Is Your Mortgage Forbearance Ending Soon?
At the peak of the pandemic, mortgage forbearance served as an essential support for millions of homeowners. However, many who participated in a CARES Act forbearance program have now seen their plans come to an end.
If your forbearance period is approaching its end, there are several repayment options available to you before it expires. You might be able to refinance, adjust your loan term, or even request an extension. It’s important to discuss your repayment and forbearance options with your lender. Here’s what you can expect.
When does mortgage forbearance conclude?
The exact end date of your forbearance depends on various factors, such as the type of mortgage, the terms of your forbearance agreement, and the policies of your loan servicer or lender.
In the U.S., the COVID-19 pandemic prompted temporary mortgage relief programs to assist homeowners experiencing financial difficulties. While the end dates of these programs have varied, many were extended through the end of 2021 or early 2022.
However, it’s crucial to note that mortgage forbearance policies may change, so homeowners should contact their loan servicers or lenders to get the latest information on when their forbearance program will conclude.
End Dates for Mortgage Forbearance
In the U.S., the COVID-19 pandemic prompted temporary mortgage relief programs to assist homeowners experiencing financial difficulties. While the end dates of these programs have varied, many were extended through the end of 2021 or early 2022.
However, it’s crucial to note that mortgage forbearance policies may change, so homeowners should contact their loan servicers or lenders to get the latest information on when their forbearance program will conclude.
It’s important to understand that the end dates for the CARES Act mortgage forbearance program apply only to homeowners with federally-backed mortgages, including those guaranteed by Fannie Mae, Freddie Mac, FHA, VA, and USDA. If you have a private mortgage, the terms of your forbearance may differ.
While the last official extension set March 31, 2021, as the deadline for requesting forbearance, the end date for your specific program may vary, but it will not extend beyond June 30, 2021. As David Shapiro, president and CEO of EquiFi Corporation, explains, forbearance plans are based on the date you requested one.
Repayment Options After Mortgage Forbearance Ends
Once your mortgage forbearance period concludes, you’ll need to resume your regular mortgage payments unless you’ve made other arrangements with your mortgage servicer.
As Dongshin Kim, assistant professor of finance and real estate at Pepperdine Graziadio Business School, explains, ‘Forbearance is not loan forgiveness.’ Borrowers will still be responsible for repaying the principal and interest that was deferred during the forbearance period.
To prepare for the end of forbearance, it’s essential to have a strategy for repaying the missed payments from the forbearance period. Ensure you fully understand your options and collaborate with your mortgage servicer to find the best solution for your circumstances.
After forbearance ends, you will generally have several repayment options:
1. Loan Modification
A loan modification can adjust the terms of your mortgage, such as lowering the interest rate or extending the loan term, to help make your monthly payments more manageable. You can reach out to your mortgage servicer to discuss this option.
2. Make Partial Payments
This option allows you to repay the missed amount over a period of 3 to 12 months, along with your regular monthly mortgage payments.
3. One-Time Lump Sum Repayment
You may choose to repay all missed payments in a single lump sum, though lenders cannot require this option. ‘If you’re unable to make a lump-sum payment, other options are available,’ says Jackie Boies, senior director of housing services at Money Management International.
4. Payment Deferral
With this option, the missed payments are deferred until the home is sold, refinanced, or when the loan term ends.
5. Refinance
Refinancing your mortgage can help lower your interest rate or extend your loan term, reducing monthly payments. This option requires sufficient home equity and a solid credit score.
6. Sell Your Home
If you’re unable to continue mortgage payments and have no other options, selling your home could prevent foreclosure. While this decision can be challenging, it may be the best way to protect your credit and financial future. Consulting a real estate agent or financial adviser can help you determine the best path forward.
7. Deed in Lieu of Foreclosure
With a deed in lieu of foreclosure, you voluntarily transfer ownership of your home to the lender to avoid foreclosure. This option may lessen the impact on your credit score, but it may not be suitable if you wish to keep your home.
Refinancing After Forbearance
For homeowners struggling to resume regular mortgage payments post-forbearance, refinancing may offer a practical solution. Here’s how it works:
Refinancing replaces your current mortgage with a new one, often at a lower interest rate or with more favorable terms. By refinancing after forbearance, you may be able to reduce monthly payments, secure a lower interest rate, or adjust your loan term, making your mortgage more manageable and helping you regain financial stability.
However, refinancing post-forbearance can be challenging. Due to economic uncertainty from the COVID-19 pandemic, many lenders have tightened their requirements, making new loans harder to secure. Additionally, missed payments during forbearance could affect your credit score, adding further difficulty to the refinancing process.
How Long Is the Wait to Refinance After Forbearance?
The waiting period to refinance after forbearance depends on your loan type.
For most major loans, such as conventional, FHA, and USDA loans, you generally need to make at least three consecutive payments after leaving forbearance to qualify for refinancing.
Refinancing FHA Loans After Forbearance
For some borrowers eligible for a Streamline Refinance, the waiting period to refinance an FHA loan may be shorter than three months.
Refinancing VA Loans After Forbearance
The VA loan program offers more flexibility, with no specific waiting period set by the Department of Veterans Affairs for refinancing after forbearance. The only requirement is that VA lenders must confirm the borrower has recovered from their financial difficulties.
Refinance requirements can differ by lender. If your current lender imposes a longer waiting period, consider looking for another lender who may allow you to refinance sooner.
As long as you meet basic credit, income, and debt criteria, you should typically be able to refinance within three months after your forbearance ends.