What is a Forbearance Plan?
A forbearance plan or forbearance agreement is between the borrower and the lender wherein the lender would agree to lessen or temporarily stop the payments of the borrower for a period of time. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, there are several programs and aids given to homeowners who struggle to pay for their mortgages. (More on CAREs act here.)
What are the benefits of getting a forbearance plan?
It would give the borrower enough time to get back on their feet while not getting worried about their mortgage payments growing over time.
Should I wait to miss a mortgage payment before contacting my lender?
No. If you are having a difficult time with your finances, contact your lender right away. Remember that the CAREs act is there to protect you and give you the needed assistance. Contact for mortgage servicer and know the available assistance programs for you. Do this so you would not have a negative impact on your credit report or to not incur late fees. It’s better to be sure than have a permanent negative record.
Is it difficult to get a forbearance plan?
Definitely not. The first step is to contact your lender. There are situations that these plans can even be set-up online.
What are the documents that I need to prepare in applying for a forbearance plan?
It varies from each mortgage servicer. You can check the website of your lender to see the needed documents. Be sure to prepare your account number and be thorough in asking questions that are relevant to your situation.
Will a forbearance plan negatively impact my credit score?
No, if your plan is under the CAREs act your plan will still be reported to credit reporting companies as current as long as you are current before entering a forbearance plan.
Can I refuse a forbearance plan?
Definitely. If by some reason, you were placed under a forbearance plan, contact your lender immediately and discuss your options with them, especially if you’re having some financial hardships.
Once my forbearance plan ends, am I required to pay the full amount of missed payments?
No. There are many repayment options available.
What are my repayment options when getting a forbearance plan?
There are several options. If you are able, you can pay off the whole amount all at once. You can also resume your monthly dues with the added forbearance amount over a period of time. You may ask your lender to modify your payment terms to make it more affordable for you. There’s also the COVID-19 Payment Deferral wherein you can either pay the amount at the end of the mortgage term or if you decide to sell your home or have it refinanced, it should be paid at closing. There is also a possibility to extend the forbearance period if your financial difficulty continues because of COVID-19.
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