Q: Under extenuating circumstances, can I get forbearance for my mortgage?
A: The answer is "possibly" or even "most likely", but this depends on the circumstances.
What is mortgage forbearance?
Forbearance is the temporary suspension of making payments on your mortgage. These may come in two forms: A full suspension of payments for a time or one that allows you to make a partial payment for a time.
Forbearance isn't loan forgiveness. You will need to pay back deferred or delayed payments at some point, and interest charges and late-payment penalties can also accrue during any forbearance period.
Forbearance can help you deal with a temporary hardship, situations that might include your home being damaged in a flood, you had an illness or injury that increased your healthcare costs, or you lost your job
How to request mortgage forbearance
If you're struggling with making mortgage payments or you expect to be coming into difficulty, you need to get in touch with your mortgage servicer as soon as possible. Their phone number or website address can be found on your mortgage statement. When you contact them, ask them what 'forbearance' or 'hardship' options may be available to you.
Forbearance terms and offers can vary from servicer to servicer and from situation to situation. You'll need to discuss with your servicer your needs and expected timelines for being able to start making full payments again and manage any amounts in arrears.
Repaying mortgage forbearance
You will be required to repay any mortgage forbearance at some point. Common repayment methods might include:
- One where you make no payments for a time, but then will make at "catch up" payment all in one lump sum at an agreed-upon later date. You will need to be prepared for that large expenditure;
- One where you cut your monthly payment in half for a time, then return to both your full monthly payment and send additional funds to "catch up" over a given period of time, such as a year;
- One where any accrued payments and fees are added to the back end of your mortgage, essentially extending your mortgage term, but not requiring any "catch up" monthly payment increases.
Fannie Mae and Freddie Mac forbearance policy
If your loan is owned or backed by Fannie Mae or Freddie Mac, your servicers will need to follow their procedures. Fannie Mae has a standard Mortgage Assistance Application form that your servicer will provide to you, but it might be a good idea to familiarize yourself with it even before you call them.
Fannie Mae and Freddie Mac allow the servicer to offer forbearance for up to 12 months (for anything longer, approval from Fannie/Freddie is required and would be done on a case-by-case basis).
If you aren't proactive in contacting your servicer and begin to fall behind on your mortgage, both Fannie Mae and Freddie Mac have also established standards for communicating with borrowers in need of mortgage forbearance or modification, called "Quality Right Party Contact (QRPC)". Quality right party contact occurs when the servicer establishes contact with the borrower, co-borrower or trusted advisor, such as a housing counselor, and discuss the most appropriate options for delinquency resolution.
The purpose of QRPC is to:
- Determine the reason for the delinquency and whether it is temporary or permanent in nature,
- Determine the occupancy status of the property,
- Determine whether or not the borrower has the ability to repay the mortgage loan debt,
- Educate the borrower on the availability of workout options, as appropriate, and
- Obtain a commitment from the borrower to resolve the delinquency.
See more about Fannie Mae's Assistance Options, including how to determine if Fannie Mae or Freddie Mac owns or backs your loan.
Can forbearance affect my ability to refinance or get a new mortgage?
Under CARES-Act guidelines federally-backed mortgages in forbearance plans are required to be reported as "current". However, as reported by Kathleen Howley of HousingWire some servicers are adding comments into "notes" sections of credit reports indicating that loans are or were in forbearance plans, which can indicate to potential lenders that a borrower seeking a new mortgage was having trouble paying an existing loan. Such an entry could give a new lender pause in making a new loan.
On May 19, 2020, new clarity from FHFA, Fannie Mae and Freddie Mac's regulator was released in the form of "temporary guidance". Their statement read: "Borrowers are eligible to refinance or buy a new home if they are current on their mortgage (i.e. in forbearance but continued to make their mortgage payments or reinstated their mortgage). Borrowers are eligible to refinance or buy a new home three months after their forbearance ends and they have made three consecutive payments under their repayment plan, or payment deferral option or loan modification."
Additional help with mortgage relief
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).
Related: Mortgage Modification: What's Available Today?
