The window to initiate a temporary pause in mortgage payments has been extended for homeowners with government-backed loans facing COVID hardships.
On October 4, the Consumer Financial Protection Bureau (CFPB) announced that mortgage servicers may continue to approve initial COVID hardship forbearance for FHA, USDA, and VA loans until the COVID-19 National Emergency is officially over. The previous deadline was September 30.
There currently is no deadline to request initial forbearance for loans backed by Freddie Mac or Fannie Mae.
The extension by CFPB comes as the Delta variant continues to affect daily life in many communities. Homeowners struggling to make mortgage payments due to COVID hardships such as illness or job loss now have a chance to pursue assistance through a COVID forbearance plan.
Forbearance is a temporary pause in mortgage payments, in most cases without additional fees or penalties. However, payments are not forgiven. Missed payments still need to be repaid once the forbearance period has ended. At the end of the COVID forbearance, mortgage servicers will work with homeowners to identify the optimum options for curing the missed payments due to the COVID hardship.
With the Delta variant prolonging the pandemic, homeowners facing tough times can use this avenue to get back on their feet.
According to the CFPB, homeowners have a right to COVID forbearance if they:
- Experience financial hardship directly or indirectly due to the coronavirus pandemic, and
- Have a federally backed mortgage, which includes HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac loans
Initial forbearance plans typically last 3 to 6 months and the first step for borrowers to request a plan is to contact their mortgage servicer.
On July 23, the Biden administration rolled out a series of enhanced mortgage relief programs for delinquent borrowers with VA, USDA, and FHA loans coming out of forbearance plans. Depending on the loan program, options include payment reductions of up to 25%, loan term extensions, and interest rate reductions.
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