Forbearance is defined as the period in which one’s mortgage servicer or lender, permits them to pause or decrease their payments temporarily. As of March 7th, 2021, the Mortgage Bankers Association estimates that “2.6 million homeowners are in forbearance plans.” Under Biden’s administration, he has extended the enrollment window until June 30th, 2021 for those that desire to develop a forbearance plan. If you have a Fannie Mae or Freddie Mac loan, there is currently no deadline.
It’s important to understand and consider all the possible outcomes of going through the forbearance process. Under normal circumstances, it may be possible that at the end of a forbearance period, you would need to pay a lump sum of all the payments that were paused during this period. Due to COVID-19, under the CARES Act, mortgage servicers are prohibited from being able to seek this lump sum from you. Furthermore, it’s important to note that interest will still accrue on your paused payments. HOA and condo fees will still be required in these payments, they’re not part of the forbearance. If needed, you are also granted the ability to request extensions of your paused/reduced payments, on a case by case basis.
You may wonder how a forbearance would affect your credit. Normally, forbearance would be reported on your account. However, if you were current on your account beforehand and received relief from the CARES Act, your servicer must still report your account as current.
In order to end a forbearance, you must develop a plan with your mortgage servicer to repay the amount that was omitted. There are a few different ways, but they vary depending on the type of loan and protection you have. If you want more information about forbearance, call George Freelove at 407-408-5167.