Since March 2020, millions of homeowners have taken advantage of the CARES Act loan forbearance program allowing them to temporarily pause or reduce their mortgage payments. This article provides an update to the Cares Act 2021 mortgage forbearance process and a new deadline for applying.
What does forbearance mean?
Words like deferment and forbearance are not used in everyday language unless you work at a bank. So, what does forbearance on a mortgage mean? According to Rocket Mortgage, a mortgage forbearance is when a lender allows the homeowner to pause their mortgage payments on a temporary basis. Those in need of forbearance typically have experienced circumstances that created a hardship such as illness, loss of job, natural disaster, or some other unforeseen event. Once the forbearance time period is over, typically the homeowner must pay back the paused payments.
What happens when mortgage forbearance ends?
Homeowners normally have more than one option to repay back payments. Options may vary depending on qualification criteria and lender. Here are some common options.
- Repayment plan: Part of your past-due amount is added to your normal monthly payments.
- Deferment: A portion or all of your past-due balance is set aside for payment when your mortgage is paid off, or if you refinance or sell.
- Forbearance Loan Modification: If the homeowner qualifies, mortgage payments may be modified in order to include the past-due balance.
- Reinstatement: If the homeowner has the funds, there could be the option of paying back the past-due, paused payments upon the end of the forbearance.
Depending on the terms of the forbearance with the lender, the homeowner may have to pay more in interest and other fees as a result of paused payments.
The CARES Act and mortgages
Under the CARES Act passed in 2020, homeowners experiencing financial hardship due to Covid-19 were eligible to be granted forbearance on a federally backed mortgage loan. The legislation helped Americans with loans backed by Fannie Mae, Freddie Mac, the FHA, VA or the USDA. Since March 2020, millions of American homeowners have received forbearance under the CARES Act, allowing them to temporarily pause or reduce their mortgage payments. One great part about the program is that homeowners are not required to provide proof of financial hardship. For more information about the government’s COVID-19 mortgage relief programs, click below.
Pandemic mortgage forbearance application update 2021
In June 2021, the FHA announced additional measures to help those who are struggling.
Homeowners at continued risk of falling behind on mortgage payments due to COVID-19 can now take advantage of an extension of the time period to submit a first time forbearance application. If the loan is backed by HUD/FHA, USDA, or VA, the deadline for requesting an initial forbearance is September 30th, 2021. If the loan is backed by Fannie Mae or Freddie Mac, there is not currently a deadline for requesting an initial forbearance.
The COVID-19 Forbearance for homeowners who newly request forbearance assistance between July 1, 2021, and September 30, 2021, is for six months.
For homeowners who received a forbearance from their mortgage servicer between July 1, 2020, and September 30, 2020, the FHA is providing one additional three-month forbearance extension for those who need and request additional time to recover financially before resuming mortgage payments.
Please check back often for more pandemic mortgage forbearance updates, and any additional updates or news.
