Homeowners have had the option of applying for mortgage forbearance during the COVID-19 pandemic. Mortgages that are federally backed (most U.S. mortgages fit into this category) are eligible for mortgage forbearance. This doesn't forgive any amount of a home loan but offers a chance to delay payments.
Originally, the CARES Act, passed in March of 2020, offered forbearance protection until December 31, 2020. The deadline to request a forbearance extension has been extended twice, first to the end of March 2021, then to the end of June 2021.
What is mortgage forbearance?
For homeowners, mortgage forbearance allows them to temporarily pause or reduce mortgage payments. This isn't the same as forgiveness of payments since you're still obligated to make all of the payments. You can make payments on an altered schedule with no added interest charges. Forbearance prevents homeowners from losing their homes to foreclosure.
Home lenders might offer different options for mortgage repayment. Some homeowners will simply have their missed payments added to the end of their existing loan repayment plan. Others might have higher monthly payments when forbearance ends, although the CARES Act prohibits lenders from requiring missed payments in one lump sum.
This program is similar to the student loan forbearance provided by the CARES Act. Student loan borrowers have also been allowed to pause all student loan payments, which are currently scheduled to resume on October 1.
What happens when mortgage forbearance ends?
If you’re a homeowner with a mortgage currently in forbearance, you need to know when that protection will come to an end. According to CNBC, about 35 percent of those who requested mortgage forbearance were still in a forbearance program as of March 2021.
Once homeowners reach the end of their mortgage forbearance agreement, they will be required to start making mortgage payments again. They could face foreclosure if they aren't able to resume payments as scheduled.
Homeowners might request an extension on forbearance. The CARES Act provided for up to 360 days of mortgage forbearance, with an initial 180-day forbearance and an option to request a 180-day extension. Some loans are eligible for up to 18 months of forbearance.
If you are a homeowner or renter, you can check the Consumer Finance Protection Bureau (CFPB) website for important information about relief options on mortgage and rent payments.
Will mortgage forbearance be extended?
Homeowners who have used the forbearance to avoid foreclosure on their mortgages throughout the COVID-19 pandemic are likely wondering if another extension is in the works. Since the mortgage forbearance program has already been extended twice, will it get extended again?
The FHFA (Federal Housing Finance Agency) has extended multifamily forbearance and certain tenant protections until September 30 for Fannie Mae and Freddie Mac loans.
In addition, the CFPB is working to try to pass rules that could “delay many foreclosure scenarios into the foreseeable future,” according to CBS News. One of the new rules (not yet passed) would prohibit mortgage lenders from beginning foreclosure proceedings until December 2021, which would give homeowners until 2022 to resume payments.