By now you’ve probably heard that homeowners struggling to pay their mortgage due to COVID-19 can apply for temporary relief. The program, outlined in the CARES Act, is called a forbearance and lets homeowners “pause” their mortgage payments for 3 to 12 months.
Here’s the thing though: At the end of the forbearance, all of those unpaid payments are due. And while you may have heard that these payments can simply be tacked on to the end of your loan, there’s no one-size-fits-all solution. Deferring payments may be possible, but sometimes it’s not that simple (there are options however … take a look at “Get a Loan Modification” below).
While various politicians and media outlets have done a great job of letting homeowners know that help is available, there is still a lot of confusion about what exactly that help looks like — and, just as importantly, what happens afterwards when the payments are due.
So to help clear that up, here are the most common options homeowners have to help them repay any unpaid payments after a forbearance.
Get a Loan Modification
At the end of a forbearance, a servicer may adjust the terms of a homeowner’s mortgage to make up for the amount they owe. Some examples of modifications that may be available for homeowners exiting a Pandemic Forbearance Plan include:
- Extension of the term of the loan (i.e., tacking on missed payments to the end of your loan).
- Deferral of the unpaid amounts to the end of the loan, interest free (i.e., a balloon payment).
- A new interest rate.
Start a Repayment Plan
With a repayment plan, a servicer simply tacks on an extra amount to the regular monthly payment until the amount owed is paid back. This usually happens over three to six months but could vary depending on the homeowner’s circumstances.
Pay a Little at a Time
While on a forbearance plan, some homeowners continue to make occasional or partial payments. This helps keep the amount they owe low but still provides financial relief until they can start making full payments again.
Pay All at Once
And yes: For some homeowners, paying back the amount they owe all at once is the best option. It’s not for everybody, but it’s definitely on the table. It’s technically called a reinstatement.
What to do Next
If you’re a Mr. Cooper customer and you’ve entered into a forbearance, check your online account 30 days before the end of your plan. Tell us if you are ready to resume your payments and we’ll be able to provide possible options.
Rest assured that we will explore every option available. The Pandemic Forbearance Plan exists to help homeowners get back on their feet during a tough time. We’ll work with you before, during, and after to help you find the best solutions for your situation.
Are you a Mr. Cooper customer struggling to pay your mortgage due to COVID-19? Click here to see how we can help.