Getting a free break from mortgage payments during COVID?

[AG Gupt]

INVESTORS READ THIS CAREFULLY:

As you probably know under the CAREs act most borrowers can request upto a 12 month forbearance, meaning you have the option of not making your monthly payments for 12 months; this is available for investors not just homeowners. Obviously this is for people who’re genuinely facing loss of incomeBUT this post is about what happens after you get on forbearance. Below are the 4 options available to get back to ‘current’ status with your loan.

1. 1. Bring ‘Current’: Payup all payments due. If you do that your clock to re-request forbearance is set to 12 months.
   
2. 2. Request a ‘Payment plan’: Your missed payments will be divided over 12 months & added to your new payments.
   
3. 3. Request ‘Deferment’: Missed payments are added to the back of the loan. So for ex. if you’ve 100 payments left & have missed 6 payments - you will now have 106 payments. This does not include Escrow payments (taxes & insurance) that you will have to pay over 60 months. 
   
4. 4. Get a ‘Loan modification’: The bank will take the unpaid principal balance plus the interest payments you missed & give you a 40 year loan. This IS NOT a re-finance meaning you’re credit is not getting pulled & you don’t have closing costs. In many cases your interest (& hence monthly payments) may be reduced given the low interest rate scenario.

IMPORTANT - Once you get off forbearance using option 2-4 you can still get back on it IF you have not missed all 12 months. BUT YOU CANNOT get these options again, they’re essentially 1 time deal.This information is applicable mostly for Fannie/Freddie loans - but may be applicable to other loans as well (check with your lender)