“Most borrowers who had not used forbearance during the pandemic reported that it was because they simply did not need it. However, among the remainder, a lack of understanding about available accommodations may also be playing a role. Around 2 out of 3 in this group reported not seeking forbearance because they were unsure or pessimistic about whether they would qualify — even though a high fraction of borrowers are eligible for forbearance under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.”Here are some of the reasons why those borrowers didn’t opt for forbearance:
- They were concerned forbearance may be costly
- They didn’t understand how to request forbearance
- They didn’t understand how the plans worked and/or whether they would qualify
If you’re concerned forbearance may be costly:The Consumer Financial Protection Bureau (CFPB) explains:
“For most loans, there will be no additional fees, penalties, or additional interest (beyond scheduled amounts) added to your account, and you do not need to submit additional documentation to qualify. You can simply tell your servicer that you have a pandemic-related financial hardship.”It’s important to contact your mortgage provider (the company you send your mortgage payment to every month) to explain your current situation and determine the best plan available for your needs.
If you’re not sure how to request forbearance:Here are 5 steps to follow when requesting mortgage forbearance:
- Find the contact information for your servicer
- Call your servicer
- Ask if you’re eligible for protection under the CARES Act
- Ask what happens when your forbearance period ends
- Ask your servicer to provide the agreement in writing
If you don’t understand how the plans work and/or whether you will qualify:This is how the Consumer Financial Protection Bureau (CFPB) explains the program:
“Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time while you build back your finances… Forbearance doesn’t mean your payments are forgiven or erased. You are still obligated to repay any missed payments, which, in most cases, may be repaid over time or when you refinance or sell your home. Before the end of the forbearance, your servicer will contact you about how to repay the missed payments.”The CFPB also addresses who qualifies for forbearance relief:
“You may have a right to a COVID hardship forbearance if:
For mortgages that are not federally backed, servicers may offer similar forbearance options. If you are struggling to make your mortgage payments, servicers are generally required to discuss payment relief options with you, whether or not your loan is federally backed.”
- You experience financial hardship directly or indirectly due to the coronavirus pandemic.
- You have a federally backed mortgage, which includes HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac loans.