What To Do After Your Forbearance Ends
Forbearance offers homeowners temporary relief from their mortgage payments if they have fallen on hard times, but that relief is not indefinite. As your forbearance period nears its end, homeowners will be responsible for paying back the full forbearance amount, including interest on the payments that were paused.
How that repayment works will depend on who owns your loan and how you want to proceed based on your options.
For government-backed mortgages that qualify for relief under the Coronavirus Aid, Relief and Economic Security (CARES) Act, like those owned by Fannie Mae or Freddie Mac, you are allowed a maximum of 12 months of mortgage forbearance. Loans owned by private lenders may offer different forbearance options. Be sure to talk to your lender as soon as possible to understand what repayment options are available to you.
Repayment Options for When Forbearance Ends
Below are a few of the potential repayment options you may qualify for when your forbearance period ends:
- Lump-sum repayment – This option is for homeowners who wish to and are able to repay the entire amount owed in one lump-sum payment. It is also referred to as a mortgage reinstatement as it will be restoring your loan to its original, pre-forbearance condition.
- Short-term repayment plan – Spread out your total repayment amount that has accumulated during forbearance over the course of a 6- or 12-month period of time (this is negotiable with your lender or mortgage servicer). Under this or similar options, you would resume paying your regular monthly mortgage payments plus pay an additional repayment amount each month until your mortgage is current again.
- Extended loan modification or payment deferral – Rather than tack on forbearance payments to your existing obligations in the immediate term, this option allows you to extend your mortgage term in order to repay what you owe on the back end of your loan. For example, if your forbearance lasted one year and you had 15 years left on your loan prior to the forbearance period, you would now have a new loan term of 16 years.
Depending on your situation, you may also be eligible for a loan mortgage modification which is any change to your existing loan terms. It may include changes to your interest rate, length of time for repayment, loan type or other modification.
Forbearance can offer much-needed relief for families who have experienced unexpected job loss or other financial hardships. As you consider plans for repayment when forbearance ends, consult with your lender to understand which options are available to you.
If you have questions about your legal rights and steps you should take if you’re concerned about your ability to make your mortgage payments, please get in touch with us at Jacobs Legal to schedule a confidential consultation.