As the pandemic continues to sweep throughout the world, many people have struggled to pay their mortgages. Thankfully, the Coronavirus, Aid, Relief, and Economic Security (CARES) Act established a 12-month maximum mortgage forbearance program for most loans. However, many people still are confused as to what the term means. Here we will explain what mortgage forbearance is and why it might be helpful for you.
Mortgage forbearance is when a borrower and a lender agree on a temporary postponement of payments towards a mortgage. This definition does not mean that the mortgage has ended or has been paid off. It only means that after the forbearance period is over, the payments will start again. During this coronavirus pandemic, the CARES Act established that the period would last 12 months for most loans, after which payments would resume. Under the CARES Act, if you have lost your job, become ill, decreased your income, or been affected by coronavirus in some way, meaning you cannot pay your mortgage, you are eligible to qualify for this forbearance.
This kind of assistance is nothing new. Even before the pandemic began, borrowers could initiate talking to their lender and agree to a forbearance period and repayment plan. Borrowers need to understand that this is not a long-term solution. Those unable to pay a mortgage might need to reconsider owning a home and avoid foreclosure.
Mortgage forbearance is different from loan modifications and refinancing. Loan modifications, like refinancing, are permanent modifications made to the mortgage, such as changing the loan’s length, reducing the interest rate, or changing between a fixed and variable rate. For those looking into mortgage forbearance during this brutal pandemic, make sure to talk with one of our RPM Mortgage Loan Advisors.