People relying on COVID related forbearance relief are watching what programs will be extended as we navigate the ongoing pandemic. Many households are looking to prepare their next steps once temporary forbearance programs come to an end.
As defined in our financial glossary, forbearance is a process when a lender agrees to a lower payment or no payment for a temporary period of time. Forbearance is not loan forgiveness. After the designated forbearance time expires, the borrower may face higher payments, accrued interest or an extended loan term.
Even if servicers extend relief temporarily, the earlier borrowers reach out to our HUD-certified counselors who can examine their entire financial picture and prepare them to resume payments, the better.
Steps to Take after Forbearance Ends
Many people we talk to ask what they can do to help ensure that they successfully exit forbearance. Shared here are some steps people can take to successfully manage the process after forbearance ends.
Consider a budget review: After a temporary payment pause ends, take time to review your budget to plan to handle the mortgage payment being added back in. A few months prior to exiting forbearance, review your budget and expenses to reset things and make sure you’re set up for financial success moving forward.
Understand the terms: Remember that forbearance is not payment forgiveness. And, in most cases, the lender will not automatically add the deferred amount to the end of the loan. To fully understand your specific situation, contact your lender to understand their policies.
Communicate with your lender about your situation: Be honest and realistic about your ability to maintain payments. If your financial situation has not stabilized to the point where you can afford to pay the mortgage, let the mortgage company know.
Start early: Connecting with your servicer early will help establish a path forward. Staying in contact with your servicer gives you a chance to learn about options. If unemployment is an issue, have a copy of the unemployment award letter or the denial letter. This can help with options.
Learn about repayment options: If a large lump sum is due after forbearance ends, be aware that there are options to repay that amount back. You can ask about a repayment plan to add a portion of the deferred amount to the upcoming monthly payments to pay it back over time. You can also apply for a loan modification if can’t afford the mortgage payment long term. A modification could result in an adjustment of the loan terms to make it more affordable moving forward. Be sure the repayment plan is realistic for your specific situation.
Many people can move forward after forbearance ends if their situation improves due to income stability or other improvements in budget. If forbearance is no longer needed, contact the lender and start working toward bringing the loan current again.
You’re Not Alone
If you’re concerned or confused about what you’re hearing, our housing counselors can assess your complete financial situation, help you evaluate options, make informed housing choices, and develop a customized plan to stay in your home.
Connecting with a counselor is a good chance for borrowers to take a close look at not only any loans currently on pause but your entire financial pictures such as changes in income, credit card debt, expenses, and other spending.
We’re here to help you figure out next steps as COVID forbearance relief ends. Our housing counselors are available around the clock, providing free foreclosure prevention counseling and supporting homeowners like you in more than 200 languages. Call the Homeowner’s HOPE™ Hotline: 888-995-HOPE(4673)