What to know about mortgage forbearance amid the pandemic
PHILADELPHIA (WPVI) -- With so many people suddenly unemployed, an estimated 4 million American homeowners have put their mortgage payments on pause. The new concern is how lenders will require repayment post-pandemic.
"It's a bit of a tough circumstance to be honest," said landlord Ed Edge.
Like so many homeowners, Edge, of West Philadelphia, put a pause on paying his mortgage. The CARES Act provides for a one-year mortgage forbearance for federally backed loans.
"Meaning 70% of American borrowers can defer their mortgage payments for up to 12 months without late fees or penalties," said Christina Tetreault, Consumer Reports Manager of Financial Policy. "For the other 30% of borrowers, the services are making relief available. In any case, consumers should contact their borrower.. they're required to contact their borrower if they want to take advantage of these relief programs."
But a warning: "Every single homeowner who's going through hardship right now should read the fine print," said Edge.
Edge does not have a federally backed loan but did get a 6-month forbearance.
"However at the end of those six months, all of those payments I haven't made are due," he said.
And at the end of any forbearance period, lenders can start charging late fees, put a black mark on your credit, and begin foreclosure proceedings.
So here's what experts say you need to know:
Fannie Mae and Freddie Mac have now clarified balloon payments will not be required of their borrowers.
"So the crucial thing to remember is that consumers who are able to get help, under the CARES Act, which applies to federally backed loans, are not required to repay their skipped payments in one lump sum," said Tetreault.
And even for borrowers like Edge, there is hope many banks are also making repayment plans available, you just have to push for them.
"Such as tacking the skipped payments onto the end of the loan or paying a little bit more per month," said Tetreault.
For some, a mortgage modification may also be an option.
No matter who your lender is call now to understand your options and to get your repayment plan in writing as soon as possible.
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