There is good and better news for homeowners managing their finances during the current pandemic.
The good news is with the Biden administration’s recent announcement of a forbearance extension, there is temporary financial relief for families.
The better news is that you have an opportunity to establish a more solid financial foundation. Now is the time to consider being proactive, while the forbearance is in place.
All borrowers with government backed loans, which include: Federal Housing Administration (FHA), Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA) loans, Fannie Mae and Freddie Mac; 1) may request up to (2) three-month extensions when their forbearance plans expire, 2) have until June 30th to make an initial forbearance request and 3) have a moratorium on foreclosures through June 30th.
What is a Forbearance Plan?
According to Consumer Finance Protection Bureau (CFPB), “a forbearance plan allows you to pause (suspend) or reduce your mortgage payments for a limited time while you build back your finances.”
A forbearance plan is a way for people to stay in their homes during a hardship or crisis, like COVID-19.
The takeaway for homeowners should be to think a little differently about this extension, or any further news of extended debt relief.
Take this opportunity to be proactive, learn more about your finances, put a plan in place, and access resources for the future. A great start is to connect to financial tools like those available through 995Hope.
Use this forbearance plan to manage expenses, finances, and prepare for when the temporary pause ends.
Here are several tips to consider as you look at this latest forbearance and what may happen next, once it has ended.
- A forbearance does provide temporary relief, but it doesn’t erase the money you owe on your mortgage.
- Once the forbearance ends, you must repay the missed payments, but not necessarily all at one time.
- Contact your mortgage servicer to discuss your particular situation and options for repayment.
- Create a financial plan to put yourself on a firm foundation going forward.
- Start with short term goals you can achieve within one year, such as paying down a debt or paying off a medium-sized bill. Then, add long-term goals like saving for retirement or building your child’s college fund.
- Create a budget to reach those goals by gathering all your bills and pay stubs. Then, write down your monthly income and expenses, and break down your expenses into “needs” like housing and food, and “wants” like streaming services and eating out. Next, subtract your expenses from how much you make. If you don’t have enough left for savings goals, try to cut back on some expenses or find ways to increase your income.
- Know your options – Once you have contacted your mortgage servicer, they will help you understand what options are available to you.
- Set up a repayment plan – A repayment plan allows you to bring your mortgage current over a period of time (up to 12 months).
- Reinstatement – This means you pay the total forbearance amount all at once.
- COVID-19 Payment Deferral – If you cannot afford a reinstatement or repayment plan, a payment deferral lets you bring your mortgage current by delaying repayment of forbearance amounts until you refinance your mortgage or sale your home.
- Loan Modification – Your mortgage servicer may offer a loan modification. This permanently changes the terms of your original loan. This could make the payments and terms of your mortgage more manageable.
- Refinance – Once you have resolved your outstanding forbearance amount, you may qualify to refinance your loan.
- The key for any of these options is to be proactive and communicate with your mortgage servicer to find the best fit for your particular situation.
It Starts with 995Hope
With the latest mortgage forbearance extension, now is the time to put a plan in place to secure your home and your future.
995Hope offers resources to help improve your financial health and keep you on a productive path, regardless of the challenges you might face.
Working one-on-one with homeowners, you can receive free, confidential and comprehensive financial and foreclosure prevention education through our national Homeowner’s HOPE™ hotline – 1-888-995-HOPE™ (4673).