The COVID-19 outbreak has completely derailed life in the U.S. and limited many people's ability to work and earn a paycheck. You might be among the millions who're out of work and finding it difficult or impossible to keep up with mortgage payments. Depending on what kind of loan you have, you might be entitled to payment relief under federal law. Or your lender or the current mortgage owner (called an "investor") might offer unique foreclosure avoidance options to people in your situation.
If you have a Fannie Mae or Freddie Mac loan, you're most likely eligible for a payment suspension or reduction called a "forbearance." When the forbearance period ends, you might be able to lower your mortgage payments permanently through a loan modification or defer repayment of the missed amounts until the end of the loan through Fannie and Freddie's COVID-19 payment deferral program..
Different lenders and investors offer various kinds of foreclosure avoidance options. So, to fully understand your mortgage-relief choices and rights, you need to know who owns or backs your mortgage. A mortgage company or bank might own your loan, or it might be guaranteed by some other entity like FHA, VA, Fannie Mae, or Freddie Mac. These entities, which were set up by the government, support and finance the housing market by ensuring that the loan owner gets paid even if the borrower defaults.
To find out if either Fannie Mae or Freddie Mac owns your mortgage, call your servicer or use the Fannie Mae and Freddie Mac loan-lookup tools online. If Fannie Mae or Freddie Mac owns your loan, you have access to specific foreclosure avoidance options.
Under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, homeowners with federally backed mortgage loans, including those with loans that Fannie Mae or Freddie Mac purchased or securitized, regardless of delinquency status, are eligible for a forbearance. The forbearance period will last up to 180 days and can be extended up to 180 more days if you request the extension during the "covered period." In some cases, you can extend the forbearance beyond this time frame.
While the relevant section of the CARES Act doesn't define the term "covered period," a different part of the law (one that addresses forbearances in connection with federally backed loans on multifamily properties) defines it as before December 31, 2020, or the termination date of the COVID-19 national emergency declaration, whichever is sooner. Fannie Mae and Freddie Mac haven't issued any guidance giving a deadline to request an initial forbearance. So, it's currently unclear exactly how long borrowers get to request forbearances for Fannie Mae and Freddie Mac mortgage loans. If you want to get an extension on an initial forbearance, make your request before the original forbearance period ends.
The right to get a forbearance under the CARES Act applies to loans secured by a first or subordinate lien on residential real property, including individual units of condominiums and cooperatives, designed principally for the occupancy of from one to four families.
It's pretty easy to get a forbearance under the CARES Act. Contact your servicer and ask. You'll need to affirm that you've suffered a financial hardship due to the COVID-19 emergency, but the servicer can't require any additional documentation beyond your attestation.
While you're in the forbearance, the servicer can't add fees or penalties to your account and must report the debt as current to the credit reporting agencies if you weren't already delinquent. (Though, the servicer might add a comment to your reports noting that you're in a forbearance.) It also can't charge interest other than the amounts scheduled or calculated as if you made all contractual payments on time and in full under the terms of the mortgage contract.
Getting a forbearance isn't the same as getting loan forgiveness; you'll still owe the amounts you skipped paying once the forbearance period ends.
When a CARES Act forbearance ends, depending on your situation, you can pay the skipped amounts:
If you can't get caught up with a reinstatement or in a repayment plan, and you can't afford to resume making your regular monthly payments, Fannie Mae and Freddie Mac typically offer modifications to borrowers following a completed forbearance plan. If you can resume making your normal monthly mortgage payment, the COVID-19 payment deferral program is available.
Fannie Mae and Freddie Mac have issued guidance to servicers on how to handle borrowers who finish a coronavirus-related forbearance plan. Under the coronavirus guidelines, the servicer must begin attempts to contact the borrower no later than 30 days before the forbearance plan ends to discuss a modification.
Fannie Mae and Freddie Mac offer special disaster modifications, like Extend Modifications for Disaster Relief (called "Extend Mods") and Capitalization and Extend Modifications (called "Cap and Extend Mods"), as well as Flex Modifications. Extend Mods and Cap and Extend Mods typically go to homeowners who can resume making their full pre-disaster monthly payments after a forbearance, but can't get caught up on escrow amounts. Flex Modifications are usually are available to homeowners who can't afford to go back to making their regular monthly payments.
To get a modification, you'll have to submit an application to your servicer and meet eligibility criteria. Among other things, you must have a financial hardship that's due to coronavirus, which has impacted your ability to make your monthly payments. Qualifying hardships generally include:
Also, the mortgage loan must have been current or less than 31 days delinquent as of March 13, 2020, the date of the national emergency declaration related to COVID-19.
With the COVID-19 payment deferral option, the missed payments are deferred, or moved, to the end of the loan term. The deferred amounts, including escrow advances, must be repaid when the home is:
Unlike with a modification, with the payment deferral program, the loan's maturity date, remaining term, monthly payment amount, and interest rate remains the same as it was before. (To learn more about this program, including eligibility requirements, read Mortgage Payment Deferral for Freddie Mac and Fannie Mae Mortgages.)
Fannie Mae also offers other kinds of assistance, like personalized recovery plans for borrowers, and help from experienced disaster relief advisors. To find housing resources, including details on disaster relief, go to Fannie Mae's Know Your Options website. You can also go to www.knowyouroptions.com/relief to learn about Fannie Mae's Disaster Response Network.
Freddie Mac's My Home website provides information about available assistance for homeowners impacted by coronavirus.
To learn more about different ways to avoid a foreclosure, consider talking to a (free) HUD-approved housing counselor. A housing counselor can help you understand the specific options available to you. You can also call your servicer to learn about available relief. Consider talking to a foreclosure lawyer if you want to learn about foreclosure laws and procedures in your state, including how long the process takes.