What Are My Mortgage Forbearance Options After COVID-19 Modifications?

The COVID-19 Pandemic created serious financial challenges for many, if not most, Americans. With an unprecedented stoppage of industry virtually across the board, many people—even those who had formerly considered themselves relatively financially secure—were suddenly in financial crisis.

Homeowners were not immune to this widespread economic emergency. Many homeowners found themselves laid off, furloughed, or trying to manage on reduced income due to COVID-19, and were therefore unable to make their regular mortgage payments.

Under the CARES Act passed in March 2020, millions of homeowners who were struggling financially due to COVID-19 were allowed to temporarily pause or reduce their mortgage payments with no additional fees, penalties, or extra interest. This is referred to as COVID-19 hardship forbearance, or mortgage forbearance.

Notably, these forbearance plans are temporary. On average, they last 3 to 6 months. However, if a homeowner is not financially recovered by that time, they can request an extension (usually up to 12 months, but in some cases up to 18 months).

What Happens After A Mortgage Forbearance Plan Expires?

All forbearance plans end eventually, and many homeowners—most of whom are very new to forbearance plans—aren’t quite sure what comes next.

The answer to this question depends on your circumstances. Generally, homeowners have several options after COVID-19 mortgage forbearance, depending on their circumstances.

• Reinstatement: This is essentially a return to “business as usual,” in which financially recovered homeowners resume making payments under the regular terms of their mortgage. Those who are capable of making their forbearance-delayed payments up front will often be required to do so.
• Repayment Plans: Homeowners who can afford to return to regular mortgage payments but can’t afford to pay back their delayed payments all at once can request a repayment plan. This allows them to pay back the delayed payments in increments tacked onto their regular mortgage payments each month.
• COVID-19 Payment Deferral: Some homeowners have recovered enough to resume making regular mortgage payments, but cannot afford to repay their missed payments, even in increments. Deferral allows these homeowners to defer the missed payments (as well as associated taxes/insurance premiums) to the maturity date of the loan, into what is called the loan’s “non-interest-bearing balance”. This essentially means that the missed payments won’t come due until the loan matures (or until the home is sold or the loan is refinanced or paid off).
• Fannie Mae Flex Modification: In some cases, homeowners have been so seriously economically impacted by COVID-19 that they are now permanently unable to make their previously established monthly mortgage payments. If a homeowner in this situation has a Fanny Mae loan, they can pursue this loan modification plan. Though there are many complex steps involved, this plan essentially reorganizes the loan, usually in a way that reduces monthly payments and extends the loan over a longer amount of time.

Navigating your mortgage forbearance options may seem overwhelming, confusing, and complicated. The high stakes of these decisions can increase the surrounding anxiety and the feeling of being in over your head. Thankfully, you don’t have to do any of this alone. Owner and Senior Attorney Alon Nager is here to help.

Attorney Nager is an experienced, knowledgeable attorney who specializes in debt reorganization and loan restructuring. He has his finger on the pulse of COVID-19 mortgage forbearance, and can help you make the best choice for you, your family, and your home. If you or a loved one are in Columbia, MD, Annapolis, MD, or Towson, MD and are facing the end of a COVID-19 mortgage forbearance, reach out to Owner and Senior Attorney Alon Nager at the Nager Law Group today for an expert consultation on your case.