To start, verify your mortgage type

The kind of mortgage you have may determine what types of assistance are available to you.

• The GSEs, Fannie Mae, and Freddie Mac deal with conventional loans.
• The Federal Housing Administration insures FHA loans.
• The Department of Veterans Affairs guarantees VA loans.
• The Department of Agriculture offers USDA loans.

 

Freddie Mac and Fannie Mae mortgage assistance

Conventional loan borrowers are eligible for up to 12 months of forbearance, which won’t be reported to the credit bureaus. If you were already in an active forbearance as of Feb. 28, 2021, you may request an additional three months of forbearance (up to 15 months total).

Suppose you’re able to go back to your regular mortgage payments at the end of the forbearance term but cannot pay anything additional. In that case, you may be eligible for COVID-19 Payment Deferral. With that deferral, the forbearance amount won’t accrue interest and would not be due until the end of the mortgage — whether that’s when you sell, refinance or pay off the loan.

Even if you are ineligible for deferral, your lender cannot demand a lump-sum repayment and must work with you to find a different solution.

If you cannot resume your regular mortgage payments at the end of your forbearance, you have options. The Federal Housing Finance Administration, which supervises Freddie Mac and Fannie Mae, discourages lenders from pursuing foreclosure. Instead, you may be evaluated for a loan modification, which changes the terms of your mortgage.

Both Freddie Mac and Fannie Mae offer the Flex Modification. This loan modification aims to reduce your monthly mortgage payment amount by up to 20% by rolling missed or forborne payments into the total loan amount, extending the mortgage term, and, for some borrowers, changing the interest rate or allowing you to make payments against a lower principal balance. The Flex Modification also makes your loan current, with your lender, and on your credit report — in other words, you’re no longer missing any payments.

Contacting your lender directly is the first step you should take to obtain a forbearance or be considered for a loan modification. This is especially important because the GSE moratoriums on foreclosures and evictions have ended. You can also find more information on the Freddie Mac or Fannie Mae websites.

 

FHA loan assistance

The FHA is allowing borrowers to apply for initial COVID-19 forbearance through “the end of the COVID-19 National Emergency.” You can request an initial six months of forbearance, with the possibility of extending the term a set number of months depending on when you entered forbearance.

• If you are already in an active forbearance that began on or before June 30, 2020, after 12 months, you can request up to two additional three-month extensions for a total of 18 months of forbearance.
• If you are in an active FHA forbearance that began between July 1, 2020, and Sept. 30, 2020, after 12 months, you can request one three-month extension for a maximum of 15 months’ forbearance.
• If you began an FHA forbearance between Oct. 1, 2020, and Sept. 30, 2021, you are eligible for two six-month periods of forbearance, for a total of 12 months.
• Borrowers who request an initial COVID-19 forbearance after Oct. 1, 2021, are eligible for up to six months of forbearance. An additional six months of forbearance will be an option if the forbearance period expires before the COVID-19 National Emergency has ended.

 

In addition to COVID-19 forbearance, the FHA always has several mortgage relief programs in place. These include standard mortgage forbearance lasting up to six months and special forbearance for unemployment, which can last a year or more.

If you can resume your regular home loan payments at the end of your FHA forbearance term but cannot repay some or all of the payments you missed, you may be eligible for HUD’s COVID-19 Standalone Partial Claim. This is a no-fee, no-interest junior lien (a type of second mortgage) that doesn’t have to be paid back until you sell your home, pay off your mortgage or otherwise end the loan.

Suppose you reach the end of your FHA forbearance or are 90 or more days delinquent on your FHA loan, and you meet specific eligibility requirements. In that case, your mortgage servicer is required to offer you a COVID-19 Advance Loan Modification. The ALM is a 30-year modification — so no matter how far along you were with your existing loan, you’ll now be starting over with a new 30-year term — that will make your loan current and reduce your monthly principal-and-interest payment by at least 25%.

FHA borrowers who cannot resume their loan payments at the end of their forbearance may be eligible for the COVID-19 Recovery Modification. Like the ALM, this extends your mortgage term by 30 years and should reduce your principal and interest payment by 25%. The Recovery Modification can also be combined with a partial claim.

The FHA says it offers other repayment options for homeowners who are ineligible for the Standalone Partial Claim. You’re still eligible for other repayment options if offered an ALM but choose not to take it. No matter which you choose, FHA lenders cannot require a lump-sum repayment.

The FHA foreclosure and eviction moratoriums have ended, so you could face foreclosure and eviction if you have missed mortgage payments and don’t seek a modification. The FHA urges borrowers to contact their mortgage servicers as early as possible about mortgage payment relief options. You can also get more information on the Department of Housing and Urban Development website.

 

VA loan assistance

The Department of Veterans Affairs deadline to apply for an initial COVID-19 forbearance expired Sept. 30, 2021.

VA borrowers are eligible for a six-month forbearance, which can be extended to another six months. If you requested an original forbearance on or before June 30, 2020, you could apply for two additional three-month extensions, if needed. Each extension must be requested separately.

If you received a COVID-19 forbearance from the VA and missed at least one payment on your VA loan, you may be eligible for a VA Partial Claim Payment when you are ready to resume paying your mortgage. The VAPCP has strict requirements, including that either your loan began after March 1, 2020, or that you were no more than 30 days delinquent on March 1, 2020. The VAPCP is a second mortgage that can cover any missed payments, with a limit of 30% of your current outstanding principal (how much you still owe on your loan). You can repay it at any time without penalty, but it must be repaid when you sell, refinance or finish paying your VA loan. The VAPCP will be available through Oct. 28, 2022.

The VA offers additional options, including the VA Disaster Extend Loan Modification and payment deferment, if you can make your regular mortgage payments but won’t be able to repay your forbearance.

If your VA forbearance is ending and you cannot go back to making your monthly mortgage payments, you may be able to get a COVID-19 Refund Modification. This can include your mortgage servicer changing the terms of your VA loan to reduce your monthly payments by 20% or more. If you are facing extreme hardship, the VA may purchase some of your missed payments and principal to reduce the overall amount you owe.

The Department of Veterans Affairs’ moratoriums on foreclosures and evictions have expired. That makes it crucial to seek assistance if you are behind on your mortgage or in danger of missing a payment. Contact your lender to learn more about your options or see additional mortgage assistance information on the VA website.

 

USDA loan assistance

If your mortgage is backed by the USDA Rural Housing Service, the USDA deadline to apply for initial assistance has passed.

If your ability to pay your USDA-guaranteed loan has been affected by the pandemic, you can receive 180 days’ forbearance as long as your lender approves your request before Sept. 30, 2021. Assistance can be extended to another 180 days if needed. As with FHA and VA loans, if you were in active forbearance on or before June 30, 2020, and need an additional deferral, you can apply for two additional three-month forbearance periods.

At the end of your forbearance, if you cannot resume monthly USDA loan payments, you may be eligible for the USDA COVID-19 Special Relief Measure. This loan modification aims to reduce your monthly mortgage payment by up to 20%. Your servicer will work with you to reduce your interest rate; if that doesn’t provide enough relief, you may be able to have the term extended as well. Borrowers may also be considered for a mortgage recovery advance, which provides funds to help cover past due payments and other costs.

If you are delinquent on your USDA loan, you could face foreclosure or eviction, as these moratoriums have expired. Contact your lender if you are concerned about making your USDA loan payment or find more information on the USDA website.

 

Contact your lender to get mortgage relief

No matter what type of loan you have or what government assistance may be available, contact your lender directly if you have concerns about paying your mortgage.

You don’t have to wait until you are delinquent on your mortgage, and calling before you miss a payment will likely give you more mortgage relief options. If you’ve already missed a payment when you ask for forbearance, that delinquency may show up on your credit report (and stay there until the loan is made current again).

Here’s what you should have ready when you contact your lender:

• An estimate of your current income (and future income, if you anticipate that it may change).
• An estimate of your current monthly expenses.
• Your most recent mortgage statement.
• Documentation of what caused your situation to change.

 

Beware of third parties offering mortgage assistance. Look for help from your lender, not from other organizations providing mortgage relief. If you want to get advice about talking to your lender, find a HUD-approved financial counselor on the HUD website. These counselors offer no-cost assistance and can help you be better prepared to call your lender.

You can also find more information on all of the programs listed above at the Consumer Financial Protection Bureau website.

 

 

Reference:

https://www.nerdwallet.com/article/mortgages/mortgage-relief-programs-coronavirus

https://www.americanfinancing.net/market-watch/mortgage-lending-changes-coronavirus