What is Mortgage Forbearance & What Can It Do for You?

If you’re experiencing temporary financial difficulty and are having trouble making your mortgage payments, a mortgage forbearance can give you some financial breathing room while you are getting back on your feet.

A forbearance is a short-term solution only, so if you truly can no longer afford your property or have fallen critically behind in your payments, you will probably need to look at other options to avoid foreclosure. However, a mortgage forbearance can be of assistance if you are experiencing a temporary setback like an illness, unemployment, or an unexpected disaster such as a flood that has caused property damage.

What Does Mortgage Forbearance Involve?

According to the Consumer Financial Protection Bureau (CFPB), Mortgage Forbearance involves you coming to an agreement with your mortgage lender that includes either lowering payments or pausing a mortgage for a limited time. After the time is up, you will have to pay back any payments you have missed or reduced.

How Do I Begin Paying Back a Forbearance?

Different lenders will offer different repayment plans. When paying back a forbearance, there are three repayment options you will usually see.

  • The lender will make you pay it back all at once after the forbearance period ends.
  • The lender will modify your mortgage payment by adding a portion of what you owe to your regular payments each month until you catch up.
  • You will extend your loan and pay back what you owe at the end of your loan period.

How Do I Know if I Qualify for Mortgage Forbearance?

If you are a homeowner, with a federally backed mortgage, and you are experiencing temporary financial hardship than you most likely qualify for mortgage forbearance. Recently, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was established to help homeowners who are experiencing financial hardship, specifically as a result of the Coronavirus pandemic.

If you have recently fallen on unexpected financial hardship, you should contact your lender right away. Some lenders have a time requirement in which you need to contact them within a certain amount of time after a qualifying event (job loss, natural disaster, etc.) to receive a mortgage forbearance.

What Do I Need to Know about the CARES Act?

The CARES Act helps ease the current financial burden on homeowners who are suffering financial setbacks as a result of the COVID-19 pandemic. Under the CARES Act, homeowners can be granted mortgage forbearance for up to 180 days. After the initial 180 days, homeowners can request one extension for another 180 days.

All mortgage lenders that provide federally backed residential mortgages are currently required to participate in the provisions of the CARES Act. The act also prevents homeowners from having to pay any additional fees, penalties, or interest beyond the standard charges. If you qualify for forbearance under the CARES Act, it will also not affect your credit score. You can read more about the CARES Act here if you have additional questions.

What Do I Need to Keep in Mind if I’m Considering Mortgage Forbearance?

When you are considering speaking to your lender about a mortgage forbearance, keep in mind, it is only a temporary fix. No matter what, you will be responsible for ultimately repaying any missed or reduced payments, and you will need to be financially capable of doing so. Additionally, any paused mortgage payments will continue to gather interest, so you’ll end up paying more over time.

You also should keep in mind that forbearance options will vary depending on the type of loan, the investor’s specific loan requirements, and your particular lender.

Frequently Asked Questions Regarding Mortgage Forbearance

Who Can I Talk to About Mortgage Forbearance?

When you are considering mortgage forbearance, you need to speak to your lender or mortgage servicer. It may also be beneficial for you to talk to a Department of Housing and Urban Development approved housing counselor to discuss your options.

What is the Maximum Amount of Time a Forbearance Can Last?

Since mortgage forbearance is only a temporary option, it will last a maximum of one year, but it is usually less.

Will Mortgage Forbearance Negatively Effect My Credit?

Unless you qualify for mortgage forbearance under the CARES Act, it will have some negative impact on your credit. However, it is less damaging than missing a payment and a much better option than foreclosure.

Is forbearance an option if my mortgage is not Federally Backed?

Most residential mortgages are federally backed, but if yours isn’t, contact your servicer because many will grant you a forbearance or work with you to provide you with other options.

What Should I Have with Me When Speaking to My Lender About Mortgage Forbearance?

When speaking to your lender about granting you a forbearance, you should have with you the following documentation:

  • Your Most Recent Mortgage Statement
  • Estimates for your current monthly income and expenses
  • An explanation of your hardship ideally in the form of official proof such as a medical bill

Are Forbearance and Deferment the Same?

No – a mortgage deferment is different than a forbearance. Review our full guide on Forbearance vs Deferment.