Mortgages Payments Delayed? How To Handle Forbearance Post Quarantine
By Javon Dimitri
- More than 2 million coronavirus-related forbearance plans set to expire in September
- At the end of 2019, 44% of Black households owned their home
Owning a home in 2020 during Covid has become a blessing and a curse depending on who you ask. Six months into the pandemic, many people who agreed to put their payments on hold will now need to decide whether to extend their time in a forbearance program or, negotiate a payment plan with their lender to pay the deferred amount back. With more than 2 million coronavirus-related forbearance plans set to expire in September, according to Black Knight, let's discuss how homeowners need to prepare for what comes next.
Why This Matters: Simply stated you can either “Exit” your forbearance plan or “Extend” it, which can significantly impact the Black homeownership rate that has experienced its share of ups and downs in the past half-century. A recent Zillow report found the rate of homeownership for Black households rose from 41.6% in 1970 to a peak of 46.5% in 2007. But homeowners of color were hit the hardest during the Great Recession, and by 2016 the Black homeownership rate had plummeted all the way below 1970 levels. At the end of 2019, 44% of Black households owned their home, an increase from lows hit during 2016 but still below the 2007 peak.
Mortgage servicers will contact borrowers 30 days before the end of forbearance to go over repayment options
Although the government has stepped in to provide temporary monetary relief, there’s a strong belief that things will never go back to the way things were. The Federal Housing Finance Agency (FHFA), which dictates guidelines for Fannie Mae and Freddie Mac-backed loans, said borrowers with federally backed mortgages who obtain a forbearance due to the coronavirus crisis aren’t required to make a balloon payment when relief ends.
Mortgage servicers will contact borrowers 30 days before the end of forbearance to go over repayment options. If the hardship has not been resolved, the forbearance plan can be extended, the FHFA said in a statement.
Situational Awareness: If you really need to keep your monthly payments the same or even lower than they were prior to the forbearance, you could ask for a repayment plan, a loan modification, or a deferment which will add the amount you owe to the end of the loan. This should be good news for the 3.8 million homeowners in forbearance, a number that’s down 21%, or about 1 million homeowners from the peak back in May.
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