Time Is Running Out to Apply for COVID-19 Mortgage Assistance

Homeowners who can't pay their mortgages can still request forbearance -- but they need to act quickly.

When the coronavirus outbreak first erupted, millions of jobs were lost within weeks. And that put many homeowners in a position where they suddenly couldn't pay their mortgages.

Normally, not paying a mortgage for several months puts homeowners at risk of foreclosure. But homeowners with mortgages in forbearance are protected from that.

Under forbearance, homeowners can stop paying their mortgages on a temporary basis, and they won't be counted as delinquent. Normally, loan servicers have the right to decide which borrowers are approved for forbearance and which aren't. But thanks to the CARES Act (the massive coronavirus relief bill that went into effect early on in the pandemic), any homeowner who requests forbearance is entitled to it. The only thing a homeowner has to do is certify that they're experiencing a financial hardship due to the pandemic.

At this point, many homeowners have put their mortgages into forbearance. If you're having a hard time paying your home loan, you may want to do the same. But if that's the case, you'll need to hurry; you only have until September 30 to apply for forbearance. That deadline applies to conventional mortgages backed by Fannie Mae and Freddie Mac. It also includes government-backed mortgages, like VA loans. If you miss that deadline, you could put yourself at risk of foreclosure.

The upside of forbearance

The mortgage payments you skip during forbearance are not forgiven; you'll need to make good on them eventually. But if you're having a hard time making ends meet, getting permission to pause those payments makes sense. That way, you can cover your other bills and catch up on your mortgage once your financial situation improves.

Furthermore, when you put a mortgage into forbearance, it doesn't mean you're not allowed to make payments on your home loan. All it means is that you don't have to. If you normally pay $1,000 a month and you can only swing $500 a month, you're allowed to pay that amount. That way, you'll have less to catch up on once forbearance comes to an end.

Another thing you should know is that under the CARES Act, loan servicers cannot require you to repay your missed payments in a single lump sum. Instead, what'll generally happen is that the length of your repayment period will be extended.

Say you have 20 years left on your mortgage and you pause your payments for 12 months. To catch up on those payments, your loan term will be extended to 21 years. In other words, forbearance won't cause you to have higher monthly payments once you start paying your mortgage again. It may just take you longer to finish paying off your home.

Don't wait

Mortgage forbearance has been a lifeline for millions of borrowers during the pandemic. It's a good idea to request forbearance, especially if your income has taken a hit or you've incurred other expenses you didn't formerly have. Just knowing that you have the option to skip some monthly payments could bring you peace of mind and help you get through whatever rough patch you're dealing with.