Last spring, the CARES Act entitled everyone with a federally backed home mortgage to a forbearance of 6 months, extendible for another 6 months. 15 USC 9056.
The end of the mandated forbearances is approaching for many. But the law provides no clue as to what comes after forbearance.
UPDATE: New Biden orders extend forbearance availability https://cnb.cx/2Zmzu9j
Fannie Mae (the Federal National Mortgage Association) has now come out with a range of options for the borrower after the forbearance period ends.
1. Reinstatement
If you are able, you may repay the deferred monthly payments in a single payment. Appealing, but most likely not feasible.
2. Repay over time
Fannie Mae provides that you can repay the deferred amount over a 12 month repayment plan, alongside your regular monthly payments.
3. COVID payment deferral
This option puts the missed payments at the end of the loan, as a balloon payment that is due at loan maturity or when you sell or refinance. No interest accrues on the deferred amount.
4. Loan modification
Here’s our old “friend” from the last economic crisis: loan modification. A modification may change the duration and/or the interest rate on your loan.
5. Refinance
There’s always a refinance. Fannie Mae suggests speaking to your servicer; I’d suggest talking to other lenders as well. There’s nothing like market competition here.
Foreclosures prohibited
The federal housing agency has extended the bar to foreclosure on Fannie/Freddie loans through the end of July, 2021. This mortatorium applies to a narrower range of loans, only those involving Fannie/Freddie.
Is your loan guaranteed by Fannie or Freddie?
In addition, some states have instituted their own foreclosure bans.
Loans eligible for forbearance
The CARES Act defines a “federally backed mortgage loan” to include:
(A) insured by the Federal Housing Administration under title II of the National Housing Act (12 U.S.C. 1707 et seq.);
(B) insured under section 255 of the National Housing Act (12 U.S.C. 1715z–20);
(C) guaranteed under section 1715z–13a or 1715z–13b of title 12;
(D) guaranteed or insured by the Department of Veterans Affairs;
(E) guaranteed or insured by the Department of Agriculture;(F)made by the Department of Agriculture; or
(G) purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.
Exhaustive table showing remedies and options for each kind of loan, with links to the orders or guidance providing for each remedy, prepared by the marvelous folks at NCLC.
More change ahead
How to cope with the pandemic’s impact on homeownership is certain to be the topic of further legislation and executive actions. Keep your eyes peeled for new developments.
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Escrow payments and your forbearance
