According to the White House, “1 in 5 renters is behind on rent and just over 10 million homeowners are behind on mortgage payments. People of color face even greater hardship and are more likely to have deferred or missed payments, putting them at greater risk of eviction and foreclosure.” If you are in loan forbearance now, what happens next? When does mortgage forbearance end, and can you still take advantage of the benefits?
Statistics and Moratoriums
The Consumer Financial Protection Bureau estimates that the number of mortgage loans in forbearance is 4.7 percent as of May 2021. Those who are in a 60+ day delinquency is 0.5 percent. The CFPB goes on to say that “More borrowers are behind on their mortgage than at any time since the height of the Great Recession.” (1)
The New Moratorium
The federal government has new measures to help you if you did not already take advantage of a mortgage forbearance. First, they have extended the time you have to enter forbearance. The list of all the benefits include:
- Extending the foreclosure moratorium for homeowners through June 30, 2021
- Extending the mortgage payment forbearance enrollment window until June 30, 2021 for borrowers who wish to request forbearance
- Provide up to six months of additional mortgage payment forbearance, in three-month increments, for borrowers who entered forbearance on or before June 30, 2020.
You Are Covered
You likely have one of the US mortgages that are federally backed. If your loan is an FHA, VA, or USDA loan, you are part of the 95% of single-home mortgages that qualify for forbearance.
As long as you apply for a forbearance before June 30, you are covered under the forbearance program for 360 days. You don’t even have to prove to your lender that you are struggling due to covid or show them any eligibility to qualify for forbearance.
How Does Forbearance Help Me?
Forbearance is when your mortgage servicer or lender agrees to a different type of payment structure. They may change your mortgage so that you:
- Pay your mortgage at a lower payment each month for a set number of months
- Pause paying your mortgage and make no payments at all for a set period of time
Will I Still Owe the Money I Don’t Pay Now?
Whatever you do not pay during a forbearance period does not disappear. Therefore, you still owe the money you don’t pay now. However, you will have choices as to how you pay it back. Working with your loan servicer to agree upon how you will pay back the money is part of negotiating your new terms.
You may choose to:
- Add the owed money to the end of your mortgage loan and pay all at once at that time
- Add the owed money to the end of your mortgage loan and take out a separate loan to pay it off in monthly increments
- Pay all of the money you owe to the lender as soon as your forbearance period ends
How Much More Will I Pay?
During forbearance, you are not paying the main part of your loan, the principal. You are also not paying the interest. Therefore, you will owe both the principal and interest that you did not pay.
In addition to your interest and principal no paid, you may owe more interest on the deferred amount. This process, called compounding interest, can make your total amount of loan much higher. You may also end up paying your mortgage for many more years.
It is best to work with a consumer rights attorney to ensure that your lender offers fair terms for your repayment schedule. Unfortunately, unethical lenders take advantage of those who do not understand their mortgage structure or the definition of compounding interest.
Other Proposals
The CFPB is also considering a proposal that could “temporarily require servicers to:
- Enhance communications with borrowers who are delinquent or in forbearance
- Allow servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships
- Require servicers to afford all borrowers a special pre-foreclosure review period.” (1)
We Can Help
If you are struggling under the heavy load of mortgage debt and wondering what is next, contact us for a clear picture of your options. We work with consumers across the nation to ensure fair treatment for all. If you are dealing with an unscrupulous lender who is gouging you for every penny, find a way out. Contact us for a free initial consultation. We work on contingency, which means that we don’t get paid if you don’t get paid.