UPDATE: FHFA Announces Refinance and Home Purchase Eligibility for Borrowers in Forbearance
Washington, D.C. – Today, to support borrowers and mortgage servicers, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) have issued temporary guidance regarding the eligibility of borrowers who are in forbearance, or have recently ended their forbearance, looking to refinance or buy a new home.
Borrowers are eligible to refinance or buy a new home if they are current on their mortgage (i.e. in forbearance but continued to make their mortgage payments or reinstated their mortgage). Borrowers are eligible to refinance or buy a new home three months after their forbearance ends and they have made three consecutive payments under their repayment plan, or payment deferral option or loan modification.
Millions of Americans have been financially impacted by the coronavirus pandemic, with an uncertain future ahead. If you are one of these individuals, you might be concerned about how to pay your mortgage, your rent, and your bills, among other things. Federal and State governments, as well as utility providers and loan servicers, have rolled out plans to help struggling homeowners. Read more about your mortgage relief options, below.
First, and foremost, if you can pay your mortgage, pay your mortgage. If your income isn’t affected but you are still concerned that it may become affected then you can take steps to refinance your current loan, taking advantage of the extremely low rate environment. Most people can skip a payment or two by refinancing their home loan, saving thousands in the interim. Interest rates have been at or near historically low levels so it is a great time to look at refinancing to lower your payment, lower your term, consolidate debt, pull cash out for home improvements or other investments, and strategically re-position your financial position both for the short term and long term.
At Skyridge Lending, it is our goal to help you make an informed decision as to what is best for your situation. We have many options available to our customers. Many that you’ve heard of and a few you likely haven’t, like the All-In-One mortgage – the most flexible mortgage option in today’s market – that is a principle first mortgage. This option isn’t for everyone but may be great for you, so contact us today so we can evaluate your options in more detail. We don’t need to pull your credit to better understand what’s best for you. We’re happy to get started in the process and help you along the way.
If you are unable to make your mortgage payments because of the coronavirus, start by understanding your options and reaching out for help. Be patient. It may take a while to get a loan servicer on the phone. Remember, your financial institution may also be impacted by the pandemic.
What coronavirus mortgage relief options are there?
The Consumer Financial Protection Bureau and other financial regulators have encouraged financial institutions to work with borrowers who may be unable to meet their obligations because of the effects of Coronavirus.
(CARES Act) – A new federal law, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, provides two protections for homeowners with federally backed mortgages: security of no foreclosure, and loan forbearance.
Before taking advantage of the CARES Act, please understand what forbearance is, the payback policy of your financial institution, what the future impact a forbearance can have on your credit or ability to qualify for a loan(s), and understand what other help may be available to you.
If you don’t have a federally backed mortgage, you may still have relief options through your mortgage loan servicer or from your state government. Feel free to contact us to speak with one of our mortgage professionals for further guidance.
What is a mortgage forbearance?
- A forbearance is when your mortgage servicer or lender allows you to suspend or reduce your mortgage payments for a limited period while you regain your financial footing.
- Forbearance does not mean your payments are forgiven or erased. You are still required to repay any missed or reduced payments, at a specified later date.
- Make sure you understand how the forbearance will be repaid. There can be different forbearance programs or options, depending on the type of your loan and your loan provider.
- When your income is restored, reach out to your servicer and resume making full payments as soon as you can so your future obligation is limited.
Forbearance is not forgiveness. It does not relieve the borrower’s obligation to pay back the loan. It simply provides temporary relief of payment for people experiencing hardship (in a nutshell). It is imperative to understand your forbearance plan and the effect it will have on your financial future. In most cases, forbearance is better than a foreclosure and is a great tool to use for a temporary hardship, like many are experiencing with the COVID pandemic. In most cases, the forbearance will affect your ability to qualify for a lower rate refinance or a new home purchase loan for between two and three years, once you’ve been in it and missed a month or two of your payments. So, for most people, it is wise to only use this option if you have no other choice to keep your payments made.
One of the difficulties with forbearance is the strain it can cause a homeowner once the forbearance period ends. Since this is a temporary option, it will only delay the monthly mortgage payments to a later date, causing a balloon payment to be due once the forbearance period is over, if the homeowner has not made other loan payment arrangements with the servicer. A homeowner in forbearance should only be utilizing that option because of financial hardship since trying to pay a large sum that equates to multiple monthly payments at one time could be difficult or impossible and servicers aren’t required to offer all alternative options to borrowers under the CARES Act.
Other COVID Mortgage Relief Options
At Skyridge Lending, we have your financial interest and personal goals in mind. We will do our best to find a solution to your current state of affairs, whether through a refinance, loan modification, an equity line of credit, or an all-in-one loan. We don’t want to see your situation get worse because you felt influenced to take advantage of forbearance relief. It may not be in your best interest. That’s why reaching out to our team of mortgage professionals can be beneficial. They are experienced and happy to help you understand your options and the impact your decision will have on your financial future.
Deferment is when overdue payments are delayed to a later date. The balance of the loan is due on either the mortgage maturity date, the pay-off date, or upon the sale of the property. Usually, deferment is only an available option after missed mortgage payments, which affect the borrower’s credit. The borrower will need to contact their servicer to see if they qualify for deferment.
This is when a borrower is required to pay the total outstanding payments owed, in a lump sum, by a specific date. This will follow a forbearance plan unless otherwise specified in the agreement. If the loan is made current following the forbearance period, there is typically no effect on a borrower’s credit.
This allows a borrower to pay back past‐due payments with regular payments over an extended period of time in order to bring the loan current. This is typically granted to borrowers who can prove a financial need for a repayment plan because they cannot otherwise bring the loan current.
This is when a lender changes the terms of a mortgage following default by the borrower in order to avoid foreclosure, usually after a repayment plan trial period. This can include adding time to the end of the loan or changing the amount required in each payment. Modifying a loan is not typically offered until a borrower has missed a payment or payments and will affect a borrower’s credit.
Please reach out to Skyridge Lending, LLC if you have any questions or concerns regarding mortgage lending options, forbearance, servicing questions, home refinance or purchase questions, or anything related to your current or future mortgage needs. We are here to help in any and every way we can. Call us today!