What Is Mortgage Forbearance?
Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited period of time. Forbearance doesn’t erase what you owe – you would have to repay any missed or reduced payments in the future.
Important Things To Know First
For many homeowners with mortgages, there’s help, but first assess your situation:
If you CAN pay your mortgage, pay your mortgage. In fact, according to the Department of Housing and Urban Development, if you can pay your mortgage, it is in your best interest to do so. Please do not call your mortgage servicer if you aren’t facing an immediate issue. Mortgage servicers are getting a lot of calls and need to first help those who need it the most. Check your servicer’s website first for possible options. Once again, a forbearance is not debt forgiveness – you still have to pay back any and all missed payments.
If you CAN’T pay your mortgage, or can only pay a portion, contact your mortgage servicer immediately. It may take a while to get a loan servicer on the phone, as loan servicers are experiencing very high call volumes and are impacted by the coronavirus pandemic as well. (You’ll find their contact information on your mortgage statement.) If your income is restored, we strongly suggest reaching out to your servicer and resume making payments as soon as you can. We recommend reading this Consumer Financial Protection Bureau (CFPB) article carefully so you are prepared for your conversation with your servicer.
Mortgage Forbearance: CARES Act
A new federal law, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, puts in place two protections for homeowners with federally backed mortgages:
- A foreclosure moratorium
- A right to forbearance for homeowners who are experiencing a financial hardship due to the COVID-19 emergency
If you’re among those financially impacted by the coronavirus pandemic, you might be concerned about how to pay your mortgage. Federal and state governments have announced plans to help struggling homeowners during this time. We recommend watching the Consumer Financial Protection Bureau's (CFPB) video below to get additional information on what to do now, and what your options are for mortgage relief.
CARES Act Mortgage Forbearance
What You Need to Know From the Consumer Financial Protection Bureau:
Forbearance Impact On Credit Scores
Below is what FICO® has said in regard to how a forbearance during the COVID-19 pandemic will affect credit scores:
It is important to note that the CARES Act governs how furnishers [like FICO] must report to the credit reporting agencies (CRAs) only in circumstances where they have reached an accommodation with the borrower. In those cases, furnishers must continue to report the account status as “current”, provided the account was not already in a delinquent status prior to the accommodation.
This reporting approach– placing borrowers in a temporary deferred payment plan or in forbearance, along with reporting an account status as “current”– will permanently ensure that a borrower’s FICO® Score will not be impacted by late payments related to the effects of the COVID-19 pandemic.
To summarize, only your lender is in a position to assess how you’ve been impacted by the COVID-19 pandemic, and to report all key credit data fields in a manner that best reflects your situation. As they are reported to the CRAs, payment status, amounts past due (if any), and balance information will continue to be important and considered in the calculation of the FICO® Score. You should not stop making loan payments until you’ve reached an accommodation plan with your lender.
We strongly suggest reviewing the complete details on credit reporting during the COVID-19 crisis on the FICO® website.
COVID-19 Forbearance FAQs
What is the difference between a forbearance plan and payment deferral?
A forbearance provides temporary relief by reducing or suspending your payments for a brief period of time, depending on your individual situation. Toward the end of your forbearance period, your servicer will reevaluate your situation to determine the best program to repay those missed payments.
A payment deferral is an agreement to pay the past due amounts at a different time. This may be an option for you at the end of your forbearance period based on your unique circumstances and loan program. However, it may not be the best solution if you need a more permanent payment reduction or have an extended need for forbearance.
What if I need even more time to resume my mortgage payments?
If you still aren’t ready to resume making monthly payments at the end of your forbearance plan, you can request an extension of your plan for another three months. Extensions will be available through a maximum 12-month forbearance term upon a showing of continued hardship.
Will I have to pay extra fees?
While in forbearance, homeowners do not incur late fees or other penalties. However, the terms of the mortgage are unchanged, and arrangements will need to be made with the servicer to make up missed payments.
What happens at the end of the forbearance?
At the end of the forbearance period, the homeowner will work with their servicer to repay all past due amounts and accrued interest. Homeowners unable to resolve past due amounts, or who need a lower mortgage payment, are evaluated for longer-term borrower assistance options such as a loan modification.
Will I qualify for a refinance if I enter into a forbearance plan?
You will not be able to qualify for a refinance until your plan is completed and your payments are brought fully current.
How will a forbearance affect my credit? Will it prevent me from obtaining mortgage financing in the future?
A forbearance plan properly authorized by your servicer should not adversely impact your credit. Borrowers who simply stop making payments, however, without obtaining a formal approval for a forbearance plan will most likely see an adverse impact to their credit. Borrowers with a formally authorized forbearance plan should be able to obtain mortgage financing in the future as well, but only after they make up or pay all of their missed payments.
Content Sources & Other Helpful Information:
- Consumer Financial Protection Bureau – Guide to Coronavirus Mortgage Relief Options
- CARES Act Mortgage Forbearance: What You Need to Know— consumerfinance.gov
- PennyMac COVID-19 Resource Center
- Fannie Mae – Know Your Options – Get Relief From The Financial Impacts of Coronavirus
- Freddie Mac’s COVID-19 Response
- U.S Department of Housing & Urban Development Homeowner Help
- FICO Credit Reporting in the U.S. During the COVID-19 Pandemic
- Experian CARES Act Reporting Guidelines
NJ Lenders Corp. DBA Silver Bay Lending, NMLS # 35286. For more information regarding state and branch licensing, please visit the NMLS Consumer Access Website at http://nmlsconsumeraccess.org. Corporate office location: 219 Paterson Ave, Little Falls, NJ 07424
If you would like more information in regard to COVID-19 payment relief and you currently make your mortgage payments to NJ Lenders Corp. you may contact us at the 219 Paterson Avenue, Little Falls, NJ 07424 Telephone No. 973-890-0005. You may also email firstname.lastname@example.org. If you do not currently make your mortgage payments to NJ Lenders Corp., you should contact the current servicer of your loan.