What is Mortgage Forbearance?
Borrowers who have trouble staying current should get in touch with their mortgage servicers and inquire about getting a mortgage forbearance agreement. This agreement means you and your mortgage lender agrees to suspend mortgage payments for a certain time period and not to exercise its legal right to foreclose your home. And you, as a borrower, agree to resume the full payment at the end of the period.
Since the coronavirus pandemic started, many Americans are worried about how they’ll make their mortgage payments, especially if they’ve been laid off from their jobs or being furloughed. This crisis has triggered forbearance help from Fannie Mae and Freddie Mac making lenders more flexible with borrowers, reducing or even suspending mortgage payments for a certain time period and not initiating a foreclosure during the forbearance period.
If you have an FHA or VA loan and you are trying to do a mortgage forbearance with your loan company, it’s very important to read this before calling your mortgage company.
Fannie Mae and Freddie Mac are offered folks up to 12 months in payment forbearance. That is if your loan is backed by Fannie Mae or Freddie Mac, however, not all loans are backed by these mortgage giants. Your loan is likely backed by a 3rd entity called Ginnie Mae (GNMA).
Ginni Mae is the government loan version of Fannie Mae and Freddie Mac. FHA and VA are government loans. In the case of an FHA loan or a VA loan, when you miss a payment, your mortgage company is still required to make the monthly payment for you to Ginnie Mae. Under normal circumstances, mortgage companies have the cash reserves to do this if just a few borrowers don’t pay, but the industry is now looking at a potentially unprecedented wave of missed mortgage payments.
The Mortgage Banker Association estimates that if about a quarter of all borrowers request and are granted loan forbearance for six months or longer, demands on servicers could exceed $75 billion and could climb well above $100 billion. That would easily bankrupt the mortgage finance system.
“It’s a massive crisis right now currently being discussed in Congress. It’s why lenders frantically changed FHA and VA loan guidelines and credit score minimums last weeks,” says Caitlyn Marcel, a mortgage loan specialist in Greenville. “It may change once Congress addresses this, and changes those current contracts but, for now, if you have an FHA or VA loan, don’t expect your mortgage company to offer much more than that.”
To find out if your loan is owned by Fannie Mae, visit https://www.knowyouroptions.com/loanlookup
To find out if your loan is owned by Freddie Mac, visit https://ww3.freddiemac.com/loanlookup/