What is Forbearance - and is it my best option?

Similar to last month’s blog on short sales, forbearance has become a popular buzzword due to the pandemic. Despite the steady real estate market, many people have sought out mortgage relief during these stressful times.

Types of mortgage relief

There are two different kinds of mortgage relief, and yes, they are different! Although mortgage forbearance and mortgage deferment both have the same purpose on the front end, temporarily suspending your mortgage payments, they both have different approaches that affect the back end. Traditionally at the end of the forbearance period, you pay back the lump sum; whereas in loan deferment your back pay is tacked on at the end of the loan. Business Insider provides this handy table:

Avoiding foreclosures at all costs

In today’s “pandemic” market, the forbearance parameters have shifted a bit. Instead of the rigid lump sum payment at the end of the forbearance period, there are options such as payment reductions with a deadline to pay back within three months to a year. The Consumer Financial Protection Bureau (CFPB) outlines different kinds of forbearance, within the context of COVID-19. It is up to your lender to decide the specifications of forbearance and how you will pay back the money owed.

As the CFPB states in their article, forbearance is complicated. There isn’t a “one size fits all” because the options depend on many factors. Those factors include:

• The type of loan
• The owner or investor requirements in your mortgage loan
• Your servicer

There are key things to consider with each type of forbearance. You’ll want to pay close attention to how your servicer expects you to pay back any missed or reduced mortgage payments.

Think you might need mortgage relief?

Don’t panic, you now know you have options and protections in place to help you keep your home. The first step to any mortgage relief is to contact your lender. Your missing payments will not go unnoticed and can potentially put your home and your family at risk. If you think you missed your window to request forbearance, don’t worry. Under the CARES Act, homeowners are protected with the right to request forbearance up to 180 days as well as the right to request and obtain forbearance for another 180 days (360 days total).

There is much more information available about forbearance. For instance, check out this blog post and follow us on Facebook for regular updates on the market.

HOMM Real Estate Services, located in the Brandon, Florida area of Tampa-Bay focused to Hillsborough, Pasco and Polk Counties. As a full-service general real estate company, we specialize in general real estate, home buyers, home sellers, new home construction, rentals, tenants and landlords and property management.