Is mortgage forbearance an option for you? Here’s what to know

Suddenly out of work or making due with reduced paychecks, an estimated 4.1 million Americans have sought forbearance on their mortgage, according to data released Monday by the Mortgage Bankers Association. That’s a staggering number, and experts anticipate more homeowners will seek this protection as the economic impact of the coronavirus wears on.

This April 16, 2020 photo shows a real estate company sign that marks a home for sale in Harmony, Pa. U.S. home sales showed signs of collapsing in March, as the number of contract signs plunged sharply because of the coronavirus outbreak. The National Association of Realtors said Wednesday, April 29, that its pending home sales index, which measures signed buyer contracts, plummeted a seasonally adjusted 20.8% in March from the prior month to a reading of 88.2. (AP Photo/Keith Srakocic, File)

A forbearance hits the pause button on mortgage payments. As part of its massive economic rescue package for the economy, Congress made it easier for homeowners to enter a forbearance plan and regain their financial footing.

Still, there are considerations for homeowners. Eventually the money must be paid, and homeowners with federally back loans have some advantages over those with private mortgages.

Here’s what they should know:

How do I obtain a forbearance?

If you feel forbearance is your best option, you need to know which company services your loan and which company owns it. They’re not always one and the same.

The servicer is the company you make your payment to and get monthly statements from. You can typically find information on forbearance at the servicer’s website and can start the process there. If necessary, you can look up your servicer by searching the Mortgage Electronic Registration Systems website.

Who owns the loan plays a role in what relief options are available to you.

About 70 percent of all mortgages are federally backed, according to the Urban Institute. That includes loans through the US Department of Agriculture, Federal Housing Authority, the Veteran’s Administration, as well as those held by organizations such as Fannie Mae and Freddie Mac. The remainder have mortgages held by banks or other private investors.

You can often find this information online, on your statement, or by calling your servicer, which must provide you the information they have on file.

The Consumer Financial Protection Bureau has useful tips on its website determining who owns your loan and seeking forbearance. Fannie Mae and Freddie Mac also have their own lookup tools to determine whether they back your loan.

What happens during a forbearance?

Forbearance allows homeowners to suspend mortgage payments for a designated period of time. The payments aren’t forgiven; they must be repaid later. Some servicers may also offer a reduced payment during…

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