A forbearance plan is an agreement that allows homeowners experiencing a temporary hardship to make a reduced mortgage payment (or no mortgage payment at all) during the plan’s term and is aimed at helping homeowners get their financial footing. Hardships related to COVID-19 are causing millions of Americans to look at a forbearance plan as a way to stay in their homes and avoid foreclosure.
If you receive a forbearance plan, you will eventually have to repay any amounts that were not paid during the plan. Right now, many homeowners are confused about how they’ll be required to pay back the amounts not paid while on a forbearance plan.
Here’s the important thing to remember: If you receive a forbearance plan, you will have options when it comes to repaying the missed amount. You don’t have to pay the forbearance amount at once unless you are able to do so.
Options that may be available
About a month before your forbearance plan is scheduled to end, your mortgage servicer (that’s the company you send your monthly mortgage payment to) will contact you to discuss your situation and provide information on options that may be available to you. Here are options that may be available to you:
Option 1: Reinstatement
A reinstatement means that you pay the total forbearance amount all at once.
Your servicing company must consider a reinstatement at the end of the forbearance plan. Remember, this is only one option to discuss with your servicing company. You do not have to take this option unless you are financially able to make such a payment.
Option 2: Repayment Plan
A repayment plan allows you to bring your mortgage current over a period of time (up to 12 months). A repayment plan is an agreement that provides you with an opportunity to repay the forbearance amount on your mortgage by making additional monthly payments along with your regular monthly mortgage payments.
Option 3: COVID-19 Payment Deferral
A COVID-19 payment deferral allows you to bring your mortgage current by delaying repayment of forbearance amounts without changing other terms of your mortgage. This option may be available if you cannot afford a reinstatement or repayment plan. You will not be charged interest on the forbearance amounts, which will be due and payable at the maturity of the mortgage loan or earlier whenever you sell or transfer of the property, refinance the mortgage loan, or pay off the interest-bearing unpaid principal balance.
Option 4: Loan Modification
A loan modification permanently changes the terms of your original loan. It is intended to make your payments or terms more manageable, and typically results in a lower monthly payment.
Examples of the terms that may be changed include the interest rate or the term of the loan.
If you receive a loan modification, you’ll be required to complete a trial period plan where you’ll need to make trial payments on-time each month for a few months to ensure you can afford the new modified payment.
How to start the forbearance process
To start the forbearance process, contact your mortgage servicer.
Your mortgage servicer is the company you make your monthly payments to. You can find their contact information on your monthly mortgage statement. Reach out as soon as you suspect you might have trouble making your mortgage payment and be sure to have your account information ready.
As COVID-19 continues to change our lives and impact our economy, you may come across confusing and contradictory advice, but we are here to highlight the facts.
At Fannie Mae, we’re here to help you make sense of all the options, and you can always keep coming back here or to our Facebook page for clear, reliable information.