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Mortgage Forbearance: CARES Act, End Date, and What You Need to Know

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Millions of Americans have suffered income loss during the COVID-19 pandemic, making it more difficult for them to keep up with their mortgages. Because of this, legislators took action to provide mortgage forbearance for affected homeowners. In this article, we'll run down how mortgage forbearance works and the steps to request mortgage forbearance.

What is mortgage forbearance?

Forbearance is a temporary modification of your payment obligations on a loan. This means reducing your payments or suspending them entirely. Typically, borrowers ask lenders for forbearance during times of financial hardship.

With mortgage forbearance, you pause your payments for a time. You won't be reported as delinquent to the credit bureaus in that time. During the coronavirus pandemic, you're entitled to an initial 180 days of forbearance, followed by a 180-day extension, then an additional extension until June 30, 2021 for a total of 15 months.

How does it work?

With forbearance, your missed loan payments aren't forgiven. Rather, you're allowed to pause them and catch up later.

Your mortgage lender may give you several options in a forbearance agreement. One of the more common ones is to add the missed payments to the end of the loan's existing repayment plan. For example, if you miss five mortgage payments while in forbearance, your loan is extended by five months beyond the current end date. Or you may have to make higher monthly payments once your forbearance period ends. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act -- the official name of the $2.2 trillion stimulus package passed in late March 2020 -- your lender can't make you catch up on your missed payments in a single lump sum.

How do you qualify for mortgage forbearance?

Lenders have their own procedures and practices around mortgage forbearance. That's true of every lender type, from mortgage lenders for first time home buyers to refinance lenders. If you're having a tough time making your loan payments, first, talk to your lender. There are certain legal protections that might apply to you.

Mortgage forbearance CARES Act

The CARES Act provides mortgage forbearance to any homeowner with a federally-backed mortgage. During the pandemic, your lender cannot deny your forbearance request, nor can it demand proof of financial hardship.

Most U.S. mortgages are federally backed. Loans issued under the FHA, VA, or USDA programs qualify. Since 95% of mortgages on single-family homes in the U.S. fall into one of these categories, there's a good chance your mortgage is eligible for COVID-19 mortgage forbearance.

Some mortgages, such as jumbo loans, aren't federally backed. However, your mortgage servicer may well be willing to work with borrowers who need help. Even if you don't qualify under the CARES Act, call your mortgage servicer to discuss your options.

When does forbearance end with the CARES Act?

The CARES Act initially set forbearance protection to expire on Dec. 31, 2020. However, the program has since been extended to March 31, 2021, and more recently extended until June 30, 2021. Keep in mind that March 31 is the deadline to request forbearance. The date your forbearance period ends is 360 days from the day it begins.

Is there an extension on forbearance?

The time to request an extension on forbearance has already been extended to June 30, 2021. This includes FHA loans.

What to do when your CARES act mortgage forbearance ends

When your forbearance period ends, you need to start making payments on your mortgage again to catch up, as per your agreement with your lender. If you can't make the payments, ask your lender for options -- you may be able to modify your loan to make it more affordable.

Should you try to pay your mortgage while it's in forbearance?

If you're able to partially pay your mortgage during forbearance, do so. You'll have fewer payments to catch up on afterward.

How do you request a mortgage forbearance agreement?

The CARES Act requires mortgage servicers to provide forbearance to most U.S. mortgage borrowers, but it isn't automatic. Your loan also does not enter forbearance if you just stop paying. Regardless of whether you qualify for a legally-protected forbearance program, you have to start the process. To request a mortgage forbearance, contact your mortgage servicer (the company you send your mortgage payments to).

How does mortgage forbearance affect my credit score?

Normally, when a mortgage is put into forbearance, that's noted on your credit report. That can bring your credit score down. However, during the pandemic, forbearance is not a black mark on your credit.

Mortgage forbearance & refinancing

You should be eligible to refinance your mortgage as soon as three months afterward if you stay current on your mortgage payments once forbearance ends. You can't refinance your mortgage while your loan is in forbearance.

Is mortgage forbearance a good idea?

If you're struggling to pay your mortgage, forbearance is a good solution. If you're delinquent on even a single payment, it can cause your credit score to plummet. And if you miss more than one mortgage payment and fall behind, you could put your home at risk of foreclosure. You're better off pausing your payments while you try to improve your financial situation.

Still have questions?

Here are some other questions we've answered:

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