How to hit pause button on mortgage payments during the coronavirus crisis

Disheartening levels of jobless claims will likely drive more homeowners to seek mortgage relief in the weeks ahead.

Already almost 4 million homeowners were on forbearance plans as of May 3, according to the Mortgage Bankers Association.

The Coronavirus Aid, Relief and Economic Security Act — or CARES Act — provides borrowers with home loans the right to request a temporary suspension of payments on federally backed mortgages.

Forbearance is a temporary fix but it may be worth exploring in order to avoid a foreclosure down the road.

In March, lenders might have initially offered to let homeowners who made such requests to postpone 90 days of mortgage payments through a forbearance agreement. Many of those agreements, though, would likely expire come late June or July.

Consumers can see their payments paused for up to six months initially and possibly another six months.

The debt isn’t forgiven and the regular interest keeps building. No additional fees can be charged.

“Forbearance is really a deferral. They will still need to make these payments,” said Kathleen L. Kraninger, director of the Consumer Financial Protection Bureau on Friday.

Some early requests triggered a great deal of confusion and frustration, though, when some homeowners were told by some mortgage servicers that they’d be required to repay the money in a lump sum when the three months were up.

But that’s not your only option.

A new Consumer Relief Guide, which spells out the relief process associated with federally backed mortgages, was released Friday by the Consumer Financial Protection Bureau and the Conference of State Bank Supervisors. The guide outlines the rights to mortgage payment forbearance and foreclosure protection under the federal CARES Act.

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Such relief is essential as over 40 million workers across the country have applied for unemployment benefits in the past 10 weeks.

Much of the U.S. economy has been put on pause in an attempt to save lives during the coronavirus crisis. In the coming weeks, parts of the economy are expected to gradually reopen. Some workers may return to their jobs soon; others won’t.

John W. Ryan, president and CEO of the Conference of State Bank Supervisors, said borrowers are telling state regulators that they’re confused about mortgage relief, and in some cases, getting inconsistent information about forbearance.

Consumers have a right to get up to 180 days of forbearance initially, and then request an extension for up to another 180 days of payment relief.

The consumer relief guide gives a summary of borrowers’ rights under the CARES Act, steps to access mortgage relief and repayment options.

Many lenders and servicers are providing forbearance benefits regardless of federally backed status, according to the Consumer Relief Guide.

Kraninger said the CFPB is working hand-in-hand with other federal and state regulators to protect consumers during this national emergency.

The guide notes:

Homeowners have the right to obtain a 180-day pause in paying your mortgage or temporarily lower mortgage payments if you are a borrower on a federally backed mortgage loan and affirm that you are experiencing a financial hardship due directly or indirectly to the COVID-19 emergency.

Your mortgage servicer — or company where you send payments to each month — can tell you if your loan is federally backed.

While in forbearance, you can still choose to make partial payments, which will reduce the amount you would need to repay in the future.

In most cases, you should receive multiple options for repaying the monthly payments that were not made during the forbearance period.

Foreclosure actions on loans federally backed by Fannie Mae, Freddie Mac and HUD, which includes single family FHA loans and reverse mortgage HECM loans, are frozen until June 30, 2020.

Loan types that are federally backed include: Conventional loans purchased or securitized by Fannie Mae and Freddie Mac.

Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at stompor@freepress.com.

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