By Catherine Reagor| May 03rd, 2020
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Many homeowners worried about making their mortgage payments during the COVID-19 pandemic can ask to delay their payments for a few months.

About 4 million U.S. mortgages are in forbearance now, meaning the borrowers aren’t required to make monthly payments for up to 12 months.

Unlike renters, homeowners don’t have to submit a lot of proof that they have lost a job or income due to the novel coronavirus. And unlike during the housing crash of 2008-2012, lenders appear to be moving faster on loan modifications.

But like with most of the current moratoriums on evictions for renters, homeowners will need to catch up later on what they don’t pay now. So be sure to understand what you are agreeing to — and even better, get it in writing.

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Looming lump sum?

Many borrowers have been worried they will have to pay back delayed mortgages in a balloon payment.

But last week, the announcement came that homeowners with federally backed loans won’t face a hefty one-time payment at the end of the forbearance.

Federally owned mortgage backers Fannie Mae and Freddie Mac said borrowers missing payments due to the public health crisis won’t have to come up with one to 12 months of payments at once to catch up on their mortgages.

“We do not require a homeowner to repay missed payments all at once at the end of the forbearance plan, unless they choose to do so,” said Fannie Mae CEO Hugh Frater in a statement.

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Worried homeowners

Nate McNamara wants to ask his lender to miss a few payments on his Phoenix home while on furlough from his job at a tech security firm but hasn’t been able to get an answer on how he’ll need to catch up later.

“If they want $6,000 all at once from me in four months, I’ll still lose my house,” said McNamara, who has an FHA loan, which is a federally backed loan. 

I have heard from several other Arizona homeowners with similar concerns. Those concerns are also all over social media. 

Who can get a forbearance

The $2.2 trillion federal CARES Act stimulus package requires loan servicers to give homeowners with federally backed loans forbearance. More than half of all U.S. home loans are backed by Fannie, Freddie, FHA, VA and the USDA, which all qualify for forbearances. 

To find out if your loan is eligible for a federal forbearance, look on your mortgage statement. If you are paying mortgage insurance every month, you likely are eligible.

For Fannie Mae loans, you can check online at www.knowyouroptions.com/loanlookup.

For Freddie Mac loans, check at ww3.freddiemac.com/loanlookup.  

Other borrowers still can ask their lender for forbearance help, but lenders are not required to give it.

Gov. Doug Ducey announced in March that most banks operating in Arizona agreed to suspend foreclosures for at least 60 days, with the potential to extend that period. 

How to ask for forbearance

Housing advocates advise homeowners to contact their lenders right away if they can't make payments.

Many lenders are asking borrowers to seek mortgage help online because call wait times have climbed.

Most lenders aren’t requiring borrowers to prove they are struggling to make payments now, but the Consumer Financial Protection Bureau recommends borrows be prepared to answer these questions:

  • Why can’t you make your payments?
  • What is your current income?
  • Do you have savings?
  • Did you lose a job or are you being furloughed?

The Consumer group also recommends getting a forbearance agreement in writing.

Options for catching up

The government agency that regulates federally backed mortgages lists repayment options, besides balloon payments, for borrowers.

  •  A loan modification to reduce a borrower’s original monthly payment amount.
  •  A repayment plan that allows borrowers to catch up gradually to making their regular monthly payments.
  •  A payment deferral that keeps monthly payments the same but adds missed payments to the end of a mortgage.

Be sure to understand what you are agreeing to so you aren't surprised by a balloon payment or any other deal terms.

Forbearances don’t help all

Jumbo loans, mortgage typically over $510,000, aren’t backed by federal programs. Borrowers with bigger loans will need to work with their lenders if they can’t make payments.

Also, concerns over future foreclosures and the pressure a lack of mortgage payments put on banks and other lenders have led to higher lending requirements for all borrowers

“Uncertainty (due to forbearances) made lenders immediately tighten all guidelines,” said Amy Swaney of Scottsdale-based Citywide Home Loans.

That means it's now tougher for homebuyers to get a mortgage and homeowners to refinance. 

Reach the reporter at [email protected] or 602-444-8040. Follow her on Twitter @Catherinereagor.

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