mortgage forbearance


If you’re like most Americans these days you’re paying special attention to your bank account. With millions of people dealing with job loses or a reduction of income due to the coronavirus, it’s a real worry how everyone is going to be able to pay their bills. The recently approved CARES Act, adds to weekly unemployment checks, ensures a stimulus will be sent to most Americans, and it also allows you to put off your mortgage payment for up to a year.

However, the verbiage between the government and the banks may leave many people scratching their heads. The most important question on everyone’s mind seems to be what happens when the mortgage forbearance period is up?

That answer might depend on your mortgage company.

Homeowners that have mortgages through Bank of America, Chase, Wells Fargo, and other banks have been told they can indeed apply for mortgage forbearance. However, they should attempt to pay as much as possible during the forbearance period. The main reason for this is that when the 3 to 6-month forbearance period is up they will owe the lump sum of the payments they missed.

In other words, if your mortgage is $1,000 per month and you get a forbearance for 6-months and are unable to pay anything in that time, on the 7th month you would owe your monthly mortgage plus an additional $6,000.

Many are thankful for the idea of a reprieve in this difficult time, however the idea of having to pay as much as a full year of mortgage payments in one go is an impossibility for most families. As a result, experts are worried about how this will impact borrowers in the coming months.

As Shamus Roller, the executive director at National Housing Law Project said, “The problem with the CARES Act is that it doesn’t make clear how borrowers pay back the money during the forbearance period.”

The main problem appears to be that Wells Fargo, Chase, and Bank of America often service the loans of Fannie Mae, Freddie Mac, and the Department of Veterans Affairs loans. The loans that are serviced are required to get all forbearance funds at the end of the forbearance period. If your mortgage is through one of the aforementioned banks, they often allow borrowers to take on suspended payments to the end of their loan.

The goal before signing up for any mortgage forbearance is to know who services your mortgage and what is going to happen at the end of your forbearance period. This will give you the chance to make a more informed decision about what to do. If you’re dealing with financial hardships due to COVID-19, you should visit your mortgage company website and contact your servicer to find out about all of the relief options that are available to you.

Make sure to ask questions and that you understand the bottom line. Once you’re sure you know the details, you’ll be able to make an informed decision. Even if your loan servicer expects you to pay back your forbearance in one lump sum, you might be able to restructure your mortgage to roll those payments into your loan. The best thing you can do is stay in touch with your loan servicer, ask about available options, and ask as many questions as you need to until you’re certain you know the best path for you.