Mortgage servicers have been overwhelmed with calls about forbearance plans lately. And, as the industry adapts, we’ve been hearing a few rumors.
Specifically, we’ve heard that many homeowners who may be interested in and eligible for a forbearance plan are holding off because they’re worried about reinstatement – that is they think their only option is to repay the entire forbearance amount all at once at the end of the forbearance plan.
This is simply not true.
Reinstatement is the first option the servicer must consider for homeowners to resolve the missed amount, but it’s not the only one.
Homeowners who receive a forbearance plan are not required to pay back the amount they owe all at once unless they are able to so. Each homeowner is facing a unique financial situation, and there are a variety of options to resolve the missed amount.
Options that may be available to resolve the missed amount
Homeowners in a forbearance plan as a result of financial hardship caused by COVID-19 have a number of repayment options.
Option 1: Reinstatement
Homeowners who are in a position to reinstate their mortgage by paying the full forbearance amount all at once at the end of the forbearance period may do so. However, that’s one of several options, not the only option.
Option 2: Repayment Plan
At the end of forbearance, if homeowners have sufficient income to temporarily pay more than their pre-forbearance mortgage payment, you can set them up in a repayment plan. A portion of the forbearance amount will be paid each month (for up to 12 months) in addition to the homeowner’s regular monthly payment amount.
Option 3: COVID-19 Payment Deferral
Homeowners who are able to resume regular monthly payments but not able to reinstate or afford a repayment plan, can add the forbearance amount to the end of the loan. The payment is due on the last mortgage payment, or earlier upon the sale or transfer of the property, refinance of the mortgage, or payoff of the interest-bearing balance.
Option 4: Loan Modification
Homeowners who come to the end of their forbearance period and can no longer afford their pre-forbearance monthly payments may be eligible for a loan modification, which will permanently change the terms of the loan in order to makes their monthly payments more affordable.
As COVID-19 continues to change our industry, you may come across additional confusing or contradictory facts.
At Fannie Mae, we’re here to help clarify what’s true. You can always find the most up-to-date information related to COVID-19 for servicers here, and on our social channels on Facebook, Twitter and LinkedIn.