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Mortgage forbearance—a lender's agreement to temporarily suspend or reduce your payments to help you get over a short-term financial hardship—always comes with an end date. When that date comes, you'll be expected to catch up on any full or partial payments you missed during the relief period. Here's how that process works, and what your options are in case you're unable to resume your regular payment schedule.
When Does Mortgage Forbearance End?
The length of a mortgage forbearance period is typically negotiable but seldom lasts more than 12 months. The majority of U.S. single-family mortgages conform to purchase guidelines spelled out by Fannie Mae or Freddie Mac, and both agencies limit forbearance periods to 12 months.
The length of the relief period is always specified in the forbearance agreement, based in part on when you tell the lender your hardship will be over and you can resume your regular payments.
What Happens When Forbearance Ends?
Mortgage forbearance terms vary, but all require you to eventually make up for the payments that were excused during the forbearance period. While the CARES Act makes special stipulations for certain loans (see below), repayment under normal circumstances is typically handled in one of three ways:
Reinstatement
Under reinstatement, you make a single lump-sum payment for the total amount excused during the forbearance period, plus possible interest charges and fees. Following reinstatement, you resume payments in the amount you paid before forbearance.
Repayment Plan
A repayment plan divides the total amount you were excused from paying during forbearance (with interest and possible fees) into installments, which are added to your regular monthly mortgage payments until the forgiven payments are repaid.
The number of repayment installments is negotiable and can depend in part on your ability to make payments, but it's usually no greater than 12. Increasing the number of installments lowers the amount of each payment but adds to total interest you'll pay until you're caught up.
Payment Deferral
If you can resume your regular mortgage payments at the end of forbearance but lack the funds for a reinstatement or payment plan, your loan servicer may consider a payment deferral plan. This attaches a lien for payments that weren't made during the forbearance period (plus potential fees) to your house. This lien must be paid after you make the final payment on your primary mortgage or when you sell or refinance the house, whichever comes first.
Mortgage Modification
A mortgage modification is a permanent change to your mortgage loan that reduces your monthly payment to make it easier for you to keep up with payments. Under a mortgage modification, any amount you were excused from paying during forbearance is added back into the total you owe and factored into the new payment structure. A mortgage modification can extend the repayment period on your mortgage by a number of months and add significantly to the total amount you'll pay over the remainder of the loan.
Options After Forbearance on Government-Backed Loans
Government-backed mortgages are issued by private lenders but are insured by one of three federal agencies: the Federal Housing Administration (FHA loan), Department of Veterans Affairs (VA loan) or Department of Agriculture (USDA loan). In addition, the USDA and VA also issue some loans directly to homeowners, serving as the lender and not just backer of those loans.
Each agency determines eligibility requirements for the loans it insures and promises to cover the bulk of the lender's loss if a borrower fails to repay a loan. This reduces risk for lenders and may enable them to accept lower down payments or applicants with lower credit scores than they would otherwise require.
Each loan-backing agency also spells out lender guidelines for handling loan forbearance and how to handle instances when a borrower cannot afford to repay forbearance funds or resume regular mortgage payments after forbearance ends. Here are the current options for each loan type:
FHA Loans
Mortgages guaranteed by the Federal Housing Authority are designed to help borrowers including first-time homebuyers get affordable home loans. Under federal guidelines, the independent lenders who issue FHA loans can offer two types of forbearance:
- Informal or formal forbearance works as described above and calls for repayment of forgiven funds followed by reinstatement or a repayment plan.
- Special forbearance (SFB)-Unemployment is available when any borrower with an FHA loan becomes unemployed and monthly mortgage payments become unaffordable. The loan servicer grants an SFB-unemployment agreement for an agreed-upon duration with the understanding that the borrower will be re-evaluated for options to bring the loan back into good standing after they are employed again, or the SFB-unemployment agreement expires.
Borrowers unable to make FHA loan payments historically have had a third option, the Home Affordable Modification Program (HAMP), which seeks to restructure loan payments to align with borrower income levels if they have changed due to hardship. However, In January 2023, FHA's parent agency, the Department of Housing and Urban Development (HUD), suspended HAMP through October 30, 2024, and instead extended to all borrowers a series of measures originally devised to assist borrowers with COVID-19-related financial hardships.
Under these temporary terms, borrowers may seek one of the following remedies whether or not they applied for or received special mortgage forbearance during the pandemic (which had a final deadline for extension applications in May 2023):
- Advance loan modification (ALM): If, after a forbearance period, you are unable to resume your regular mortgage payments, an ALM can permanently change your mortgage terms to reduce your monthly payment by at least 25%. It could include extending the loan repayment period and could increase total interest charges on the loan.
- Standalone partial claim: If you can resume making your current mortgage payments but are unable to repay funds unpaid during forbearance, the standalone partial claim option places the amount in arrears in a zero-interest lien against the property. The lien amount must be paid only after the last mortgage payment is made, the loan is refinanced or the property is sold, whichever comes first.
- Recovery modification: This permanent change to your mortgage terms addresses both an inability to repay forbearance payments and a need for reduced monthly payments. It does so by adding any amount in arrears to your loan's principal balance and then extending the repayment term to 30 or 40 years at a fixed interest rate equal to the current market interest rate. This option may be combined with a standalone partial claim.
VA Loan
If you receive forbearance on a VA loan, you can bring it current via reinstatement or repayment plans in accordance with their forbearance agreements and loan servicers' policies.
If you are still financially unable to make payments, you may be eligible for additional assistance to avoid foreclosure, a measure the VA has instructed lenders to allow through May 31, 2024.
Borrowers with VA loans who are having difficulty resuming payments after forbearance (or under any other circumstances) can learn about foreclosure-avoidance options at the VA website or by requesting help from a VA loan technician at 877-827-3702.
USDA Loan
If you have been granted forbearance on a USDA loan and are having difficulty bringing it current through a reinstatement or a repayment plan—or if you are having difficulty making payments on your USDA mortgage for any other reason—the agency recommends calling its help line at 800-793-8861 to investigate options, including payment subsidies. Callers must provide their loan number, monthly income and expenses and reason for financial hardship.
Other Alternatives to Consider After Forbearance
If forbearance comes to an end before you can resume your regular mortgage payments, or you cannot afford to bring the loan current afterward through reinstatement or a repayment plan, it's wise to consult your lender as soon as possible (ideally before forbearance ends) to discuss options such as payment deferral and loan modification. If you are unable to qualify for those options, both of which have minimum income requirements, you may need to consider some of the following alternatives:
- Refinance: Under this option, you are issued a brand-new mortgage on your home, which you can use to pay off your original loan. Refinancing following forbearance is typically available after you've made a series of at least three regular monthly payments on the original loan.
- Sell your home: Selling your house, using the proceeds to satisfy your mortgage, and then putting remaining funds (if any) toward a new home may be a viable option. If you owe more than the home is worth, a short sale, in which the lender accepts whatever you can sell the house for as satisfaction of your debt, may be possible, but you must get the lender's agreement beforehand.
- Deed in lieu of foreclosure: In a deed in lieu of foreclosure agreement, the lender agrees to consider your debt settled if you turn over the house (and its property deed) to them by an agreed-upon date. It may even allow a "cash for keys" exchange that provides you with some money to put toward new lodgings if you meet the departure deadline and leave the home in good condition. Note that the IRS may view any unpaid portion of your mortgage that the lender forgives as taxable income, that you may be subject to a "deficiency judgment" ordering you to repay the unpaid portion of your loan, and that a deed in lieu agreement typically does significant damage to your credit.
The Bottom Line
Mortgage forbearance can bring welcome relief to individuals with short-term financial hardship, but it is a temporary stopgap. When it ends, you'll be expected to resume your regular mortgage payments and to make up any payments that were forgiven during the relief period—conditions that should be spelled out clearly in a forbearance agreement. If you are unclear on these terms, ask your mortgage servicer for guidance.
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