If you’re struggling with your mortgage payments, we have some good news.
Fannie Mae and Freddie Mac are extending their moratorium on foreclosures on single-family mortgages until Dec. 31, 2020 — the current moratorium was set to expire Aug. 31.
For homeowners in COVID-19-related forbearance, servicers can also offer the option to defer missed payments until they sell or refinance their homes or reach the end of their loans.
What does that mean for you? If you’ve lost income due to the shutdown or medical issues, now is the time to call your mortgage company and ask about mortgage relief options.
How to Know if a Mortgage Payment Deferral Can Help You
The CARES Act allows borrowers with a pandemic-related financial hardship to ask for a pause or reduction in their monthly mortgage payment.
The moratorium on foreclosures applies to the more than 28 million homeowners with enterprise-backed mortgages — aka mortgages backed by Fannie Mae or Freddie Mac. More than 3.8 million homeowners were in forbearance as of April, which can be requested for up to a year (in six-month increments).
Up until an FHFA announcement in June, it was unclear how those missed payments would be paid back after the forbearance period ends.
If lenders could require a full payment at the end of the forbearance, you’d owe your regular mortgage payment multiplied by the number of months you were in forbearance — in one lump sum.
Instead, you may be able to add up to 12 months of missed payments to the end of your loan term.
For example, if you were scheduled to have paid off your mortgage by November 2025 and you receive a 12-month forbearance, you’ll extend mortgage payments until November 2026.
If you’re able to pay your mortgage, continue to do so. Forbearance is a way to buy time until you can make payments again — it’s not a way to get out of paying your mortgage.
Your monthly mortgage payment won’t change. But if there’s any chance you’ll be moving or refinancing soon, you might want to consider other options, as the bigger bill will arrive at that point.
And be prepared for more than just your monthly mortgage in the total: The deferred sums will include principal, interest and escrow advances.
However, if you’re struggling, this option could keep you in your home without having to worry about getting socked with an eye-popping bill within the next year.
Alternatively, you may be eligible for a repayment plan that lets you pay a higher monthly mortgage payment for a period of time until you repay your missed payments.
And if your income reduction will be for the long term, you may be eligible for a loan modification.
To find out more, reach out to your loan servicer, who will evaluate your repayment and loan modification options.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.