Mortgage Relief

Buying a home is typically the most expensive purchase someone can make. Mortgage relief, also known as mortgage forbearance, can help homeowners who are having difficulty making their mortgage payments. If you own your home and are experiencing financial hardship due to COVID, you may be able to receive a forbearance plan.

Mortgage relief can give you some financial breathing room. Mortgage relief or forbearance, is when your mortgage company allows you to pause or reduce your monthly mortgage payments for a limited period of time. Forbearance only defers your payments temporarily, it does not forgive what you owe.

Prior to COVID, forbearance typically lasted three months. Under the CARES Act, the forbearance period has been extended to six months with another six-month extension if requested. Interest will continue to accrue during this time period. When you are able to make payments again, you will have to repay the missed payments.

There are several repayment options. You can pay the missed payments over time or pay it when you sell or refinance the property. Some mortgage servicers will allow you to modify your mortgage. As long as you were current on your mortgage before you requested mortgage relief, a forbearance plan will not impact your credit score. For most mortgages, there are no additional fees or penalties for mortgage forbearance. Borrowers do not need to submit documentation to be eligible; they can tell their mortgage servicer they have a pandemic-related financial hardship.

COVID hardship forbearance is for those who have experienced financial hardship due to the coronavirus pandemic, and who have a federally backed mortgage. A federally backed loan includes:

• HUD/FHA loans
• VA loans
• USDA loans
• Fannie Mae/Freddie Mac loans

Mortgage servicers that are not federally backed may have similar mortgage relief and forbearance options. Many lenders are willing to negotiate and work with homeowners to help provide relief regardless if the loan is federally backed.

Your mortgage relief options will depend on the type of mortgage you have, the servicer, the different programs it offers, and eligibility requirements. The first step is to verify who services your mortgage and who backs your mortgage.

Your mortgage servicer is the company that sends you monthly statements. If you don’t know who it is, you can look up who owns your mortgage online, call, or check the monthly statement. Your mortgage servicers may determine what mortgage relief options are available as well as the eligibility requirements.

If your mortgage is backed by HUD/FHA, USDA, VA, or Fannie Mae or Freddie Mac, then you will most likely be eligible for COVID hardship forbearance and protected by the temporary halt in foreclosures. If your mortgage loan is not backed by one of the federal agencies or entities, contact your loan servicer to see what options are available to you. There are also many state programs that offer mortgage relief. Contact your state agency to learn more about the options available.

Once you have contacted your servicer and know the options available to you, here are the steps to request mortgage relief.

1. Ask your mortgage service for forbearance

Mortgage relief is not automatic. You will need to reach out to your servicer to request mortgage relief. If your loan is backed by HUD/FHA, VA, USDA, Fannie Mae, or Freddie Mac, you can qualify for forbearance by explaining you have a COVID-related financial hardship. For other loans, ask your mortgage servicer for relief options and what the eligibility requirements are. Ensure that you research all available options to find one that is right for you.

2. Monitor your mortgage loan while in forbearance

Once your mortgage servicer has granted you mortgage relief, be sure to stop or change your mortgage auto-payments. Confirm that your property taxes and insurance are still being paid. Your servicer should be paying those expenses out of an escrow account. If it does not have one, then you will be responsible for paying them. You are also responsible for any HOA or condo fees. If the escrow account is low when you get close to leaving forbearance, you may have to pay into it.

Keep an eye on your credit report since your servicer is required to report your mortgage as current while in forbearance. If you do not make payments before your account is in forbearance, then you may be considered delinquent. Lastly, continue to monitor your monthly mortgage statement to ensure everything is up to date and there are no errors.

3. Extend your forbearance if you need more time

COVID hit many families hard. If you are in forbearance under the CARES Act, you can request an extension if you are still facing financial hardship. You must contact the servicer to request it.

• Fannie Mae or Freddie Mac: You may request two additional three-month extensions, up to a maximum of 18 months of total forbearance. But to be eligible, you must have been in an active forbearance plan as of Feb. 28, 2021.
• HUD/FHA, USDA, or VA: You may request up to two additional three-month extensions, for up to a maximum of 18 months of total forbearance. But to be eligible, you must have requested a forbearance plan on or before June 30, 2020.

You may be able to extend forbearance for other servicers. You will need to contact them for the options that are available to you. Many offer the same extension options to all homeowners. Forbearance extensions may differ by servicers, and not all borrowers will qualify.

4. Exit your forbearance

Your servicer will notify you when you are close to the end of your forbearance. The next step is to learn about your repayment options. There are several ways you can make up for your missed payments. The method of repayment will vary depending on the loan, and you may or may not be eligible for all options. Your servicer will be able to explain the options available to you.

• Repayment plan: A portion of what you owe is added to your monthly mortgage payment. If you can afford to pay more than your regular mortgage for a period of time, then this may be best for you.
• Deferral or partial claim: The amount you owe is moved to the end of your loan or is added as a subordinate lien that needs to be paid when you sell, refinance, or end your mortgage. If you can’t afford to pay more than your regular mortgage, then this may be best for you.
• Modification: If you still can’t afford to pay your mortgage, your payment can be reduced to an amount you can afford. Your missed payments will be added to what you owe. Your monthly payment may be lower, but it will take longer to pay off your mortgage. This option may be best if you can no longer pay the regular monthly payment.
• Reinstatement: Most servicers will not request a lump sum payment for the missed payments. If you want to pay back your missed payments at once, this option may be best for you.

Each federal agency and servicer will have different repayment options. Talking to your servicer can help you find the best option for you.

Homeowners with loans backed by HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac can receive a forbearance period for up to six months or 180 days. If after the initial forbearance period you need more time, you can request an extension of forbearance up to another six months, for a total of 360 days. Other mortgage servicers not federally backed may offer similar forbearance options. You can contact them for more information.

In addition to mortgage forbearance, there are other mortgage relief programs for different groups such as service members, veterans, and seniors.

Protection for service members

Service members are protected by the Servicemembers Civil Relief Act. The Servicemembers Civil Relief Act (SCRA) provides legal and financial protection during military or uniformed service such as protection from foreclosure and the right to reduced interest on loans.

Protection for veterans

Homeowners who currently have VA loans are eligible for an interest-rate reducing refinancing loan.

Protections for reverse mortgage borrowers

Reverse mortgage borrowers affected by COVID-19 can protect seniors from default and foreclosure.

Get Homeowner Assistance Fund help

The Homeowner Assistance Fund (HAF) is a federal assistance program that helps homeowners who have been financially impacted by COVID-19 pay their mortgages or other home expenses. The HAF program available will depend on your area. Each state or territory has developed its own program. Many programs began accepting applications in early 2022. In total, approximately $10 billion will be disbursed to programs across the country.

If you are worried about losing your home, contact a HUD-approved housing counseling agency in your area. They can help you figure out your options and guide you through the paperwork and process of working with your servicer. This help is free, and you don’t have to pay anyone to help you avoid foreclosure.

You should never pay a company upfront that states it will help you get relief on your mortgage. Scammers target homeowners desperately looking to avoid foreclosure. They may offer phony counseling, fake forensic audits, or use many other common scamming strategies. According to the Mortgage Assistance Relief Services (MARS) Rule, it's illegal for a company to charge you anything until it's given you a written offer for mortgage relief and you accept that offer. If you are unsure, contact the Federal Trade Commission or the Consumer Financial Protection Bureau.

RELATED: If you're applying for a mortgage, you need to protect yourself from scams and fraud. Check out The Ascent's guide on the different types of mortgage fraud.

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