Homeowners with federally backed mortgage loans got a lifeline for payments skipped under COVID 19 home loan forbearance agreements.
The feds have mandated that servicers offer deferral as one way to repay those payments that came due while the loan was in forbearance.
Deferral results in the missed payments being added to the back end of the loan. When homeowners resume making payments, their payments are the same as they were before the forbearance.
The deferred payments will be due when the home is sold or refinanced, or when the loan reaches the end of its term.
Without a deferral option
This action saves homeowners from facing a lump sum payment of the skipped payment the month after the forbearance ends.
The home loan forbearance agreements that I’ve seen all said that the missed payments were due in full at the end of the forbearance. Or the homeowner would have to negotiate a loan modification.
Pronouncements from governmental sources similarly suggested that each borrower with a forbearance agreement would have to negotiate with the servicer a modification of their loan terms.
Requiring loan modification for each loan in forbearance threatened a repeat of the disastrous round of mangled or illusory loan modifications we experienced in the Great Recession.
The pandemic has put far more homeowners in jeopardy than we experienced a decade ago. And there is no sign the servicing industry is any better prepared to deal with a tidal wave of modifications.
Guidance only for federally backed loans
While the federal government owns or backs some 2/3’s of home loans nationally, the remaining loans are not guaranteed the same mitigation options that FHFA directs.
You can find out if your loan is owned by Fannie Mae or Freddie Mac, the huge governmental financing agencies through these look up tools:
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