Mortgage Forbearance: Example & FAQ

Let’s talk about the Jones’s 

The Jones’s have a $3,000 mortgage payment every month 
The Jones’s get temporarily laid off 
The Jones's don't have any other options so they request a mortgage forbearance by: ​

1. Calling up the mortgage servicer listed on their mortgage statement. While being put on hold they put the phone on speaker & sip on some tea then:
   1. navigate through the website listed on the mortgage statement 
   2. clicking the links for Covid19 & Mortgage Forbearance & completing the steps to request a mortgage forbearance 
2. When the call is connected specifically request a Mortgage Forbearance for 6 months
3. Attest that they are going through financial hardship due to the Covid19 Outbreak

Repercussions

Repayment: On the 7th month, they will owe month 1 through 6 that was on pause in addition to month 7 for a lump payment of $21,000. 

$18,000 Month 1-6 that was in forbearance  
  $3,000 Month 7 
$21,000 Total ​

​Based on a monthly mortgage payment of $3,000

You can request them to:

• Tack on the payment due on to the total mortgage 
• Spread out the payment over time 

Note: It is a bank & it's up to their discretion

Refinance: There will be a minimum 12 month wait after the forbearance is over, contingent that the last 12 months of payments were on time.

FAQ

1. Where is Mortgage forbearance derived from 
   1. Section 4022 of the 2 Trillion dollar CARES Act also knows as the Covid19 stimulus plan “which is for the people” yet is also 100’s & 100’s of pages 
2. What is it & who is it meant for  
   1. It’s the last resort. It allows you to put your mortgage payments on pause for a specific period of time that you will absolutely have to pay back. 
   2. This is meant for people going through a temporary loss of income due to covid19, such as being laid off
3. How long is it for 
   1. According to the Cares Act it’s 6 months which can then be renewed for an additional 6 months for a total of 12 months (snapshot below of CARES Act that reflects term)
   2. Keep in mind you can request it to be shortened 
4. Is it Mortgage forgiveness & if not when is the payment due 
   1. It is not forgiveness & absolutely has to be paid off. 
   2. It has to paid back once the agreed forbearance is over
5. What are the qualifications 
   1. You have to own the 1 – 4 unit home 
   2. Your mortgage must be federally insured such as: FHA; Fannie Mae; Freddie Mac; VA; USDA (most mortgages are)
   3. You have to attest that you’re going through a financial hardship during this COVID 19 outbreak 
6. What questions should I ask:
   1. Confirm that there are no fees or penalties 
   2. When will the payment on the skipped months specifically be due & Request the payments to be spread out rather than due in one large lump sum
   3. Request something in writing as well
   4. How long after the forbearance is over can I refinance 

CARES Act reflecting 6 initial months & an additional 6 months after renewal

Video & Article by Mohamed T Gulamali
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