What is Mortgage Forbearance?

If you are watching the news, you have probably heard the term “Mortgage Forbearance.”  What is it and how does it work?

• You can temporarily suspend, or even reduce, your monthly mortgage payments.
• At the end of your forbearance, you will still have to repay your mortgage. Forbearance is not the same as mortgage forgiveness.

If you’re able to keep up with your payments, keep making them. Forbearance does not erase what you owe. You’ll have to repay any missed or reduced payments in the future.  Make sure you understand how you will be asked to repay your mortgage.    There are several ways to pay back your mortgage after forbearance, including:

• A lump-sum payment at the end of your forbearance;
• Higher monthly payments; or
• A lump-sum payment at the end of your mortgage.

There may be alternative options. Freddie Mac, for example, can provide forbearance for up to 12 months, waive penalties and fees, and offer loan modifications, among other benefits. Check with your mortgage servicer for details.

Keep in mind, mortgage forbearance does not apply to every loan.  If your mortgage is through a private lender or not owned or backed by the federal government, then the mortgage forbearance provisions of the CARES Act will not apply to your mortgage.  You should contact your lender for options to pause your payments.

Anyone considering mortgage forbearance should understand all the financial implications before agreeing to any alternative payment options.  Although the CARES Act specifically states any delayed payments can not impact your credit report, there are rumors circulating that lenders have found a way around this by showing payments as “current” but also making notes in the comments section of your report indicating you are delaying payments.   Ask questions and know before you commit.