Current Mortgage Forbearance Agreement
marekbilek.cz - 12.2.2023As the COVID-19 pandemic continues to affect the economy, mortgage forbearance agreements have become an increasingly popular solution for homeowners who are struggling to make their monthly mortgage payments. What exactly is a mortgage forbearance agreement and how does it work? Let`s explore the current state of mortgage forbearance and how it may impact homeowners in the near future.
What is a Mortgage Forbearance Agreement?
A mortgage forbearance agreement is a temporary arrangement between a homeowner and their mortgage servicer. In this agreement, the homeowner agrees to temporarily suspend their mortgage payments or to make reduced payments for a specified period of time. This is typically done as a way to help homeowners who are experiencing financial hardship due to a job loss, medical emergency, or other unexpected circumstances.
Under a mortgage forbearance agreement, the missed or reduced payments are not forgiven or cancelled. Instead, they are added to the end of the loan term or paid back over a specified period of time. It`s important to note that interest may still accrue during the forbearance period and will need to be paid back as well.
Current State of Mortgage Forbearance
In response to the COVID-19 pandemic, the CARES Act (Coronavirus Aid, Relief, and Economic Security) was signed into law on March 27, 2020. One of the provisions of the CARES Act was to provide mortgage forbearance relief for homeowners with federally-backed mortgages who were impacted by the pandemic. This includes mortgages backed by Fannie Mae, Freddie Mac, FHA, VA, and USDA.
Under the CARES Act, homeowners with federally-backed mortgages are eligible for up to 12 months of mortgage forbearance if they are experiencing financial hardship due to COVID-19. Additionally, the CARES Act prohibits lenders from charging fees, penalties, or interest on the deferred payments.
The CARES Act protections were set to expire on March 31, 2021, but were extended through June 30, 2021 by the Biden Administration. However, there is some uncertainty around what will happen when the forbearance protections expire.
Impact on Homeowners
For homeowners who are struggling to make their mortgage payments, a forbearance agreement can be a lifesaver. However, it`s important to understand that the missed payments will still need to be paid back eventually. Homeowners who enter into a forbearance agreement will need to work with their lender to determine how the missed payments will be paid back and what impact it will have on their overall loan balance and monthly payments.
Additionally, homeowners who are considering a forbearance agreement should be aware that it may impact their credit score. While the missed payments may not be reported as late to credit bureaus during the forbearance period, the fact that the homeowner is in forbearance could still be noted on their credit report.
Conclusion
Mortgage forbearance agreements can be a useful tool for homeowners who are experiencing financial hardship. However, it`s important for homeowners to understand the terms of the agreement and how it will impact their loan balance and credit score. As the current mortgage forbearance agreement protections expire, it will be important for homeowners to stay informed and work with their lender to determine the best course of action.