The right thing to do if you’re falling behind your mortgage payments due to the COVID-19 pandemic is to call your servicer. If your loan belongs to any of the government-sponsored enterprises (GSE) e.g. Fannie Mae, Freddie Mac, FHA, or VA, you could be allowed to temporarily suspend making your monthly payments.
Forbearance policies could vary depending on who owns your loan. Use Fannie Mae’s Loan Lookup tool to find out who owns your mortgage. It’s also the tool you would use if you’re considering refinancing your mortgage. If Fannie Mae owns your loan, here’s how your servicer would handle the situation if you think you’re affected by COVID-19:
Your servicer would determine your hardship
Telling your servicer that you’re experiencing financial hardship is not enough for your servicer to offer you a forbearance. Expect that your servicer would want to know more about your financial hardship to better understand your situation. You need to explain in detail to your servicer how your financial hardship is related to the COVID-19 National Emergency. If you’re not infected with the virus, your ability to pay your monthly mortgage could either be affected if you lose your job, your regular working hours are significantly reduced, or if a family member suffers from a serious illness. Your servicer may decide to end the conversation, or, would offer you normal loss mitigation if you fail to demonstrate how the pandemic affects your ability to make your monthly payments. Some borrowers find it ideal to prepare their supporting documents before speaking with their servicer.
Your servicer would introduce you loan forbearance
Once your servicer determines that you’re financially affected by the COVID-19 National Emergency, your servicer could offer you a forbearance plan or a workout solution in the form of programs to reduce your burden.
If Fannie Mae owns your loan, your servicer could offer you several assistance programs to help you keep your home during a pandemic even if you’re struggling with your finances. If you agree with forbearance, you could reduce or suspend your payments for several months until you recover your finances. At the end of the forbearance period, your servicer would reevaluate your situation and may decide to extend your forbearance period if you could prove that your finances haven’t improved yet since you applied for a forbearance. During a pandemic, a forbearance plan could be a good option if you want to use your remaining funds for other important needs like food and healthcare.
Forbearance means you still need to repay your missed payments
Your servicer would explain to you that while you’re allowed to reduce or suspend your payments during the forbearance period, you still need to repay everything back, but you don’t have to pay it in a lump sum, unless you can afford it. You may need to call your servicer during the forbearance period if your finances have improved so you won’t need to extend your forbearance. A month (or about 30 days) before your forbearance period ends, your servicer will contact you to help you figure out the best repayment option that suits your financial situation at that time.
While you’re under forbearance, your servicer will tell you to continue paying for your taxes, insurances, condo or HOA fees.
Available repayment options after the forbearance period
The first repayment plan your servicer would offer you is through reinstatement where you would pay everything back in a lump sum at the end of the forbearance term. Your servicer could also help you catch up by spreading out your missed payments to your upcoming payments until you have covered all of your missed payments. Keep in mind that spreading your past dues will lead to increased monthly payments. Your servicer could offer you other options if you can show that you can continue making regular payments but could not afford the additional payments to cover the missed ones.
Your servicer could allow you to modify your loan if they will determine that the COVID-19 pandemic still makes it difficult for you to repay your mortgage. In a loan modification, your servicer could permanently change the terms of your loan so you can afford your monthly payments based on your financial capacity.
Contact your mortgage servicer immediately if you’re having trouble with your monthly payments because of the COVID-19 pandemic. Depending on who owns your loan, your servicer could offer you a forbearance plan so you could suspend or reduce your payments temporarily. Before the end of your forbearance period, your servicer will contact you to discuss what repayment option best suits your situation.