Borrowers must contact their mortgage company and work out a payment plan and cannot just stop paying their mortgages. Applications may be handled by telephone.
The plan is not a forgiveness of debt; borrowers are expected to work out a repayment plan or extend the term of their loan.
Unfortunately, the CARES Act and regulations do not specify what happens after the forbearance period ends. Many borrowers say they are being told they will have to make lump-sum "balloon" payments, and nothing clearly prevents this. Borrowers have arguments that this is inequitable and cannot be required, but no specific provision of law is violated.
Important: Fannie Mae and Freddie Mac have now announced that borrowers whose loans are held or insured by them may repay the lender by making larger monthly payments once forbearance ends or enter into loan modifications, whereby the rate is reduced or the loan term extended, or both. Lump-sum repayments are at the option of the borrower.
Fannie Mae and Freddie Mac are also directing lenders not to report people to the credit bureaus for late or missed payments if they are in one of these forbearance plans, and to halt foreclosures.
Many other financial institutions are offering similar relief. In all cases, it must be requested.
Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), and the U.S. Department of Agriculture’s Rural Home Service (RHS) are also imposing a 60 day moratorium on foreclosures and evictions. This has now been extended to June 30, 2020.
Important: There is no exception in the forbearance provisions for mortgage loans already in foreclosure.
The Consumer Financial Protection Bureau suggests being prepared to answer the following questions when you contact your mortgage company and ask for forbearance relief.
• Why you can’t make your payments?
• Is the problem you are facing temporary or permanent?
• What is the current state of your income, expenses and other assets, including money in the bank?
• Are you a service member with permanent change of station orders?
You should indicate they you had a hardship due to COVID-19 and ask about your forbearance option. Ask how long of a forbearance they can qualify for and what your options are with respect to making up the payments.
According to HUD, relief is also being afforded with respect to reverse mortgages where payments must be made for escrow items: taxes and insurance.
Finally, get the forbearance arrangement in writing. If for any reason you do not promptly receive a letter from the mortgage company, write a letter to them setting forth the terms.
Please contact us if you have problems with your mortgage company.