Forbearance: A COVID-19 Mortgage Relief Program

Different types of relief are available for people who have been impacted by the coronavirus and the ensuing blow to the economy.  The big news today was the possible cash payments from the government. Congress is working to provide at most $2,500 for struggling families to help pay for necessities in this challenging time. Less widely reported was the mortgage payment relief program in the form of forbearance to families to help ensure housing security for struggling homeowners.

What is the Mortgage Relief Program for COVID-19?

Currently, there is a major push for up to a 12 month break for homeowners on their mortgage payments.  This is called forbearance. What that means is the mortgage lender and the delinquent borrower enter into an agreement based on the borrower’s hardship.  Under this agreement, the lender chooses not to exercise their legal right to foreclose on a mortgage. Plus, the borrower agrees to a mortgage loan payment plan that will eventually bring them current on their payments.  Homeowners should not confuse this with a modification, which is a more permanent alteration to the terms of the loan when the payment becomes unaffordable.  Although temporary, forbearance does provide a much needed lifeline.

Forbearance Gives Homeowners a Break

This information is crucial right now where household incomes could be zero for some homeowners.  Financial hardship will follow which puts them in the precarious position of trying to prioritize one debt over another.   Under these circumstances, the possibility of forbearance is especially important.  Some homeowners may be tempted to use other types of government-provided relief to stay current on their mortgage to the exception of other needs.  A break in their mortgage payments allows these homeowners to maximize their overall benefit by avoiding late mortgage loan payments and foreclosure while giving them precious resources to use toward food, medicine or other important needs.

How to Get Forbearance on a Mortgage

Homeowners should be cognizant that this does not happen automatically.  They need to reach out to and coordinate with their mortgage loan servicer before making any changes to payments.  Many of the major banks and mortgage loan servicers have already encouraged homeowners to reach out and seek help as soon as possible.   These banks have communicated not to let homeowners let their mortgage loans fall into late or non-payment when it is not necessary.

COVID-19, Mortgage Relief Program and Divorce

All of this is even more important for divorcing or divorced couples.  It is extremely common to have both ex-spouses still on a mortgage note several months after the decree.  In these cases, one ex-spouse has likely already vacated the home.  This does not mean that they are not still liable for the debt.  Late payments will still adversely impact their credit rating.  It is an imperative that all parties communicate and coordinate.  In situations where divorced homeowners are seeking forbearance, they will both likely need to be involved with the process and the negotiation with the lender.

All toll, there is a ton to know.  Information is coming quickly, but without sufficient detail to know how to take advantage of forbearance opportunities.  Struggling homeowners need to take note of communications from their loan servicer.  If confused or unsure of their next steps, homeowners should reach out to directly to their creditors for the who, what, where when and why of different relief options.

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