Mortgage Forbearance – How to postpone mortgage payments

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Getting through this tough time is possible, there are programs in place for just such an occasion.

If for any reason, your renters cannot pay during this time, the government is taking steps to help. You may have options you have not yet considered! Below is an excellent tool to help landlords who cannot pay their mortgage payments in full for the coming months. 

What is mortgage forbearance and how can it help me?

In this article from Fortune Magazine, the author outlines a few ways to work with your mortgage company during difficult times, including forbearance options. Mortgage companies are well aware of the crisis that has been caused by Covid – 19. Loan companies (banks) backed by Freddie Mac or Fannie Mae (most mortgages are in the US are) have been ordered by Fannie Mae and Freddie Mac to work with borrowers over the next few months and for up to a year.  

There are pros and cons to this approach, as the payments are still due at the end of the mortgage. In the short term, we find this option to be a great relief to many owners. At Top Properties, we can’t guarantee that all tenants will maintain employment, but we can help find the best ways to mitigate damages to keep you financially secure.

As this epidemic is worldwide, the US government is working on solutions to keep borrowers’ credit strong while they push for more options from mortgage companies. Further guidance from Washington should be available shortly. At Top Properties we are here for you and will keep you updated as we know more!

We will contact you as soon as possible if your tenants let us know they may not be able to pay rent. We will work on the best solutions together.

For more information on what Freddie Mac and Fannie Mae do, read an excellent article here.  

Covid-19 specific mortgage forbearance requirements will be included in the stimulus package

At the time of writing this post, the details of the stimulus package have not been fully approved or released. A forbearance is an option that includes details that may need to be negotiated at the time of the agreement.  

Mortgage forbearance agreements have been an option for borrowers during any time of hardship and is not specific to the current Covid-19 pandemic. Congress has recent language to specify extra protections for forbearances that are caused directly by Covid and will soon be released.  

We are anticipating that with the passing of the bill and the required hardship (financial loss) from non-payment of rent to qualify for forbearance, the best time to file will likely fall sometime between the 3rd and the 8th of April.

An enrollment timeframe for filing will be a window from which the hardship occurred. We believe this may be a 90-day window, but things are changing rapidly. 

Provisions to not have forbearance negatively impact your credit are drafted in the bill, but you will need to verify with your lender.

Some items to consider when filing:

Do not stop paying your mortgage!

It is essential to wait until you have written confirmation from your mortgage company. 

Your mortgage due date and the date payment is late are different. Typical mortgages are due on the first of the month, but not late until a date around the 15th. Every mortgage is different, so please consult directly with your mortgage company. 

If you do not pay your mortgage payments through the time your forbearance is accepted in writing, your loan may but put in “past due” status. If you enter forbearance in this status, this status may be frozen to credit report agencies throughout the period of which payments are not required. If you are current on your payments when you file, you may stay in that status instead, which we see as beneficial. Loan status may affect any outside credit requests.  

We are not experts in this process, and this is only a recommendation that may be worth considering. Your lender’s practices surrounding this process must be verified directly.

There are different ways that your mortgage company may want you to pay back the missing payments.  

Typical options for repayment may include:

  • Lump-Sum – All payments due in full at the end of forbearance period
  • Monthly Installments – starting when the forbearance period ends
  • Added To End – payments added to the end of your mortgage term

As you can see, each of those options has a significantly different impact. We believe the stimulus package will clarify to banks to allow you to choose your preference easily. Currently, your bank may offer you the lump sum first without disclosing the other options are available. Make sure to ask!

Taxes and Insurance 

Most loans include as part of your payment escrow savings account held within the loan. This account saves up money from each payment to apply towards your property tax and home insurance. Your loan escrow account may need additional funds added if you skip payments.  

Add this to your list of questions to ask to anticipate how much may be required to replenish the account later.

Paying Your Mortgage If You Can Is Still The Best Option!

If you can pay, you should continue to do so. No form of forbearance is free! Although you may still be able to skip payments, refinancing debt may be more difficult in the future. Not all banks are the same, and this process can be complicated.

Mortgage forbearance agreements should be used as a last resort if you are unable to pay.

The current tenant may be required to occupy the property throughout forbearance

Once again, these terms have not been finalized at this time. From what we are looking at now, it seems like the aim of the special circumstance forbearance rules is to protect landlords and tenants. Per your lease agreements with the tenants, rents are owed for the full term of the lease. The modifications to make forbearance an attractive offer also encourage landlords and tenants to agree on a payment plan for unpaid rent.  

There may be items we are missing in this article, and we are not mortgage brokers. Talking to your lender will be the first step in this process.   

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