8 Important Things FHA Loan Owners Need To Do After Receiving Forbearance

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Loan forbearance is a viable option you may consider if you experience financial hardship and start missing your monthly mortgage payments. It allows you to reduce or suspend your payments for a period of time and determine a plan on how to repay them after.

If you have an FHA loan and the coronavirus disease of 2019 (COVID-19) pandemic affects you in any way, you’re eligible to apply for forbearance under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Forbearance could help protect your family’s home during this pandemic.   

According to the Consumer Financial Protection Bureau (CFPB), these are the important things you need to do once your servicer or lender approves your forbearance:

  1. Keep all forbearance documents – Make sure that you keep all written documentation about your forbearance so you can access them anytime if, during the period, you find errors on your mortgage statements.
  2. Ask about property taxes and insurance – Confirm with your servicer if you have an escrow account for paying your property taxes and insurance. If you don’t have an escrow account and you’re in forbearance, it’s your responsibility to settle these payments.
  3. Monitor your mortgage statement – Closely monitor the mortgage statements you receive each month. Immediately notify your servicer if you find any errors.
  4. Stop mortgage auto-payments – If you’re using automated banking in repaying your monthly mortgage, call your bank to stop it right away if your servicer approves the pausing of payments.
  5. Regularly monitor credit reports – Regularly monitor your credit reports to ensure that your information is accurate. When you’re in forbearance, your servicer is not allowed to report it to the credit bureaus because it will negatively impact your credit. If you find any errors in your credit report, immediately dispute it by writing a letter to the respective credit bureau and request to take the necessary actions to correct it.  
  6. Continue making payments once income is restored – This is worth considering because forbearance doesn’t erase what you owe. Choosing to continue making payments once you recover your finances reduces what you owe at the end of your forbearance.
  7. Request for an extension if financial hardship persists – Consider requesting to extend your forbearance when needed. Under the CARES Act, you can request to extend forbearance for another 180 days. Your servicer will call and re-evaluate your situation at least a month before your forbearance period ends.
  8. Increase your savings – If you’re still receiving income and it’s more than enough to cover all your bills, increasing your savings can help you prepare for any payments that you need to settle in the future.

FHA loan owners don’t need to pay a lump sum at the end of the forbearance period

If you’re on a special COVID-19 forbearance, you’re not required to pay a lump sum at the end of the forbearance period under the CARES Act. Your servicer will assess if you’re eligible for the COVID-19 home retention option or the COVID-19 Standalone Partial Claim before your forbearance period ends. This option places the amounts you owe into a junior lien, then you repay it either through refinancing, selling your home, or if your mortgage terminates. The FHA may offer you other options if you need mortgage relief but don’t qualify for the COVID-19 Standalone Partial Claim. 

Conclusion

As an FHA loan owner, you’re eligible to apply for forbearance under the CARES Act if you’re experiencing financial difficulties. Keep in mind that forbearance only lets you temporarily pause or reduce your payments and you need to pay everything you owe depending on the repayment option you have. Once you’re in forbearance, consider doing the things mentioned here to ensure your home is protected.

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