Mortgage Forbearance Requests Hit Lowest Level Since March of 2020

by Maurie Backman | Updated July 19, 2021 - First published on March 25, 2021

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Fewer homeowners are asking to put mortgages into forbearance, which could be a sign that things are improving.

Just as the coronavirus pandemic has hit a lot of renters hard, so too have homeowners struggled. Thankfully, there's been relief available for mortgage borrowers -- forbearance.

Forbearance lets borrowers hit pause on their mortgage payments for a period of time, and normally, it's something mortgage lenders can approve or deny as they please. But under the CARES Act, all mortgage borrowers are entitled to forbearance if they claim a financial hardship. And some borrowers may be entitled to up to 18 months, depending on when they initially requested it.

Speaking of requesting forbearance, it seems fewer homeowners are going that route. The Mortgage Bankers Association reports that new forbearance requests have reached their lowest level since March of 2020. Not only that, but an estimated 100,000 homeowners have exited forbearance within the past month.

Both of these stats could point to the start of our economic recovery. After all, if forbearance requests are down and exits are up, it's natural to assume that it's because more homeowners can now keep up with their mortgage payments. (Keep in mind that those who requested forbearance at the start of the pandemic haven't reached their 18-month limit, so those exits are likely to be voluntary.)

That said, even though forbearance requests are down, if you're struggling to keep up with your mortgage, you may want to ask your lender to put your home loan into forbearance -- while that option still exists.

The upside of forbearance

At its core, mortgage forbearance buys homeowners flexibility. If you're worried about falling short on your mortgage payments, you can pause them for a period of time and pay your lender what you can (or nothing at all). During this time, you won't be being reported as delinquent on your home loan, thereby preserving your credit score. Pausing your home loan could also make it easier for you to keep up with other bills -- ones you may not have the option to put off.

The only downside of forbearance is that you'll need to catch up on your missed payments after the fact. But that could be less painful than you'd expect, since your lender can't require you to make up those missed payments in a single lump sum once your forbearance period ends. What'll generally happen is that you'll extend your home loan's repayment period, so if you have 21 years left on your loan and you skip a year of payments, you'd end up with 22 years of payments.

And remember, you're allowed to pay your mortgage while your loan is in forbearance -- you just don't have to. If you have a month when money is less tight, you're welcome to submit your payment so you'll have less to catch up on.

All told, fewer forbearance requests is a good thing as we near the one-year anniversary of the CARES Act. But there's no shame in putting your home loan into forbearance if that's what you need to get by at this stage of the pandemic.

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