COVID-19 Update: FHA Loan Forbearance vs. Payment Forgiveness
November 3, 2020
Many borrowers including those who own homes purchased with FHA mortgages, want to know what their options are for saving their home if they experience financial difficulties related to COVID-19. At the time of this writing, the latest concerns about coronavirus include a second wave due to increasing indoor gatherings as fall weather gives way to colder winter conditions.
Borrowers with FHA mortgages have options to save their homes if they fall behind in their payments but it is crucial to fully understand what your lender is required to offer you and what the borrower is required to do.
The first thing to understand? The difference between the FHA loan forbearance option you may be offered and the concept of “payment forgiveness.”
What the FHA Says About Foreclosure Avoidance Options
The FHA official site, FHA.gov, reminds borrowers that the CARES Act offers you mortgage relief in the form of forbearance--also known as “mortgage payment forbearance,” which requires no documentation to prove financial hardship beyond your claim that you are having the hardship.
Borrowers are encouraged to continue making payments if they are financially able to do so, but in the absence of that ability, the borrower must reach out to the loan servicer to discuss loan forbearance options under the CARES Act.
But what does the borrower get under this forbearance? They get an arrangement where payments are temporarily postponed. This postponement does NOT relieve the borrower of the obligation of eventually making the payment. Instead, it simply delays your required payment until a later date.
You Still Owe Your Payments, But at a Later Date
The FHA official site puts it this way; loan forbearance is NOT payment FORGIVENESS. “Under the CARES Act, borrowers are entitled to an initial forbearance period of up to 180 days, upon a borrower’s request.” Borrowers are also entitled to request a second 180 days if needed. The borrower can resume making payments at any time during this forbearance and resume the regular payment schedule.
Mortgage Payments Are Delayed, Not Wiped Off the Books
If it seems like we are repeating ourselves here, that’s because it cannot be emphasized enough that even with the loan forbearance, you will eventually be required to make those delayed payments.
Borrowers who need help in this area can call their loan servicers but you can also take advantage of the HUD housing counseling referral option--call the FHA at 1-800 CALL FHA to be referred to a local HUD approved housing counselor who can provide advice about saving your home, refinancing if needed, etc.
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Borrowers with FHA mortgages have options to save their homes if they fall behind in their payments but it is crucial to fully understand what your lender is required to offer you and what the borrower is required to do.
The first thing to understand? The difference between the FHA loan forbearance option you may be offered and the concept of “payment forgiveness.”
What the FHA Says About Foreclosure Avoidance Options
The FHA official site, FHA.gov, reminds borrowers that the CARES Act offers you mortgage relief in the form of forbearance--also known as “mortgage payment forbearance,” which requires no documentation to prove financial hardship beyond your claim that you are having the hardship.
Borrowers are encouraged to continue making payments if they are financially able to do so, but in the absence of that ability, the borrower must reach out to the loan servicer to discuss loan forbearance options under the CARES Act.
But what does the borrower get under this forbearance? They get an arrangement where payments are temporarily postponed. This postponement does NOT relieve the borrower of the obligation of eventually making the payment. Instead, it simply delays your required payment until a later date.
You Still Owe Your Payments, But at a Later Date
The FHA official site puts it this way; loan forbearance is NOT payment FORGIVENESS. “Under the CARES Act, borrowers are entitled to an initial forbearance period of up to 180 days, upon a borrower’s request.” Borrowers are also entitled to request a second 180 days if needed. The borrower can resume making payments at any time during this forbearance and resume the regular payment schedule.
Mortgage Payments Are Delayed, Not Wiped Off the Books
If it seems like we are repeating ourselves here, that’s because it cannot be emphasized enough that even with the loan forbearance, you will eventually be required to make those delayed payments.
Borrowers who need help in this area can call their loan servicers but you can also take advantage of the HUD housing counseling referral option--call the FHA at 1-800 CALL FHA to be referred to a local HUD approved housing counselor who can provide advice about saving your home, refinancing if needed, etc.
------------------------------
RELATED VIDEOS:
The ARM is an FHA Adjustable Rate Mortgage
Understanding APR
A Few Words About Bankruptcy
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