Forbearance Agreement COVID: Understanding this Mortgage Relief Option

The COVID-19 pandemic has left many homeowners struggling to make their mortgage payments due to job losses or reduced income. Fortunately, forbearance agreements have been implemented to offer temporary relief for those struggling to make ends meet. Here`s everything you need to know about forbearance agreement COVID.

What is a Forbearance Agreement?

A forbearance agreement is a mortgage relief option that allows homeowners to temporarily reduce or pause their mortgage payments due to financial hardship. Forbearance agreements are typically offered by lenders as a way to help homeowners avoid foreclosure and protect their credit.

Forbearance agreements are not forgiveness programs, but simply a temporary pause in payments. Homeowners will still owe the full balance of their mortgage, including any interest that accrues during the forbearance period.

How Does Forbearance Agreement COVID Work?

Since the start of the COVID-19 pandemic, the government has increased the availability of forbearance agreements to help homeowners affected by the economic downturn. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, included provisions to protect homeowners with government-backed mortgages, such as those insured by the Federal Housing Administration (FHA) or owned by Fannie Mae or Freddie Mac.

Under the CARES Act, homeowners with government-backed mortgages who experience financial hardship due to COVID-19 can request up to 180 days of forbearance, with the option to extend for an additional 180 days if needed. During the forbearance period, homeowners can reduce or pause their mortgage payments.

Forbearance agreements for homeowners with private mortgages are also available, but the terms and conditions may vary by lender. Homeowners should contact their mortgage servicer to learn more about their options.

What are the Benefits of Forbearance Agreement COVID?

The primary benefit of a forbearance agreement is that it can provide temporary relief from mortgage payments, which can help homeowners avoid foreclosure and protect their credit. A forbearance agreement can also provide homeowners with peace of mind during a difficult time, knowing that they have the option to pause their mortgage payments if needed.

However, it`s important to note that interest will continue to accrue during the forbearance period, which means homeowners will ultimately pay more over the life of their mortgage. Homeowners should also be aware that forbearance agreements may have an impact on their credit score, although the CARES Act requires that lenders report the forbearance as “current” to credit bureaus.

Conclusion

Forbearance agreements can provide temporary relief for homeowners facing financial hardship due to the COVID-19 pandemic. If you are struggling to make your mortgage payments, contact your mortgage servicer to learn more about your options. Remember that forbearance agreements are not a forgiveness program, but simply a temporary pause in payments, and interest will continue to accrue during the forbearance period.