misconception is that missed payments must be repaid in a lump sum at the end of a forbearance period. A lump-sum payment is an option, but not the only one for most loans. Other options often include entering into a repayment plan or modifying the loan.

Can homeowners who are already behind on their mortgage qualify for these forbearance plans?

Yes, for “federally backed” loans covered by the CARES Act, borrowers are eligible for forbearance even if they are already behind on their payments.

Some economists say the pandemic will lead us into a longer-term recession. What could happen if a homeowner applies for a forbearance plan and still isn’t able to pay at the end of the forbearance term?

Borrowers that need additional assistance after the forbearance period should ask their servicer about long-term loss mitigation options such as a loan modification.

How can homeowners plan for repayment during their forbearance period?

Borrowers should discuss repayment options with their servicer. If they have the ability to save money without forgoing other necessary expenses, it may make sense to do that so they can exit forbearance earlier or with different options. Repayment options will include repaying in a lump sum, entering into a repayment plan, or modifying the loan.

If a homeowner has a loan through a bank, credit union or servicer that hasn’t announced a forbearance plan, how can they negotiate one of their own?

Borrowers should contact their mortgage servicer about forbearance options. Under the CARES Act, borrowers with federally backed loans are eligible for forbearance assistance. Most borrowers outside of the CARES Act will be eligible for some type of forbearance, though the exact details will differ.

American homeowners were given more opportunity to hit pause on their mortgage payments because of the financial ravages of the pandemic, but that relief is slowly coming to an end.

About 3 million people are behind on their mortgage, the most at any time since the Great Recession, according to the Consumer Financial Protection Bureau. About 2 million are in forbearance plans, which provide a reprieve of a year or longer from making payments.

Some people are beginning to exit these arrangements, but experts say the pace will soon pick up, with as many as 1.7 million borrowers exiting in September. Regulators have warned mortgage servicers to be prepared for the onslaught.

Those who are unable to resume payments or reach some other agreement with their lender may be forced to leave their homes through sale or foreclosure.

“We must not lose sight of the dangers so many consumers still face,” CFPB Acting Director Dave Uejio said in a statement as the agency works to ease the process and protect homeowners. “Millions of families are at risk of losing their homes to foreclosure in the coming months, even as the country opens back up.”

Experts say homeowners who are in forbearance should start making plans as soon as possible for their next steps — be that resuming payments as usual, tweaking the terms of their loan or leaving their home.

Here’s what borrowers should know:

IF YOU CAN AFFORD PAYMENTS

Homeowners who received a COVID hardship forbearance are not required to repay their skipped payments in a lump sum once the forbearance period ends, the CFPB reminds borrowers.

Contact your mortgage servicer to discuss your options.

If you can resume your pre-pandemic payments, the process should be fairly smooth. Many federally backed loans have programs in place that will allow homeowners to resume payments as usual and tack those missed payments on to the end of the loan period, said Andrea Bopp, an attorney at the National Consumer Law Center who specializes in mortgage servicing issues.

Borrowers may also work with their servicer to find other arrangements, such as increasing the size of their regular payments to help make up their missed payments. In some cases, the servicer may create a separate account for the unpaid payments that would be settled upon the sale, transfer or refinancing of the loan.

The options vary by type of loan, there are several processes in place for borrowers with federally backed loans. However, there are no universal programs to help those with privately held loans ease out of forbearance; these represent about one-third of all mortgages.

All the same, servicers have been encouraged to be flexible to find arrangements that work for all borrowers. The CFPB has a wealth of information on its website to help borrowers sort out their options.

If you do not know who holds your loan, check your mortgage statement, call or write your servicers. The CFPB has information online for consumers on how to do this.

IF YOU CANNOT AFFORD PAYMENTS

If you have a federally backed loan and are nearing the end of your forbearance period you may request up to two additional three-month extensions — although the maximum forbearance period cannot exceed 18 months. This only applies to those who received their initial forbearance on or before February 28, 2021 for loans held by Fannie Mae or Freddie Mac or June 30, 2020 for HUD, FHA, USDA, or VA loans.

If you are struggling with payments, servicers are generally required to discuss relief options with you, whether or not your loan is federally backed.

It’s important to reach out to your mortgage servicer as soon as possible to discuss your options. If you need help, talk with a free HUD-approved housing counselor; they can be found online. Or you can seek out legal help through Legal Aid or by reaching out to your state bar association.

The last resort is for a homeowner to leave their home through foreclosure.

In a foreclosure, the lender takes a property back after a borrower fails to make all the required payments. There is a foreclosure moratorium in place for all federally backed mortgages — those backed by Fannie Mae, Freddie Mac, FHA, USDA, or VA — until June 30, 2021.

However, borrowers may be able to avoid foreclosure if they seek help to make other arrangements, be that through their servicer directly or with the help of a housing counselor or lawyer.

Experts urge homeowners not to wait until the forbearance period is over or the foreclosure moratorium ends. Once the foreclosure process begins it is difficult to stop and foreclosures are expensive for homeowners, with an average cost to borrowers of $12,500.

In some cases, people with equity in their homes may be able to sell their home to avoid foreclosure, which has a not just a devastating financial but emotional and mental impact on families.

Not every deliquency leads to a foreclosure though, notes Odeta Kushi, deputy chief economist at First American. She said that rising equity and home prices may allow more borrowers to sell, causing more of a “foreclosure trickle than a tsunami” ahead.

All experts urge homeowners to reach out to their mortgage servicer as soon as possible to allow for adequate time to make an exit plan from forbearance.

“For people who are overwhelmed right now, it is important to connect with the servicer,” Bopp said. “It can be difficult to sit on the phone . or connect online. But if you wait too long it can be a snowball effect.”

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Learn five steps to take to prepare for the end of mortgage forbearance agreements. (iStock)

In February, the Biden Administration extended the CARES Act federal moratorium on home foreclosures and mortgage forbearance plans. These programs provide much-needed mortgage relief for the 10 million borrowers impacted by COVID-19 who are experiencing financial hardship.

But for many borrowers, the one-year end date is quickly approaching, and both federal moratoriums will expire on June 30, 2021. If you’ve been relying on a forbearance program to get by financially, how can you get ready to pay your mortgage again? And what should you do once payment relief ends?

One option all borrowers can consider is to refinance their mortgages at a lower rate. When you visit a lending marketplace like Credible, you’ll receive prequalified rates without hurting your credit score. Let’s look at a few other options you can consider.

What happens when mortgage forbearance ends?

The end date on your mortgage forbearance depends on when you first requested it. For most borrowers, the mortgage forbearance length is six months, and then you can request a six-month extension.

That means if you requested forbearance at the beginning of the pandemic, your mortgage forbearance has either ended or is getting ready to end. So you need to have a plan in place for how you’ll resume your monthly mortgage payments once it’s over.

And once forbearance ends, you will not only have to resume making your regular mortgage payments, but you’ll need to pay back the payments you missed. If you’re reaching the end of mortgage forbearance, there are a few different options you can take:

  • Request an extension: If your lender agrees to it, you can request an extension on your current forbearance. This should be used as a last resort, and you may need to provide proof that you’re experiencing financial hardship. For instance, if you’re unemployed due to the COVID-19 pandemic, your lender may agree to extend your initial forbearance.
  • Arrange intermittent payments: Resuming your regular mortgage payments and repaying your missed payments can feel like a huge financial hurdle to overcome. But your best course of action is to contact your mortgage lender to see what kind of repayment plans they offer. One option is to set up intermittent payments — this will allow you to pay back your missed payments over a period of time that works for you.
  • Request a loan deferral: If you can afford to begin making mortgage payments again but repaying the missed payments is too much of a financial burden, you might request a loan deferral. This allows you to repay the missed payments in a lump sum once your home is sold or refinanced.
  • Refinance your mortgage: Finally, you might consider refinancing your home. When you refinance, you replace your current mortgage with a new loan at a lower interest rate. And if you opt for a longer mortgage term, you could lower your monthly paymentseven more. You can compare refinancing rates across multiple mortgage companies by visiting Credible to compare rates and lenders.

What should you do to prepare?

Here are a few ways you can begin preparing for the end of mortgage payment forbearance:

  • Determine whether you can resume making payments: The first step you should take is to determine what you’re able to do financially after forbearance ends. Can you afford to pay your mortgage, or do you need to request an extension? Understanding where you’re at financially will help you figure out your next steps.
  • Contact your lender early: If you do need to request an extension, intermittent payments, or payment deferral, you should contact your lender as soon as possible. Mortgage lenders are receiving a lot of loan modification requests, so you want to allow plenty of time to get the process completed.
  • Consider refinancing your home: If you can resume playing your mortgage but are looking for ways to lower your monthly payments, refinancingafter forbearance ends could be a good move. Extending your loan term and lowering your interest rate will make repaying your mortgage even easier. You can visit Credible to get in touch with experienced loan officers and get their mortgage questions answered.

The bottom line

The coronavirus pandemic has caused financial problems for many homeowners, but forbearance plans helped ease the burden. If you’re nearing the end of mortgage forbearance, there are many options available to you, including extending your forbearance, payment relief through deferral and refinancing.

If you’re thinking of refinancing, consider using Credible’s free online tool to easily compare multiple lenders and see prequalified rates in as little as three minutes.

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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