The coronavirus pandemic has left many Americans dealing with reduced income or unemployment. The federal agencies and government-sponsored enterprises, or GSEs, that buy and insure mortgages have stepped in to provide mortgage relief options to affected homeowners.
Some lenders and state governments have also taken independent action to provide mortgage relief to homeowners.
If you’re worried about paying your mortgage, the mortgage relief programs below may be able to help.
To start, verify your mortgage type
The kind of mortgage you have may determine what type of assistance is available to you.
To verify whether you have an FHA, VA or USDA loan, find your closing documents (either hard copies or electronic versions) and look for the Closing Disclosure. In the upper right of the first page of this document, under "Loan Information," you'll see checkboxes indicating your loan type: conventional, FHA, VA or other.
If you can't locate this document, try looking at your monthly mortgage statement or contacting your lender at the phone number listed on the statement.
Regardless of mortgage type, contact your lender to discuss relief options. The federal government has encouraged all lenders to support homeowners who need mortgage assistance due to hardship brought about by the coronavirus pandemic.
How mortgage forbearance has changed due to COVID-19
Forbearance lets you make a reduced payment or no payment for a set amount of time. Interest accrues, and the skipped amount needs to be paid after the forbearance period ends. Before you start forbearance, make sure your lender offers repayment terms that seem reasonable.
Under normal circumstances, forbearance typically lasts about three months, but longer periods are available to homeowners dealing with financial issues during this time. Repayment may be expected as a lump sum at the end of forbearance, sometimes called a "balloon payment." If a lump-sum payment isn’t feasible, try to negotiate for another option.
Fannie Mae, Freddie Mac, along with the FHA, VA and USDA, have required lenders to offer options other than lump-sum repayment to borrowers using COVID-19 forbearance. The agencies and GSEs have also barred lenders from charging additional fees, penalties or interest during forbearance beyond what would have normally accrued.
Lenders shouldn't report forbearance to the credit bureaus.
"The lender should report it as 'paying as agreed,'" says Rocke Andrews, current president of the National Association of Mortgage Brokers. Once the forbearance is repaid, Andrews says, "in theory, it shouldn't affect your ability to refinance or purchase in the future."
COVID-19 mortgage forbearance programs
Freddie Mac forbearance
Freddie Mac borrowers are eligible for up to 12 months of forbearance, which won't be reported to the credit bureaus. If you were already in an active forbearance as of Feb. 28, 2021, you may request an additional three months of forbearance (up to 15 months total).
If, at the end of the forbearance term, you’re able to go back to your regular mortgage payments but are unable to pay anything additional, you may be eligible for COVID-19 Payment Deferral. With that deferral, the amount of the forbearance wouldn't accrue interest and would not be due until the end of the mortgage — whether that’s when you sell, refinance or pay off the loan.
Even if you are ineligible for deferral, your lender cannot demand a lump sum repayment and is required to work with you to find a different solution.
Foreclosures and evictions are currently suspended through July 31, 2021. That means no new foreclosure proceedings will start, and existing ones are on hold. You can find more info on the Freddie Mac website.
Fannie Mae forbearance
Borrowers are eligible for up to 12 months of reduced or suspended mortgage payments. The forbearance won't be reported to the credit bureaus. Fannie Mae borrowers already in forbearance as of Feb. 28, 2021, may request an additional three months of forbearance for a total of 15 months' delayed payments.
Fannie Mae borrowers may also be eligible for a COVID-19 Payment Deferral, which allows the amount of the forbearance to be paid at the end of the mortgage rather than at the end of the forbearance period. No matter what, your lender cannot require you to make a lump-sum repayment.
Fannie Mae has also suspended foreclosures and evictions through July 31, 2021. Learn more on Fannie Mae's website.
The FHA has set a deadline of Sept. 30, 2021, to apply for initial COVID-19 forbearance. You can request an initial six months of forbearance, and may have the possibility of extending the term depending on when you entered forbearance.
If you are already in active forbearance that began on or before June 30, 2020, after 12 months you can request up to two additional three-month extensions, for a total of 18 months of forbearance.
If you are in an active FHA forbearance that began between July 1, 2020 and Sept. 30, 2020, after 12 months you can request one three-month extension, for a maximum of 15 months' forbearance.
If you began an FHA forbearance between Oct. 1, 2020 and June 30, 2021, you are eligible for two six-month periods of forbearance, for a total of 12 months.
Borrowers who request an initial COVID-19 forbearance between July 1, 2021 and Sept. 30, 2021, can receive up to six months' forbearance.
In addition to COVID-19 Forbearance, the FHA always has several mortgage relief programs in place. This includes standard mortgage forbearance lasting up to six months and special forbearance for unemployment, which can last a year or more.
At the end of your FHA forbearance term, you may be eligible for HUD's COVID-19 Standalone Partial Claim. This is a no-fee, no-interest junior lien (a type of second mortgage) that doesn't have to be paid back until you sell your home, pay off your mortgage or otherwise end the loan.
If you reach the end of your FHA forbearance or if you are 90 or more days delinquent on your FHA loan, your lender may offer you a COVID-19 Advance Loan Modification. The ALM is a 30-year modification — so no matter how far along you were with your existing loan, you'll now be starting over with a 30-year term — that will make your loan current and reduce your monthly principal and interest payment by at least 25%.
The FHA says it offers other repayment options for homeowners who are ineligible for the Standalone Partial Claim, and if you are offered an ALM but choose not to take it, you're still eligible for other repayment options. No matter which you choose, FHA lenders cannot require a lump-sum repayment.
The FHA has suspended foreclosures and evictions through July 31, 2021. Find more information on the Department of Housing and Urban Development website.
VA loan forbearance
The Department of Veterans Affairs has extended the deadline to apply for an initial COVID-19 forbearance to Sept. 30, 2021.
VA borrowers are eligible for a six-month forbearance, which can be extended another six months. If you requested an original forbearance on or before June 30, 2020, you can apply for two additional three-month extensions if needed. Each extension needs to be requested separately.
The Department of Veterans Affairs has stopped all evictions and foreclosures through July 31, 2021. See mortgage assistance information on the VA website.
The USDA has set a deadline of Sept. 30, 2021, to apply for initial assistance if your mortgage is backed by the USDA Rural Housing Service.
If your ability to pay your loan has been affected by the coronavirus, you can receive 180 days’ forbearance as long as you file by that date. Assistance can be extended another 180 days if needed. As with FHA and VA loans, if you were in active forbearance on or before June 30, 2020, and need additional deferral, you can apply for two additional three-month forbearance periods.
Foreclosures and evictions on USDA guaranteed loans are suspended through July 31, 2021. Find more information on the USDA website.
Coronavirus-related loan modification options
Freddie Mac and Fannie Mae have allowed lenders to offer loan modifications typically reserved for homeowners who are victims of natural disasters. Contact your lender to understand your loan modification options. Depending on your employment outlook, a Flex Modification, which is offered by both GSEs, may be another option. If your mortgage is backed by Freddie Mac or Fannie Mae, the COVID-19 Payment Deferral option described above may be less onerous than a loan modification.
If you have an FHA loan or a VA loan, talk to your lender about loan modification options. Both agencies offer this type of mortgage assistance, but to date, neither has altered its usual programs to specifically assist homeowners impacted by the coronavirus pandemic.
What if you don't have a government-backed mortgage?
Not all mortgages are backed by government agencies or the GSEs. Sometimes called "portfolio loans," these mortgages aren't resold and are kept in-house by the lender. Portfolio loans — which can include mortgages for self-employed borrowers, borrowers who are not U.S. citizens or borrowers who have experienced a foreclosure — don't meet Freddie Mac and Fannie Mae's standards. Lenders may also choose to hang onto a mortgage for other reasons.
Portfolio loans aren't covered by any of the mortgage relief programs listed above. However, your lender may have its own assistance programs. Follow the steps below to contact your lender.
Contact your lender to get mortgage relief
No matter what type of loan you have or what government assistance may be available, contact your lender directly if you have concerns about paying your mortgage.
You don't have to wait until you are delinquent on your mortgage, and calling before you miss a payment will likely give you more mortgage relief options. If you've already missed a payment when you ask for forbearance, Andrews says, that delinquency will show up on your credit report (and will stay there until the loan is made current again).
Here's what you should have ready when you contact your lender:
An estimate of your current income (and future income, if you anticipate that it may change).
An estimate of your current monthly expenses.
Your most recent mortgage statement.
Documentation of what caused your situation to change.
Beware of third parties offering mortgage assistance. Look for help from your lender, not from other organizations offering mortgage relief. If you want to get advice about talking to your lender, find a HUD-approved financial counselor on the HUD website. These counselors offer no-cost assistance and can help you be better prepared to call your lender.