The CARES Act offers payment forbearance relief for mortgage holders of federally guaranteed loans. Jumbo mortgages with loan balances exceeding $510,400, or privately held mortgages are typically not eligible for the program. For these types of loans, it is best to contact the bank to see what forbearance terms they may be offering. Forbearance is a suspension of payments; it is not to be confused with deferral or forgiveness of your obligations.
Mortgage holders who are unable to make their monthly payment on federally backed mortgages have to be concerned with not just what forbearance is offered up front, but what the terms of payback will be. Some banks or servicers are requesting that any deferred payments be paid in full at the end of the forbearance period. Others may offer a customized repayment plan that allows you to gradually catch up over a period of months.
The CARES Act offers an initial 60-day period of forbearance which can be extended by up to a year, comprised of two 180-day extensions. Needless to say, if you are unable to make your mortgage payment, it is imperative that you contact your bank or servicer immediately. Remember, it is their money that you have borrowed, and it is important that you remain on good terms with them.
Whenever you deal with any type of financial matter over the phone, you need to document the particulars of your conversation. Relying on a bank or servicer to document your conversation is risky. We recommend that you note the date and time of your call, ask for the representative’s name and physical location, and take plenty of notes. Some organizations will offer a confirmation number as proof of your call so that the next agent can easily refer to your conversation. Finally, have as much documentation as possible at your fingertips before making your call.
For some borrowers, forbearance may provide immediate relief from default, but they may have no way to make up the deferred payments due to the severity of their financial duress. For borrowers still under the gun after 90-days, a loan modification may be the best option for avoiding default. Again, it is imperative to be in regular contact with your servicer to discuss modification options.
Mortgage relief in the CARES legislation was written with consumer protections in mind. If you have been impacted financially, directly, or indirectly by COVID-19, you qualify. Forbearance will not have an impact on your credit report. There is one final relief valve that may give you some time to consider your options; all mortgages have a 15-day grace period before you are considered delinquent in your payments.