As the coronavirus began sweeping through the country in March 2020, many states issued shut-down orders for businesses, putting as many as 40 million people out of work by May. On March 27, 2020, Congress passed the CARES Act to offer economic relief to those affected by the shut-downs, expanding unemployment benefits and offering mortgage forbearance to homeowners with mortgages backed or insured by the federal government, including Freddie Mac, Fannie Mae, VA and FHA.
In the first 18 months of the pandemic, about 7.7 million homeowners took advantage of COVID-related forbearance plans, according to Black Knight. But by the beginning of November 2021, the number of homeowners still in forbearance dropped to just over 1 million.
Black Knight reports that 84% of borrowers once in forbearance have exited their plans, with 74% either reperforming on their mortgages (51%) or having paid off in full (23%) through the refinance or sale of their home.
After multiple extensions, many forbearance plans expired at the end of September. The Mortgage Bankers Association issued its last weekly report on forbearance on Nov. 8, transitioning to a monthly report.
According to Mike Fratantoni, the MBA’s senior vice-president and chief economist, more borrowers exiting plans in the last week of October went into modification, “a sign that they have not yet regained their pre-pandemic level of income.”
“The strong job market report from October, with another drop in the unemployment rate and a pickup in wage growth, is a positive sign for homeowners still struggling to get back on their feet,” he added.
One year after the onset of the pandemic, the Mortgage Bankers Association estimated that 2.6 million homeowners were still in some form of forbearance. With extensions by the FHFA, borrowers would have up to 18 months of coverage, running through Aug. 31, 2022.
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FHFA, FHA remind servicers of mortgage relief options as coronavirus spreads.
Nearly 3 million borrowers are already in forbearance.
Fannie Mae, Freddie Mac tell borrowers that mortgages in forbearance do not need to be paid back all at once.
Fannie Mae, Freddie Mac announce that borrowers in forbearance can defer all missed payments until the end of their loan.
The Federal Housing Finance Agency on Wednesday extended the foreclosure and eviction moratorium for borrowers with mortgages backed by Fannie Mae and Freddie Mac until “at least” Aug. 31.
A report from the Mortgage Bankers Association reveals the share of mortgage loans in forbearance has fallen for the fourth consecutive week.
The Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac would continue to buy qualified loans in forbearance until Sept. 30, extending the previous deadline of Aug. 31.
Forbearance exits, measuring how many borrowers canceled agreements to suspend mortgage payments, rose to a one-month high in September’s first week. This was led by a surge in loan modifications, according to a report from the Mortgage Bankers Association.
After a slight uptick the previous week, mortgages in active forbearance plummeted 18%, marking the first time since mid-April the total number of plans fell below 3 million, according to Black Knight.
Forbearance Questions
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What is mortgage forbearance?
Forbearance is the temporary postponement of mortgage payments negotiated between a borrower and lender for repayment relief. This does not mean the loan is forgiven, rather, payments are deferred until the end of the forbearance period.
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How do I request mortgage forbearance?
To request mortgage relief under the CARES Act there are two options:
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You can phone your loan servicer directly. Your servicer is the company that you send your mortgage payments to each month and the number should be available on your payment statement or online.
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You can write and send a hardship letter affirming that you are enduring financial distress brought about by COVID-19. This creates a written record that you are pursuing forbearance protection. Letters may be emailed, faxed, or physically mailed to your mortgage servicer.
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Will I need to repay my missed mortgage payments in one lump sum?
No, though that is an option if you have the financial capability and would like to. Otherwise, you can:
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Negotiate a payment plan, that will make upcoming payments slightly larger
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Modify the existing loan, which may include a reduction of interest rates, an extended loan term or both.
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How does my mortgage transition into forbearance?
If your servicer approves your request, you will be provided a forbearance agreement outlining the terms. During the forbearance period, the servicer must not initiate or continue with foreclosure proceedings.
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How does it transition out?
Before the end of your forbearance period, your servicer should reach out to you to negotiate end of forbearance terms for repayment and possible extensions in certain situations, or a relief or workout option following forbearance.
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Are there eligibility requirements?
Yes, if you have experienced job loss, reduced income, illness or other issues related to COVID-19 you could be eligible for forbearance.
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Can the forbearance be extended and for how long?
Yes, under the CARES Act, if you have a federally backed mortgage, you can request an extension of the forbearance for up to an additional 180 days.
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What is payment deferral?
An option where the delinquent amounts are deferred and will become due later (i.e., mortgage maturity date, payoff, refinance, etc.). The deferred amount creates a non-interest-bearing forborne balance.
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What do I do if my forbearance plan is coming to an end?
Your servicer should contact you prior to the end of your forbearance plan to discuss options for bringing the mortgage current. However, you can contact them to begin this discussion and determine the best option for you, based on your individual circumstances.
Post-Forbearance Options
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How do I bring my mortgage current after my forbearance plan ends?
If you have the financial capacity, the most desirable option is to do a reinstatement or repayment plan. Reinstatement is the act of restoring a delinquent mortgage to current status. A repayment plan is when the homeowner pays the regular monthly payments plus an additional agreed upon amount in repayment of the delinquency for a period of time. However, there are additional options, including deferring missed payments until the end of the loan (payment deferral), payment relief options if needed (loan modification) or other alternatives.
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Is it possible to do a partial reinstatement with a repayment plan after my forbearance plan ends?
Yes.
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What are my options after forbearance if I can’t afford a reinstatement or repayment plan?
Home retention options may include payment deferral or a loan modification. For COVID-19 related hardships, there are additional flexibilities for these options. If homeownership is no longer affordable, there are options to exit the home without facing the costly impacts of foreclosure, including a short sale or deed-in-lieu.
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What is a loan modification?
An option for homeowners who can no longer afford their pre-forbearance payment. For example, a Freddie Mac Flex Modification, targets a 20% payment reduction by extending the mortgage term to 40 years, reducing the interest rate (if applicable) and creating a forborne balance (if applicable).
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If I had a loan modification in the past, is another loan modification an option after my forbearance plan ends?
You may be eligible for another loan modification, pending no eligibility restrictions. Your servicer will confirm your eligibility.
