CARES Act: Mortgage Forbearance Request
Background: Another provision of the CARES Act, for keeping more funds in your pocket, allows for individuals with a mortgage to defer their mortgage payments for 90 days, and as long as 180 days.
Timing: This is an immediate benefit you can receive.
If you have a federally backed mortgage loan and are experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency you may request forbearance, regardless of delinquency status. Many lenders are automatically offering a forbearance request for 90 days. The CARES Act provides you to request forbearance (deferral of mortgage payments) for an extended period of 180 days.
- During the period of forbearance, no fees, penalties, or interest beyond the amounts scheduled or calculated in your loan agreement can be accrued.
- This request for forbearance will not affect your credit score.
How do I know if my mortgage qualifies?
You can visit the following website to see if your mortgage is a federally backed mortgage, first. You can search under Fannie Mae or Freddie Mac. If either of these two own your mortgage, even if it is serviced by a bank or mortgage lender then you qualify for this forbearance.
It is important to remember that while you are allowed to defer your mortgage payment, if you have real estate taxes and insurance paid into escrow from your monthly payment, that may also be deferred. Therefore, if you aren’t paying those monthly amounts your escrow account could be short when it comes time to pay for your real estate taxes or home insurance. You would be responsible to pay the amount that your escrow account is short.
Every lender is different so be sure you ask the following questions when you call about requesting a forbearance:
1. How long are my payments deferred until?
Some lenders are allowing borrowers to add the deferred payments onto the end of the mortgage loan as a balloon payment. While other lenders require the deferred payments to be made at the end of the deferral period (either 90 or 180 days), when you likely aren’t in a much better financial position. Be sure you know what applies to you before deferring your mortgage payments.
2. This deferral will not affect my credit report, correct?
3. All late fees or interest on late fees are waived during this forbearance period, correct?
4. How much will I be short in my escrow account if I defer my payments?
Interested in the other areas of the CARES Act? We are breaking down these details by section in the following resource. You can click to the particular section you’re interested in directly below if you’d like to read the specifics of those first. We do encourage you to look through all of the sections that could potentially impact you since this is a very generous bill aimed at keeping our country’s economy strong during and after this pandemic.
Like any benefit that becomes available to you it is critical to see if it makes sense to use the provisions allowed. While a benefit might make your temporary financial situation better, it might not be beneficial in the long term. However, those who need these provisions were created for are likely in immediate need to use the benefits until employment returns to normal.
Wondering how this affects your future finances? Schedule a call with Financial Design Studio, financial advisors in Deer Park, to discuss your portfolio today.