As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the government has stipulated two important allowances in regards to your mortgage. Firstly, there is a moratorium on foreclosure proceedings, and secondly, you have the right to a forbearance of mortgage payments if your income has been affected by COVID-19. Do note this applies to federally-backed mortgages, which are mortgages owned by Fannie Mae, Freddie Mac, FHA, VA, USDA… Forbearance means that there is a short-term reduction or suspension of your mortgage payment due to a temporary hardship.
If you are affected and want to request a forbearance, do not just stop making your mortgage payments; you must get in contact with your service provider (the company you make your mortgage payments to). Service providers may have different requirements, but what I am reading from many is that you will be given a temporary suspension of your mortgage payments for 90 days. However, the payments that you skipped will be due in full at the end of the forbearance period. So if your mortgage payment is $4000/month and you skip April, May and June, with your current and back-payments due in July, then that is $16,000 you will owe all at once. I don’t know how this is helpful to most homeowners, do you? Otherwise, would you not have been able to make that mortgage payment as it came due?
If you can negotiate having the suspended payments tacked onto the back end of the loan (loan deferment, not forbearance), that would be more helpful.
In addition, the CARES Act is requiring that servicers do not report your payment as late to the credit bureaus. The forbearance will be noted on your credit report, but it will not affect your score. However, there may be a concern in the future months or years if you are looking for a new loan or refinance. The new lender may look at the forbearance as “not paid as agreed” per the terms of your original note, and may look at it similarly to a derogatory mortgage rating, even though the bureaus have not reported it as such.
There has not been any guidance issued on this latter part yet, but I am sure there will be in the coming months.
Check out this guide and resource regarding mortgage relief options: