Coronavirus and the CARES Act: We Are Here to Help
Frequently Asked Questions UPDATED AS OF August 4, 2020
Please check back periodically as the information presented may be subject to change.
Q: What is a forbearance plan?
A forbearance is a temporary suspension or reduction of your monthly mortgage payment while you regain your financial footing, but it is not a loan forgiveness. You are still required to eventually fully repay your missed payments, but you won’t have to pay them all at once if you are unable to do so. Based upon the investor and insurer requirements for your particular loan, we will evaluate your financial situation if required and review options available to you at the end of the forbearance period, such as a repayment plan, loan modification or deferral.
Q: How long does forbearance last?
A typical forbearance period is about three months. Depending on the kind of loan you have, there may be different forbearance options available to you. But under the CARES Act, as long as you have a federally backed loan, you have the option to choose a forbearance period of up to 180 days, and if necessary, to extend for up to another 180 days (for a total of up to 360 days) by simply indicating that you need this extra time. You can also shorten the time if you choose to do so. You should stay in contact and inform us of any changes in your ability to make payments.
Q: How do I know if my mortgage loan is backed by the federal government?
It is important to know if your mortgage is federally backed, since federally backed loans are afforded protections under the CARES Act. Mortgages that are not federally backed may or may not have options for forbearance, depending on who owns the loan. As your servicer, we will be able to tell you who owns your loan and whether it is federally backed.
Fannie Mae and Freddie Mac loans are federally backed loans.
Loans insured or guaranteed by FHA, VA, or the USDA are also federally backed loans.
There are some online tools you can use to look up who owns or backs your mortgage, for example Fannie Mae and Freddie Mac both offer a mortgage lookup tool on their website.
- Fannie Mae (https://www.knowyouroptions.com/loanlookup)
- Freddie Mac (https://ww3.freddiemac.com/loanlookup/)
Or, you may try the MERS ServicerID web page at https://www.mers-servicerid.org/sis/.
Q: Do I need to apply if I want to obtain forbearance from making my mortgage payment?
Yes, you need to apply with us if you want to receive forbearance from making your payments. If you have experienced a financial hardship caused by the coronavirus and you have a federally backed loan, you may obtain a forbearance without providing any written documentation, and regardless of your delinquency status. If your loan is not federally backed, the availability of forbearance or other options will be determined by the owner of the loan, and may require that you provide additional documentation or meet certain other requirements.
Q: How will I know my forbearance has been processed?
Within 7 to 10 business days of our receipt of your valid request for a forbearance plan that you are eligible for, you will receive a letter from us with all the details of the plan. We will also send you an email if we have your email address on file. Please ensure your email address is up to date in your profile as it will help us to keep in touch throughout your forbearance period.
Q: How are taxes and insurance handled during a forbearance plan?
If your monthly mortgage payment does not include an escrow payment for taxes and insurance, you must continue to make those payments during the forbearance period in accordance with your mortgage loan documents. However, if your account is currently escrowed for taxes and insurance, we will continue to make those payments from your escrow account. Should your escrow account become depleted while on forbearance, this will result in a shortage to your account; where applicable, we will handle any escrow account shortages in compliance with RESPA and investor requirements which may also allow repayment over time for these escrow amounts. We will advance, on your behalf, any escrow account shortage for taxes and insurance due during the forbearance period. However, any account shortages and advances for taxes and insurance will also need to be repaid eventually after the expiration of the forbearance plan. Depending on the type of mortgage loan you have, any advances may be repaid through a qualifying post forbearance option, and any additional account shortages may be repaid through a replenishment of the escrow account or a repayment plan. (See “Q. What is an example of a COVID-19 Payment Deferral after forbearance?” for more detail on escrow advances and shortages.)
Q: Will there be interest or fees charged for missed payments during a forbearance period?
No additional interest beyond your regular principal and interest payment will accrue, and no fees (including late fees) will be charged during your forbearance period.
Q: How will my credit reporting be impacted by my forbearance plan?
Under the CARES Act, if your loan was current at the start of your forbearance plan, your loan will remain current for credit reporting purposes through the duration of the forbearance period. However, if your loan was delinquent at the start of your forbearance plan, we will maintain that delinquency status during the period of the forbearance. If you are able to bring the loan current during the forbearance plan, we will then report the account as current at that point. You should also be aware though, that even though your lender will not report your forborne payments as delinquent in the credit information furnished to credit bureaus, we are uncertain as to how the various credit bureaus may report your loan and the impact on the various credit score models used. In addition, depending upon which post forbearance solution you obtain, interest or other amounts forborne or advanced added to your total amount due could increase your mortgage balance. We are uncertain as to the impact of a mortgage balance increase on your credit score, if any, depending upon other factors in your credit report. It is important to note, a credit score is based on many factors in your credit report and different scoring models use different methods to calculate credit scores.
Q: Do I need to cancel my automatic monthly draft if I am on a forbearance plan?
If your automatic monthly draft was set up through us, your payment will be stopped when your forbearance plan is approved. Note: In order to stop an ACH payment, we need two business days advance notice. However, if you set up monthly drafting (bill pay) with your financial institution, you will need to contact them directly to stop automatic drafting. It is always a good idea to continue to monitor your bank account to ensure that any changes to your ACH payment schedule have been executed as you intended.
Q: If I can make my payments during my forbearance plan, but they’re going to be late, will you waive my late fees?
Yes, if your mortgage is covered under the CARES Act for federally-backed mortgage loans, no late charges will occur on your account during the duration of the forbearance period.
Q: Can I make full or partial payments during my forbearance plan period?
Yes, you can. If at all possible, you should consider making at least partial payments during your forbearance period. If your financial situation improves and you are able to make partial mortgage payments, these partial payments will reduce the total amount that eventually will become due. The partial payments will be placed in a partial account (also called a suspense account) and will be applied once a full mortgage payment is received. No additional interest will accrue.
Q: Will I still receive billing statements during the forbearance?
Yes, we are required to send you a billing statement every 30 days even while you are on a forbearance plan. The statement will show your account history and total amount due as a reminder of how much you will eventually owe at the end of the forbearance period. Please refer back to your forbearance letter, which outlines the terms of your forbearance.
Q: Will I receive letters advising me of the delinquency status?
Yes, even during the forbearance period, we are often required to send certain letters, including delinquency letters, to ensure compliance with investor guidelines (requirements from the owner of your loan). Please refer back to your forbearance letter, which outlines the terms of your forbearance. Despite these mandated letters, you will not be required to make any payments during the forbearance period.
Q: How will I repay the payments that are due at the end of the forbearance plan period? UPDATED
Once the forbearance period (including any extensions) is over, we will work with you to evaluate your situation and best next steps. There are several assistance options that may be available to you after the forbearance period depending upon the type of loan you have, who owns or backs it, and whether you are able to resume making your monthly contractual payment. These may include:
- Reinstatement: If you are able to afford it, you can reinstate — which means paying any delinquent amounts including the amounts that became due during forbearance. For example, on August 1st after completing a 90 day forbearance from May through July, paying the 3 forborne payments plus the August payment would reinstate your loan if you were not delinquent when forbearance began.
- Repayment Plan: We can set up a repayment plan, allowing you to catch up gradually while you are paying your regular monthly payment. Under a repayment plan, your past due amount will be spread out over a set timeframe (e.g. 3, 6, 9 months) and added on to your existing mortgage payment amount.
- For Fannie Mae and Freddie Mac loans: If you have a Fannie Mae or Freddie Mac loan, you may be eligible for a COVID 19 Payment Deferral, which brings your mortgage current and delays repayment of certain past-due monthly principal and interest payments, as well as other amounts we paid on your behalf related to the past-due monthly payments. You will be responsible for paying the past-due amounts upon the maturity date of the mortgage or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing unpaid principal balance. This program becomes available beginning July 1, 2020, and we will evaluate borrowers under this program who are unable to afford full reinstatement or a repayment plan to bring their mortgage loan current. NOTE: Borrowers are not required to enter into a forbearance to qualify for this option.
- For FHA owner-occupied loans: FHA has developed loss-mitigation options specifically for borrowers with insured loans who have been impacted by the COVID-19 pandemic.
If you have an FHA loan, occupy your property, and you were less than 30 days delinquent on March 1, 2020, we will evaluate you for various options that may allow you to defer forborne payments or modify the terms of your loan. These include the COVID-19 National Emergency Standalone Partial Claim option, which allows you to defer forborne payments until your loan is paid off. If you are not eligible for this, you may qualify for the FHA’s other options such as loan modifications. Newly announced options will be available by October 2020; these include the COVID-19 Owner-Occupant Loan Modification, and the COVID-19 Combination Partial Claim and Loan Modification. These tools and others can help you repay missed payments over time.
- Modification:If you are not eligible for a payment deferral or your investor does not offer this option, then we can look at a modification (changes to the terms of your loan) that might suit your new circumstances; some investors allow modification plans that extend your loan term or even reduce your original monthly payment amount.**
- For VA loans or USDA loans: If you have a VA or USDA loan, you may be eligible for a repayment plan, loan modification or extension plan, payment deferral, or other options that would allow you to alter the terms of your mortgage to account for the forborne payments.**
** Available options may vary depending on investor guidelines for your type of loan. Additional eligibility requirements and documentation may or may not be required for these options. Please check back as we are monitoring investor guidelines changes to ensure we are considering all available options for your loan.
Q: Why was I offered forbearance instead of a payment deferral? UPDATED
A period of forbearance from the requirement to make monthly payments is usually the first phase of helping a consumer who is facing immediate hardship as a result of the coronavirus. It can provide an initial pause during a hardship before we are able to determine an appropriate solution for you once the hardship is resolved. It is only once the hardship has passed that we know for certain the total amount of your missed or forborne payments. Only then can we determine your options for repayment, including the option of payment deferral (if you are eligible based on your loan type), and evaluate your circumstances based upon your financial situation at that time. However, if your mortgage loan is not backed by the federal government you may still be eligible for mortgage assistance options depending on the owner of your loan.
If you have recovered from a COVID-19 hardship and are past due on your mortgage, you may qualify for a deferral or other repayment option without first entering forbearance. Available options will vary depending on your loan type, investor guidelines, and your specific circumstances. Additional documentation may or may not be required.
Q: What are some examples of a forbearance plan?
- John’s monthly mortgage payment is $1,500 and is due on May 1. He cannot make his May 1 payment but believes his hardship to be short term. John chooses a 90-day forbearance in May. As a result, the forbearance period will run from May through July. During this time, his monthly mortgage payments are suspended. On August 1 when John’s 3-month forbearance has ended and he is able to resume his monthly payment of $1,500, and the three forborne payments totaling $4,500 must be addressed for repayment. John’s servicer will contact him within a sufficient time period prior to August 1 to decide what option works best for repaying the $4500. (See When will I need to repay the payments that were due at the end of the forbearance plan period? above, for details on potential options that John would have at this time.)
- Jane’s monthly mortgage payment is $1,500 and is due May 1. Jane cannot make her May 1 payment and does not know how long her hardship will last. She chooses a 180-day forbearance which will run from May through October. During this time her monthly mortgage payments are suspended, and payments are planned to begin again November 1. However, in October it is clear to Jane that her hardship IS NOT resolved, so she requests a forbearance extension of up to an additional 180 days. Regardless of the length of forbearance, Jane understands that she will need to work with her servicer at its conclusion to determine what options are available for repayment of the missed payments. (See When will I need to repay the payments that were due at the end of the forbearance plan period? above, for details on potential options.)
- Juan’s monthly mortgage payment is $1,500 and is due May 1. He cannot make his May 1 payment in full, but can afford to pay $500 each month toward his mortgage payment. He chooses a 90-day forbearance in May. As a result, the forbearance period will run from May through July. During this time, John remits $500 each month, totaling $1,500 by July, which also equates to one full mortgage payment. John’s servicer will apply the $1,500 as soon as a full payment is collected, applying it to the oldest payment due date, which would be the May 1 payment. Therefore, on August 1 when John’s 3-month forbearance has ended and he is able to resume the monthly payment of $1,500, the June and July payments totaling $3,000 must be addressed for repayment (See When will I need to repay the payments that were due at the end of the forbearance plan period? above, for details on potential options).
Example One: 90 Day Forbearance:
Example Two: 180 Day Forbearance with extension:
Example Three: 90 Day Forbearance with partial payments:
Q: What is an example of a COVID 19 Payment Deferral after the forbearance?
- On April 12th, Malia informed her servicer that she would be unable to make her May 1st mortgage payment of $2,200 ($2000 Principal and Interest, and $200 Tax and Insurance), as she was financially impacted by COVID 19. Malia’s loan is owned by Freddie Mac and therefore eligible for a forbearance under the CARES Act. Malia elects a 90-day forbearance as she believes her financial situation will resume to pre-COVID 19 status by the end of July. Malia is placed on a forbearance from May 1, 2020 through July 31, 2020. In July, Malia confirms with her servicer that she is back to work, earning her pre-COVID 19 wages, and anticipates her ability to resume making contractual payments on August 1st. Malia is evaluated and approved for a COVID 19 Payment Deferral. Malia’s servicer sends her a COVID 19 Payment Deferral Agreement, outlining the terms of the plan which include:
- Adjusting the due date to the next scheduled monthly payment, in this case, 8/1/2020
- Deferring the scheduled repayment of the total past-due Principal & Interest amounts to the maturity date of the mortgage, or earlier upon the sale or transfer of the property, refinance of the mortgage loan, or payoff of the interest-bearing unpaid principal balance
- Deferring any Tax and/or Insurance amounts that had to be advanced for tax and insurance payments due, if there were not enough escrow funds in the escrow account
- Waiving any late charges.
The three forborne payments of Principal and Interest totaling $6,000, plus any advances made by Malia’s servicer on her behalf (typically to pay for taxes or insurance if there are insufficient funds in the escrow account), and any other fees authorized by Malia’s mortgage documents, would be deferred. The escrow account will be short by $600, or 3 times the tax and insurance portion of Malia’s monthly payment (an “escrow account shortage”). If the servicer did not advance funds to pay taxes or insurance for Malia’s home, the Tax and Insurance portion of Malia’s monthly payment is not part of the total deferred amount. This escrow account shortage will be handled in the usual way based on Real Estate Settlement Procedures Act (RESPA) requirements which allow shortages to be spread over a number of months. If this occurs it would increase Malia’s post-forbearance monthly payment amount, even with a deferral. Malia’s Servicer will work with her to ensure this new monthly payment amount will be affordable. Interest will not be charged on the total past-due amounts to be deferred.
Q: If I have or had a COVID-related forbearance, am I eligible for a refinance or new purchase money loan?
It depends. Some investors (such as Fannie Mae or Freddie Mac) will allow Borrowers to refinance or buy a new home if they are current on their mortgage (i.e. in forbearance but continued to make their mortgage payments or reinstated their mortgage). Some Borrowers may also be eligible to refinance or buy a new home three months after their forbearance ends and they have made three consecutive payments under their repayment plan, or payment deferral option or loan modification. Please work with your lender to determine your eligibility for these investor programs.