If, as a result of the current national emergency, you are experiencing a financial hardship that is negatively impacting your ability to make on-time mortgage payments, the CARES act allows you to request a forbearance from your mortgage company. A forbearance is simply a pause in making mortgage payments. Forbearance, is not the same as forgiveness. You will still owe the amount you didn’t pay, plus interest, during the forbearance period.
For a federally-backed mortgage loan, the initial forbearance period may be up to 6 months. If needed, an additional forbearance period of up to 6 months may be requested. The term of either the initial or the extended forbearance may be shortened at the borrower’s request. The mortgage company must waive all late charges, fees, and penalties, as long as the borrower is on a forbearance plan. Lenders are directed not to report you to credit bureaus for late or missed payments provided you are in a forbearance program.
It’s uncertain how lenders will handle the payments due at the end of the forbearance period. They could extend the length of the loan or demand full payment. Extending the loan term would be a far better option.
If your loan is not federally backed, contact your loan servicer or state or local government offices to find out your options. Federal regulators believe most non-government-backed lenders and servicers will adopt policies similar to those mandated by the CARES Act.
How do you find out whether your loan is backed by the federal government?
- Call your mortgage servicer. They are required to tell you who owns your mortgage and provide you the name, address and phone number of the company.
- Check online. Use loan lookup tools provided by Fannie Mae or Freddie Mac to find out if either of those two government-backed providers own your mortgage.
- Check the Mortgage Electronic Registration Systems (MERS) website to find your servicer if you don’t know who that is.
Whether your loan is backed by the federal government or a private lender, the one thing you should not do is to just stop making payments. Failure to contact your lender could result in penalties, bad credit, and, perhaps, foreclosure and eviction.
Disclosure: Marshall Financial Group, Inc (“Marshall Financial”) is an SEC-registered investment adviser with its principal place of business in Doylestown, Pennsylvania. This newsletter is limited to the dissemination of general information pertaining to Marshall Financial Group’s investment advisory services. Investing involves risk, including risk of loss.
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