The Coronavirus pandemic has done a lot to the US economy: from destroying American businesses to foreclosed homes . Borrowers struggling with their mortgage payments have been able to treat their home loans with leniency. Fortunately, homeowners struggling with income loss are entitled to forbearance, a form of credit protection under the Federal Housing Administration (FHA). Under leniency, borrowers with a credit rating are exempt from monthly credit payments and are not reported as late or at fault by their lenders.
Initially, borrowers could only ask for leniency until the end of 2020, but this has changed.
FHA’s Forbearance Extension
The FHA announced in late December that it has extended the deadline for filing a foreclosure application by two months for the first time in its history. This means borrowers can apply for clemency until February 28, 2021. While borrowers are eligible for 360 days of default normally, that is not a route most homeowners are willing to go. Due to the FHA’s intervention homeowners will not have to make mortgage payments until 2021, with zero impact to their credit score. This means they can still default on their loans after that date if their economic situation hasn’t improved.
The downside of this leniency is that repayments are not forgiven. If you take out a mortgage, you will need to repay the loan after the grace period.
One issue that most homeowners in forbearance don’t know is that you don’t have to pay it back in one lump sum. Lenders can work with you to make up for lost time without undue pressure. On the other hand, if you take a temporary break, you may be forced to miss a payment. Keep in mind when the dry spell is over, late repayment of a single mortgage can have a negative impact on your credit rating. If you’re afraid you can’t keep up payments, or won’t have a better financial situation later on, this may not be the best option for you.
If you can make your mortgage payments on time, you have less to catch up on in retrospect. If you choose leniency and additional protection, something may be lost at the moment. Still, if your financial situation improves during the leniency period, you can pay back the mortgage before the leniency period expires.
How Do I Know When Forbearance is Right For Me?
At this point, you need to explore your options. If your home is too small to meet your unique mortgage requirements, selling it and leaving it clean can be a better move. If you are underwater, which means you owe more than the house is worth, talk to your lender about a short sale.
This option could be as simple as changing your mortgage’s terms to make it more affordable or as complicated as a short sale of the house. Talk to one of our expert loan officers here to figure out options are available to you.
You have until the end of February to submit your application, but it would not hurt to ask for help earlier. You never know, an emergency could be just around the corner, so tell your lender. If you are confident that the FHA will renew its leniency period, you should ask them for leniency and not worry about keeping up with your payments. Don’t have the time to stay up to date on all the latest FHA? Start our no hassle application to have our experienced Loan Officers help keep your home for 2021.