Millions of homeowners have signed up for a forbearance under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act gives homeowners with a federally backed mortgage loan, regardless of delinquency status, who're experiencing a financial hardship that's due directly or indirectly to COVID-19, the right to get a forbearance—a temporary reduction or suspension of payments. The forbearance lasts up to 180 days (six months) and can be extended for up to another 180 days (six months).
Forbearance isn’t forgiveness though, so borrowers who forbear payments have to repay the missed amounts eventually. But loan servicers have been giving homeowners incorrect information about how they’ll have to make up these payments. Some servicers have erroneously told borrowers they’ll have to repay the skipped payments in a lump sum once the forbearance period ends. However, borrowers with a government-backed loan, including those with an FHA, VA, USDA, Fannie Mae, or Freddie Mac loan, don’t have to make a lump-sum payment if they can’t afford it; many other repayment alternatives are available. And your options depend on what entity owns or guarantees your loan.
Homeowners with a Fannie Mae or Freddie Mac loan have access to several options, including the COVID-19 payment deferral program, which defers repayment of up to 12 months of missed payments until the end of the loan. Also, if you fell behind in payments for a non-coronavirus-related reason, you might qualify for another deferral program. (To find out if Fannie Mae or Freddie Mac owns your loan, call your servicer or use the Fannie Mae and Freddie Mac loan-lookup tools online.)
When a CARES Act forbearance ends, depending on your situation, you can pay the skipped amounts:
If you can’t pay the past-due amounts all at once with a reinstatement or through a repayment plan—but you can resume making your normal monthly mortgage payment—the COVID-19 payment deferral program is available. If you need reduced monthly payments when the forbearance period ends, then a loan modification, like a Flex Modification, might be available to you. And, even if you get a payment deferral, you might still be eligible for a modification later on if you need a lower monthly payment sometime in the future.
Servicers must attempt to contact homeowners 30 days before a forbearance plan is scheduled to end to determine which of these assistance programs is appropriate.
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.
The deferred amount is non-interest-bearing.
To qualify, among other things, at the end of the forbearance:
Servicers will begin offering this option to borrowers on July 1, 2020.
To get more information on the COVID-19 payment deferral program, including eligibility criteria, see Fannie Mae’s Lender Letter (LL-2020-07) and Freddie Mac’s Understanding Payment Deferral During COVID-19 website.
Another Fannie Mae and Freddie Mac payment deferral program helps eligible borrowers who’ve resolved a temporary non-coronavirus-related hardship. This program is for those who’ve resumed making their monthly payments, but can’t afford to get caught up on the past-due amounts with either a full reinstatement or repayment plan.
Much like with the COVID-19 payment deferral program, the servicer defers repayment of overdue amounts until the end of loan. This amount isn’t interest bearing. And it only becomes due and payable at maturity or upon the sale or transfer of the property, a refinance, or a payoff of the interest-bearing principal balance.
To qualify, among other things:
Before putting you in this payment deferral program, the servicer might evaluate you for a repayment plan, reinstatement, or modification.
Servicers can begin evaluating borrowers for payment deferral on or after July 1, 2020; servicers must begin evaluating borrowers for payment deferral no later than January 1, 2021.
To get further details on this payment deferral program, including eligibility requirements, see Fannie Mae’s Lender Letter (LL-2020-05) and Freddie Mac’s Bulletin 2020-06, Payment Deferral FAQs and Bulletin 2020-6.
Because servicers sometimes give borrowers bad information, it's essential to find out who owns or guarantees your loan—and learn about your rights—before you ask for a forbearance or other assistance. If you get incorrect information from your servicer and need someone to help you enforce these rights, hire a foreclosure lawyer. Also, a HUD-approved housing counselor can provide assistance at no cost.
Fannie Mae offers disaster relief advisors who can provide assistance. To find housing resources, including details on disaster relief, go to Fannie Mae’s Know Your Options website and www.knowyouroptions.com/relief. Freddie Mac’s My Home website provides information about available assistance for homeowners impacted by COVID-19.