What To Do Next When Forbearance Ends
If your forbearance period is nearing its end, you may have questions about what comes next. The answer will depend on your situation and the agreement made between you and your lender.
For federally backed mortgages, such as those owned by Fannie Mae or Freddie Mac, FHA loans, VA loans and USDA loans, forbearance relief under the Coronavirus Aid, Relief and Economic Security (CARES) Act is offered for a period of 12 months. When the forbearance period between you and your mortgage servicer ends, repayment terms are commonly handled in one of several ways.
Before you decide on the best option for you, there are many resources to help. You can learn more about them here . Commonly repayment options following your forbearance period include:
- Mortgage reinstatement – Reinstatement involves paying back your paused or reduced loan amount in one lump sum. This includes the total amount of payments that were missed during forbearance as well as any interest and possible fees. After your mortgage has been reinstated, you will be back on track with your original loan terms and will follow the original payment schedule that is detailed in your loan agreement.
- Repayment plan – This option involves dividing the total amount owed from the forbearance period (plus interest and possible fees) and adding them into your regular monthly mortgage payments. With a repayment plan, you and your mortgage servicer agree on the repayment period, which is usually no greater than 12 months of making additional payment installments.
- Loan modification – Modifying your mortgage will permanently restructure your loan so that the terms make it easier for you to keep up with payments. Modifications may include extending the loan term or making other changes to the loan agreement. Following forbearance, the mortgage modification will factor in the additional amount owed from the forbearance period as well, and it will be included in the new payment structure.
When forbearance ends, you will be faced with the responsibility of making up those missed payments. Developing a repayment strategy to help keep you financially healthy will enable you to get back on track with your mortgage as well as set you up for a more secure financial future.
For questions about your legal rights and responsibilities when it comes to your consumer debt obligations, get in touch with us at Jacobs Legal.